Amkor Technology, Inc. Aktie

Good day, ladies and gentlemen, and welcome to the Amkor Technology Third Quarter 2026 Earnings Conference Call. My name is Diego, and I will be your conference facilitator today. [Operator Instructions] 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.

Good afternoon, and welcome to Amkor's Third Quarter 2026 Earnings Conference Call. Joining me today are CEO, Kevin Engel; 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 reconciliation to the comparable GAAP financial measures in the slides. We will make forward-looking statements today based on our current beliefs, assumptions and expectations. Please refer to our press release for a disclaimer on forward-looking statements and our SEC filings for a discussion on the risk factors and uncertainties that may affect our future results.

I will now turn the call over to Kevin.

Thank you, Jennifer. Good afternoon, everyone, and thanks for joining. Amkor delivered a strong third quarter, with revenue of approximately $2 billion. For the second consecutive quarter, we achieved record revenue in both computing and automotive and industrial end markets. Gross margins expanded to over 18% and operating margins increased to over 11%. These results reflect continued execution against our strategy and demonstrate the improving earnings power of our business.

On a year-on-year basis, revenue in the third quarter continued to accelerate in Computing and Automotive and industrial with both end markets growing 37%. In Computing, demand remained robust. At our flagship HDFO CPU program ramped throughout the quarter. Automotive and Industrial continue to benefit from strong demand for advanced in-car computing, applications, such as ADAS and infotainment.

Now let me share an update on our 3 strategic pillars. First, enhancing strategic partnerships in key markets. Customers are engaging earlier, aligning technology road maps and making longer-term commitments as advanced packaging becomes increasingly critical to AI and high-performance computing. We continue to see a shift in how customers support capacity expansions. Customers are not only planning further ahead, but are also making long-term commitments and providing advance payments tied to future capacity requirements. This gives us confidence as we accelerate our capital spending above historical norms.

We believe this reflects a broader change in our industry. These commitments reflect our customers' confidence in their long-term advanced packaging requirements and in Amkor's ability to support their product road maps. For Amkor, these agreements improve visibility, strength and alignment with our customers, and support disciplined investment in advanced packaging capacity as our global footprint increases, including Arizona and our Asian facilities.

The second pillar is elevating technology leadership. Customer engagements remain strong across our advanced packaging platforms and our pipeline continues to broaden. The progress we are making across our HDFO and 2.5D programs continues to reinforce positive outlook for the long-term growth opportunities in Computing. Our flagship HDFO CPU program is scaling, and additional HDFO CPU program for a hyperscaler began ramping in Q3. And 2 new 2.5D programs in networking and data center are expected to come online in Q4.

Customer engagement is particularly strong in next-generation AI infrastructure. With additional advanced packaging opportunities developing across traditional data center, PC applications and automotive. Advanced packaging is on the critical path of system performance. As customers push for greater performance, higher bandwidth and improved power efficiency, packaging technology is playing a larger role in enabling product road maps. As a result, customer discussions today are broader than they were just a few years ago. We are increasingly engaged in architectural design, technology road maps, and test strategy along with long-term capacity planning.

Our turnkey model allows us to integrate advanced packaging and test capabilities, providing customers with more complete solutions. This strengthens our competitive position, deepens customer relationships and creates additional opportunities to deliver value across the product life cycle. Taken together, the breadth of customer engagements we see today affirms our view that advanced packaging will remain a meaningful growth driver for Amkor over the coming years.

Our third pillar is expanding our geographic footprint. In September, we announced Phase 2 of our Arizona advanced packaging and test campus, which is expected to break ground in late 2027 as Phase 1 construction nears completion. Together, both phases are planned to be over 90,000 square meters of clean room space and represent an estimated investment of $12 billion. When fully ramped, the campus is expected to support a workforce of over 3,500 employees, strengthening the U.S. semiconductor ecosystem and support our customers' long-term needs.

In Korea, we recently broke ground on 2 new buildings on our Gwangju campus. This additional space is being built to support the continued ramp of HDFO for our data center customers, including the recent announcement with NVIDIA. On our Songdo campus, the new assembly and test building remains on schedule for completion by year-end. The incremental space is planned to expand test capacity for automotive and data center customers and strengthen our regional turnkey capabilities. Following completion of these expansions in 2028, our Korea footprint is expected to increase by 40% from 2025. This cements Korea as a center of excellence for high-value advanced packaging.

Our Vietnam buildout is also progressing as planned with increasing scale and a continued focus on automation. Automation allows for optimal space planning, higher equipment utilization and quality assurance. Our vision is for Vietnam to become our SiP center of excellence. It's been exciting to see this facility ramp from a piece of undeveloped land in 2021 to a high-tech manufacturing operation today. As we migrate SiP from Korea to Vietnam, we are opening up needed clean room space in Korea for additional advanced packaging growth. The released space in Korea is being redeployed and quickly consumed by advanced packaging customers.

In closing, our third quarter results demonstrate strong execution and continued momentum across the business. We delivered record revenue in Computing and Automotive and Industrial, expanded margins and advanced key programs. Customer commitments continue to grow, giving us greater visibility as we expand advanced packaging capacity. We are well positioned to capture long-term growth opportunities ahead.

I will now turn the call over to Megan to provide more detail on our third quarter performance and near-term outlook.

Thank you, Kevin, and good afternoon, everyone. Amkor delivered third quarter revenue of $1.99 billion, an increase of 5% sequentially. Our Computing and Automotive and Industrial end markets each achieved record revenue. Revenue in the communications end market declined 8% sequentially. The factors we discussed last quarter largely developed as expected. These included the strategic migration of SiP technology to Vietnam, memory supply constraints, and changes in build patterns. Component shortages affecting premium tier smartphones and IoT wearable devices created an additional headwind during the quarter across both communications and consumer applications. We expect these conditions to continue in the fourth quarter and for communications revenue to decline high single digits sequentially.

Revenue in the Computing end market increased 25% sequentially to a new record. During the quarter, we continued to scale our flagship HDFO CPU program and saw growth in other data center programs. Looking ahead to the fourth quarter, we expect revenue to increase low double digits sequentially, driven by ongoing scaling and new program ramps. Q4 is estimated to result in over 50% growth year-on-year and provides strong momentum heading into 2027.

Revenue in the Automotive and Industrial end market reached a new record, increasing 7% sequentially. The growth was driven by both ADAS and industrial products across multiple customers. In the fourth quarter, we expect continued strength with revenue growing low single digits sequentially. Consumer revenue increased 10% sequentially, driven by demand for IoT and home electronic products. Revenue was impacted by the same component shortages affecting premium tier smartphones. We expect these shortages to continue in the fourth quarter with consumer revenue declining more than seasonal into the mid-teens percent sequentially.

Gross margin for the quarter was 18.3%, an increase of 150 basis points sequentially and 400 basis points year-on-year. Gross profit was $364 million. Gross margin expansion is primarily driven by a richer mix of high-value advanced packaging, reflecting strong growth in Computing and Automotive. During the quarter, gross margin was impacted by foreign currency headwinds and, to a lesser extent, the impact of the July earthquake on our Kumamoto Japan facility. Together, these factors had an unfavorable impact of approximately 60 basis points sequentially. Our Japan facility returned to full operations within the quarter.

Third quarter operating expenses were $139 million. Operating income was $225 million, resulting in operating income margin of 11.3%. Net income was $191 million, resulting in earnings per share of $0.76. The EBITDA was $435 million and EBITDA margin was 21.8%. Our balance sheet remains strong and provides significant flexibility as we continue to invest to support long-term growth. As of September 30, we held $2.4 billion in cash and short-term investments, and total liquidity was $3.4 billion. Total debt was $2.5 billion, and our debt-to-EBITDA ratio was 1.7x.

Now turning to our fourth quarter outlook. Q4 revenue is expected to be between $1.9 billion and $2 billion. Gross margin is expected to be between 18% and 19%. We expect operating expenses of approximately $140 million. Our full year effective tax rate is expected to be in a high teens percent due to year-to-date discrete tax benefits. Net income is forecasted to be between $160 million and $185 million, resulting in earnings per share between $0.65 and $0.75. We are narrowing our estimated 2026 CapEx spend to around $2.5 billion, primarily reflecting the timing of construction payments for our Arizona campus. Phase 1 construction remains on schedule for completion by the end of 2027.

Looking ahead, we expect a step-up in CapEx in 2027 and driven primarily by facility investment in Arizona, Korea and Vietnam as we expand capacity to support our long-term growth opportunities. We will provide specific 2027 CapEx guidance on our fourth quarter call in February. Customer advance payments are expected to provide significant funding support for these CapEx investments. Since 2025, Amkor has executed advanced payment arrangements with a dozen customers, primarily supporting advanced packaging capacity across both Korea and Arizona, and there are several more customer agreements under discussion.

In closing, our third quarter results demonstrate the earnings power of our business, a richer mix of advanced packaging revenue and strong execution drove meaningful margin expansion. We remain focused on disciplined investment as we position the business for profitable long-term growth.

This concludes our prepared remarks. Operator, we will now open for questions.

[Operator Instructions] And your first question comes from Ruplu Bhattacharya with Bank of America.

First one for Megan. You're guiding to about 20 bps of sequential gross margin improvement for the fourth quarter. How should we think about the impact of the SiP migration to Vietnam as well as weakness in the Android smartphone market? And any other factors like FX or if there's any lingering issues in Japan? Can you just help us parse how you're thinking about that sequential improvement? And I have a follow-up.

Sure. So correct, we are going to see some modest expansion in our gross margin in Q4. That's primarily due to favorable product mix as it relates to further growth in our compute and then I would say, lower SiP, as you had mentioned before. We are also anticipating continued unfavorable FX.

As it relates to the communications market, we've indicated in Q4 that would be down sequentially as it relates to the dynamics between I would say, the iOS and the Android. We do see Android being down in Q4 compared to Q3. And we also see iOS down. So we see both ecosystems down? And did you have a follow-up?

Yes. I had a follow-up for Kevin. So with this new announced agreement with NVIDIA, it looks like total prepayments are now about $3 billion. Kevin, how should we think about the division of programs between South Korea and Arizona? And will the margin and capital return profiles differ materially between these 2 locations? And from a risk management standpoint, if any major AI program changes, how fungible is this advanced packaging equipment? So a couple of different parts, but if you can just talk about Korea versus Arizona, the margin and capital return profiles and how you're thinking about risk management.

Yes. Thanks, Ruplu. So a few components there. So when we think about the mix between Korea versus Arizona, obviously, for Korea, we're ramping today. That's obviously very important for us to continue to accelerate that ramp. There's a lot going on there. I mean, I have a little bit of color because we talked about the expansions in these locations as well.

So in Korea, obviously, as we migrate the SiP from the creative facility over to Vietnam, that opens up space in the Korea facility, and that we're quickly filling with assets that we already have on order to continue that ramp profile, I would say, short term. Then when we get to midterm, we have the new building on the Songdo campus that will be opening at the end of this year that will start to ramp to continue that acceleration. And then that announcement is also contemplating these K4 or that's our Gwangju location, where we have 2 new buildings where we recently broke ground and those will drive the acceleration into late '27 into '28. Those buildings will be completed construction in late '27.

To give you an idea of scale there from a spend perspective, the construction in Korea will basically for 2027, be in the $400 million to $450 million range. And then we talked about, obviously, this expansion in Vietnam where the SiP is going in. And that expansion facility-wise for 2027 is in the $50 million range. Obviously, for Arizona, that ramp is later. Again, the facility will be completed late this year. We'll start moving assets in. So for that customer, that will be more of a 2020 -- late 2028 type ramp profile. And then when we think about gross margins for both facilities, what we -- obviously, when we think about Arizona, we do expect the overall cost to be higher related to billing depreciation, labor.

We're managing that through multiple ways. Number one is keeping the factory very heavily utilized. So it will be lower product mix, higher utilization. And the customers we have planned for that facility understand that we want to reduce the seasonality preferentially load in Arizona and then obviously offload into Asia. So that allows us to really keep that factory running at a high level. And obviously, it will be our most advanced related to automation. So that will help us from a labor perspective. So long term, while there may be some slight deltas in the margin profile, we wouldn't expect a big delta between the 2.

So I think that's a positive outlook. When we think about risk, the cap agreements really help us from a risk profile. There's obviously multiple terms in those agreements to build confidence for us in getting that profile built. The asset fungibility, we think about any high-density fan-out program, 2.5D, even wafer bumping type things. These assets are fungible up and down that stack. Obviously, the scale that we're working with this customer is hard to offset. But are they -- regardless, the technology is very fungible to different customers.

And your next question comes from Joe Moore with Morgan Stanley.

You had good results in Compute, up 25%. I think you had talked about up to 30% when you reported last quarter. So can you just talk about -- I assume that's sort of more constraints on the supply side, but can you give us some indication of that trajectory and any nuance there?

Yes. I wouldn't necessarily say supply side actually, Joe. It's more related to -- you have to kind of imagine this process flow for these HDFO parts. This is over 300 steps in the process. So to build out that pipeline, get the product in the right locations, I think that we talk a lot about WIP loading to get that built in that whole chain with multiple steps takes time. So I'd say we were -- it took a little bit longer to really load the line to the level we wanted to. I wouldn't say anything related to supply constraints.

Okay. That's helpful. And then also on the market mix, it looked like you had some strength in Automotive. Any sense of what you're seeing in that part of the market?

Yes. Thanks for that question. I wasn't sure that was going to come up today. But I'd say Automotive and Industrial are actually very positive on that. There's a few things. For Automotive, the advanced products, again, think in car computing, ADAS, all those applications are continuing to grow for us, and that's a really exciting area. If you think about how the automotive industry has changed over the few years, it used to take years to develop a product, get it into a car. That's really accelerating. And so the advancement of new technologies in cars is going much more aggressively than we have seen in the past, which benefits these advanced packages.

Think about Arizona, in general, where we have a lot of autonomous cars. The amount of semiconductor content in these vehicles is really increasing as that continues to proliferate down into passenger cars. We obviously will continue to see semiconductor content per car growing. And then in addition to that, the mainstream legacy-type packages going into cars are also rebounding. I'd say our customers, it's nice to hear them talk about their positive outlooks, inventory being under control, where that's taken years to get to that level. So that's all boding well. And then I don't want to leave that industrial. Industrial, we also see pretty significant growth there. So all 3 of those areas, we've seen positive momentum.

Your next question comes from Ben Reitzes with Melius Research.

This is Jack Adair on for Ben. I wanted to dive deeper into the computing segment. You had guided computing to be up over 50% year-over-year in 4Q. Could you talk more about the momentum in 2027 with more capacity coming online in Korea and more data center engagements ramping? And if that pace can continue in 2027?

Yes. Thanks for the question. Yes, I mean, so basically, with our guide, we're expecting over 30% growth in computing from 2025 to 2026. Again, keep in mind that encompasses PC as well as data center. PC is relatively soft, but new data center has offset that, and that's really what's driving this over 30% growth. We would expect a similar growth rate to even higher growth rate into 2027, again, based on that space profile that I outlined already.

That's helpful. And if I could ask one more about your communications business. And with the launch cadence -- at Apple. Just if you could help us with more color on seasonality in '27 and if you expect content gains to be a factor there with new form factors in the mix?

Okay. Yes. So comms is interesting. I think, overall, it's a little early to tell what the full year profile will look like. But you're right, with the different launch profiles, which we tried to signal a bit going back last quarter, that -- we would expect that to change our typical seasonality. But I think it's, again, a little too early to see how that's going to completely play out.

And you can imagine there's lots of different dynamics going on there between supply constraints, memory pricing affecting overall demand, the build cycles like you talked about. So there's lots of components there. But in general, related to the form factors, I don't see that there's a lot of impact related to that. Obviously, it's more about unit sales, the better these -- the phones sell. Obviously, that bodes well to just increased demand overall.

Your next question comes from Randy Abrams with UBS.

My first question, I wanted to expand on your computing opportunities. You're having a nice ramp on the CPU program. Could you talk about your progress on the fan-out bridge that is progressing? And also, if you could talk about the scope. I think you mentioned a couple other new projects such as networking ramping up, how you see those incremental activities for [indiscernible]?

Okay. Yes. Thanks, Randy. So yes, a few things there. So when we think about the bridge opportunities, so I'd say that's progressing as expected. We talked about that being a late 2027 opportunity into '28. I think our time line still matches that. The discussions with the customer are ongoing. Obviously, there's a lot of interest again to kind of secure capacity overall. Again, we kind of paint a little bit of a picture around capacity constraints in general across the industry.

When we think about Computing, obviously, early on, there's a lot of discussion around silicon availability, memory availability. I'd say those seem to be -- I mean, they're still there, but at least customers understand better what is available and I'm going into 2027. I think that is highlighted even more that packaging is becoming one of the key bottlenecks. So customers are really working to make sure they secure capacity into '27 and even into 2028. So that's where you start to see a lot of these advance payment discussions.

And -- help me with the second question again, Randy?

Yes, the second part of that was the other projects. If you could talk a bit more about the scope, is compute concentrated with the core CPU where you're seeing good broadening out to these other projects if you expect them to be meaningful?

Yes. So I mean, meaningful. I think these core fundamental programs are scaling much, much faster. So I think I have to say that. But I think we have programs going on in NPU. Networking programs and things like switches, those are 2.5D type programs. And then again, we talked about the CPU program for hyperscaler. Again, all of those are on track, either ramping now or ramping in the next quarter or this quarter, late this quarter. But I think overall, the scale-wise, the big driver is the key programs we talked about.

Okay. Great. And my second question, I wanted to ask about the cost and also the pricing environment. We're seeing a lot of the substrate and material costs rise but also tight capacity. And I think your Taiwan peer has been raising price. How do you see both of those drivers? And if I could add just one offset. With the SiP business rebound stronger next year to offset if you indeed could see some pricing improvement? Do you see any offsets from SiP?

Okay. Yes. So yes, I mean, there's definitely cost pressure. I think we're managing that closely with our suppliers. And typically, we're passing those costs on to our customers.

I think the pricing environment in general is still attractive related to being able to pass costs along and think about long-term investment and how we're managing that margin profile to make sure the return is there. And again, you think about the number of players that to support these types of products or these types of packages is relatively limited. So that creates an environment where I think all of the players in this field are able to really driving attractive cost structure and price structure just because of the overall constraints in the capacity in general.

Then when it comes to SiP, we definitely see that -- again, we talked about the short-term kind of headwinds related to the transfer and how you always have a little bit of a gap as you're moving assets across the oceans. But we definitely see with working with the customers that the rebound is there. There's a lot of pipeline built up for SiP. Pricing, I'd kind of go back with that related to passing on cost increases that we're seeing. Maybe not so much related to really driving an overall margin acceleration related to that business part.

Your next question comes from Steven Fox with Fox Advisors.

I had 2 as well. I guess, first of all, you gave a lot of great clues on how CapEx could look like for next year. Can you talk about how some of the capacity expansion could impact gross margins in the coming calendar year? And also, how much of a mix offset you could get roughly when we think about that? And then I have a follow-up.

Okay. Megan, can you take that one?

Sure. So just to reiterate, Steve, we did want to signal without -- we're not yet ready to provide full 2027 CapEx guidance, but that -- we are proceeding with some programs that Kevin outlined but are going to step up CapEx specifically around facilities. So just to recap there, we have the Arizona facility. We gave a framework that '27 could be up to 15% of that $12 billion in '27. And then for Korea in the range of $400 million to $450 million and then Vietnam $50 million. So altogether, those are higher than $2 billion just around those programs.

So as it relates to margin impact, just as a reminder, the Arizona facility will not yet be completed until the end of '27. So that won't start being recognized in the income statement until that's completed. So we'll be capitalizing that over the course of the year. Similarly, with the other primary projects in Korea. As it relates to equipment, we do anticipate further expansion on the equipment side. We're going to see probably around a mid-teens percent increase in depreciation in '26. I do expect that, that will increase somewhat in '27. It's still too early to tell yet what that impact on margin will be.

However, as you just mentioned, we are executing on our strategic plan, which identified product mix as one of the primary areas for margin expansion and with our plan around compute to grow similarly 30% or more in '27, we would anticipate having a benefit related to that in '27.

Great. That's super helpful. And then just as a follow-up, I know you just covered pricing, but maybe just asking it a little differently on some of these agreements. Obviously, you've taken some of the -- a lot of the risk out in terms of planning for capacity with some of these new compute agreements and networking, et cetera. How do we think about just how you're creating pricing power within that? Is there any other thing -- anything else we should think about besides you mentioned sort of the predictability of the production in a specific plant?

No. Again, I think if you look at all of the computing customers, the environment and the pricing environment, they understand that these are very significant capital investments and there needs to be earned on these capital investments. So I think the margin profile and the return is not a major issue. They are more focused on making sure they secure the capacity. So at this point, we feel very optimistic around the pricing environment related to these multiyear agreements.

[Operator Instructions] Your next question comes from Steve Barger with KeyBanc Capital Markets.

Megan, you talked about the dozen customers with prepayments, and it sounds like there could be some more coming. As you think about CapEx timing versus these payments arrangements, can you manage this build out without incremental debt? Or is it too early to tell?

Thanks, Steve. So with what we have outlined, we are -- obviously, there's going to be significant part in '27. So that even pushes through '28, where there may not even need to be incremental debt at that point. So I would say it's still too early to tell whether we would need incremental debt within '28 and beyond. But I would say the balance sheet positioning is solid through 2027.

Got it. And if consumer electronics in comms and compute remains soft for multiple quarters into next year, does it change the margin trajectory or the earnings trajectory as you think about the CapEx investments that you've talked about relative to the unit volume potential losses from some of these consumer electronics programs? Or do you expect that the AI-related devices acceleration can mitigate that?

Yes. So let me just start again with the overall picture. I think we talked about this a good bit during the Investor Day. So when we think about what's our long-term vision. Compute is going to continue to accelerate. And obviously, that's a very attractive margin profile and become a larger portion of the business. We talked about the CAGRs we would expect there. Some of these opportunities that we've talked about in advance payments were already contemplated in those long-term targets.

But I think -- and then we look at communications, we would expect it to continue to grow, maybe not -- obviously, not at the kind of growth rates we're talking about for Computing. So in general, we feel the assets will have troughs and things like that. But the assets overall, we don't think that utilization levels will change over time. They'll continue to rise and be an attractive profile for the overall communications business.

And Megan, anything to add there?

Yes. I just wanted to mention that we do see having a diversified portfolio as a benefit. And so in times like this where we are seeing weakness in communications and consumer, those changes in market dynamics, are being cushioned by the strength in compute. And we've seen this before when we had automotive significantly declining post COVID, and we had other markets such as communications and compute at the time. So I think having a diversified portfolio definitely helps move through dynamics such as what we're experiencing today.

Yes. And again, just thinking about build cycle changes, we're optimistic that the first half, second half peaks will be different moving forward. We'll see if that cycle continues longer term. But I think that will also be pretty significant related to the communications first half, second half dynamic.

And your next question comes from Denis Pyatchanin with Needham & Company.

My first one is for Kevin. Given persistently high memory prices over the last year, what are you seeing in terms of impact on PC and smartphone-related product volume? Would you be able to quantify the current impact for each? And could you maybe provide an outlook for these markets for the next year?

Yes, that's a hard question. I'd say, obviously, memory pricing and then just availability in general has affected both markets. Definitely in communications, and I think we tried to signal some of this before. We saw that Android maybe had a little bit harder time adjusting than iOS. And that may be related to overall pricing dynamics, I think the low tier type phones had a harder time absorbing those cost changes than the premium tier. So I think that will continue.

And then when we think about the PC market, again, memory is a pretty sizable component to the overall PC costs. So we definitely saw impacts there. But I think the general trend that we've always highlighted about the migration to ARM from x86 is continuing, and that's helping to offset some of those challenges for us.

And my second one is for Megan. So more recently, CapEx has come up to over 30% of sales, while historically, it has been in the low to mid-teens. Would you be able to provide a longer-term outlook for CapEx intensity? Any thoughts on whether it will ramp down more slowly or if there will be a more significant drop at some point, 2 or 3 years out?

Sure. So we have indicated '27 will have a step-up in CapEx for -- specifically for the facility build-out. We've also, at least shared a framework that our Arizona build-out will peak in '28 and '29. That's because we will be constructing Phase 2 at the same time that we're bringing on equipment for Phase 1. So I think the CapEx is going to stay elevated through those periods. And then from that perspective, from what we've shared so far, it will probably taper back down. As far as a long-term kind of normalized, we have not provided that level of detail.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Kevin for closing remarks.

Okay. Thank you, everyone, for the questions. Let me close with 3 key messages. First, our financial performance continues to strengthen. Record Computing and Automotive and Industrial revenue and margin expansion demonstrates the improving earnings power of the business. Second, advanced packaging is driving significant growth opportunities. We continue to make progress across our HDFO and 2.5D programs with strong momentum in AI and high-performance computing. And third, customers are making longer-term commitments to Amkor. This gives us greater visibility as we accelerate our global capacity expansions. Thank you for joining the call today.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

We'll get started. Good morning, everybody. Welcome to the Goldman Sachs Communacopia Technology Conference. My name is Jim Schneider. I'm the semiconductor analyst here at Goldman Sachs. It's my pleasure to welcome Amkor Technology and Megan Faust, CFO; as well as Doug Scott, who is the VP of the Advanced and Mainstream business units. Welcome, everybody.

Good morning, Jim. Good morning, everybody.

So maybe start out with some breaking news, I think, as of last night. Going back to your Investor Day, you outlined the strategy for your global diversification, including a big component in the U.S. You've since announced a partnership with TSMC, a partnership with NVIDIA. And then last night, your expansion of Arizona for Phase 2, expanding from $7 billion to $12 billion in that phase. So maybe just kind of big picture, what is driving this expansion of demand in your business? And why is now the right time to go to Phase 2 this quickly?

Yes, sure. So we're very excited about our announcement last night. But stepping back, at our Investor Day, we really outlined our priorities around strategic partnerships, technology leadership and our geographic footprint. And we've made meaningful progress, as you mentioned, Jim, with our recent announcements with both NVIDIA and TSMC and then last night announcing that we are further expanding our footprint here in the U.S.

And what's driving that is really the demand for advanced packaging continues to strengthen. Our customers are collaborating with us very closely, and they are looking for longer-term arrangements in order to secure their supply. And so we have fully committed our Phase 1. And so with these recent announcements and ongoing conversations with other partners and customers, it's really given us the confidence that now is the right time to advance and expand further for Phase 2.

Doug, why don't you share a little bit about the space that we have planned for Phase 2.

It's worth highlighting the scale of the expansion. So when we first announced that we were going to build in Arizona and the United States, we targeted Phase 1 to be 33,000 square meters of clean room manufacturing space. The customer demand and really need for that in the United States has been very nice to see. And because of that, with our customers, we've moved forward with Phase 2, which is actually our Phase 2 is going to be larger than we were originally planning. So we're moving forward with 60,000 square meters of clean room space in Phase 2.

And that was about double what we originally were planning based on initial customer discussions. So when you look at the Arizona campus for Phase 1 and Phase 2, that will be 93,000 square meters of manufacturing space. If you were to do square footage, that's about 850,000 square feet of clean room space. So it's an incredible scale. On our campus, that's about 6, 7 miles from TSMC's campus that they're building in Peoria. We have 170 acres with Phase 1 and Phase 2. We still actually have room to build a Phase 3 on that same area in the future when we continue to work with our customers.

So I mean, it's important to understand what's really driving this. Obviously, supply generally in the market for advanced packaging is not -- our demand is much higher than supply. So that's what's certainly driving it. But what we've seen is customers really wanting to be in the United States. They want advanced packaging. Packaging is really the enabler of the semiconductor market at this point. It's where you take the memory and the silicon and make it into the advanced packaging for your advanced compute. So it's really something we're seeing from our customers, both current customers and discussions we're having. So the need is there. And because of that, we are investing much more than we were expecting, but we still believe that the -- for us, the risk is low based on what we're seeing in the market.

Great. And anything else you can offer in terms of dimensionalizing how much review that could ultimately support?

From a partnership, from a... .

Well, no, from the Arizona facility once Phase 2 is completed, in total, how much of that facility does that support in terms of revenue?

Yes. So we are still in the process of working through specific products, volumes, product lines. And so I would look at it as scaling similarly to what we've disclosed for Phase 1. And as a reminder, for Phase 1, we've currently shared that, that could be about $1 billion in revenue, greater than 30% margin. So I think for now, scaling that pro rata would be appropriate.

Excellent. Okay. Now you -- as I said, you held Investor Day back in March. You outlined a few strategic objectives. We just talked about one of them. But the other 2 technology leadership and partnerships we are -- you sort of referred to the partnerships. Maybe unpack those areas of the strategy. Maybe if you want to talk about the technology piece because that's the one piece we didn't cover so far.

Sure. Yes. So the strategic priorities are really what's centered around Amkor's growth. And I would say what we just talked about, the geographic diversification, that's really a differentiator for Amkor and what's driving our growth in Arizona. But stepping back on the strategic partnerships, I mean, in the -- I would say, historically, advanced packaging was planned very late in the process.

Today, with how advanced packaging is becoming more complex and an enabler for systems, that is where these partnerships are becoming deeper, longer term, more strategic. And you're seeing that in our announcements in the multiyear strategic announcements. And that's what's bringing more visibility into our -- not only our portfolio, but our road map. And so that pillar is really critical to our growth. The technology is really essential for everything to happen, especially with AI. We are developing systems with our partners in order to enable things that are going to support compute, and that is our fastest-growing market. So it's centered around the complexity of the architectures needed.

And I would say we're not just developing technology, but we're developing platforms around 2.5D, high-density fan-out. We have many engagements today in 2.5D. We also have engagements in high-density fan-out, development around bridge technology as well as co-packaged optics. And those 3 pillars are what we see are going to drive Amkor's growth, optimize our utilization, expand our profitability and ultimately bring shareholder value.

Great. Now from an operational perspective, sort of what's the 1 or 2 key strategic objectives you're going after in the next 12 to 18 months. I think I can kind of guess given our conversation just now, but maybe if I also sort of step back and look at investor expectations for your business in 2027, if you were to outperform, what would be the kind of key area of upside that you expect.

Sure. So our goal is to really help this supply constraint that everyone is seeing, specifically around advanced packaging. So it is critical that we execute on our high-density fan-out product launches that we have going right now. So that is what's really going to drive the scale and the volume. In addition, continuing to develop the next-generation technology around Bridge as well as co-packaged optics, that focus is one of our key priorities.

Second to that would be expanding space and optimizing our footprint. And so we're making some very intentional strategic decisions not only here in the U.S. but we are shifting and transitioning some of our products from Korea to Vietnam, SiP in order to enable more space for faster scaling in Korea, which is our center of excellence for this high-value advanced packaging. So together, those are the 2 focus areas for us. As far as upsides, that's really going to be centered around the speed that we're able to scale these products that can provide upside. And then I would say the level of engagement with our customers is unprecedented. And so what we're seeing with what they need for supply security and their level of commitment, that can also equate to upside.

Okay. One more high-level question for you. If we're back on stage here again in 5 years, what do you think is the one thing that investors are going to be most surprised at looking back?

I think we're all going to be surprised at the magnitude of the structural shift we're seeing for an advanced packaging-led era. The level of customer engagement and the duration of their agreements is unprecedented. And even though we're seeing that today, I don't think we're done. So I think that's going to surprise us.

Got it. Okay. Now sort of diving into your overall business trends more shorter term. Smartphones are still a pretty large part of your business today. I think a lot of people saw the memory price destruction in terms of unit demand occurring, but I think it's fair to say that a lot of people -- that what played out is a little different than what many people expected in terms of sort of an immediate kind of pull-in of builds, that's kind of what we got rather than sort of the immediate drop off. So maybe talk through some of the dynamics you saw for smartphones in the first half of the year? And how do you expect that market to play out into year-end?

Sure. Maybe I'll take that one. So communications smartphones is still our largest end market, and it's still a strategic path for us. So we continue to support that market. If you look at our percentage increase year-over-year, maybe first half over first half. So first half of 2026 was up 37% over the first half of 2025 in communications. So we definitely did see an increase. A lot of that is driven by the iOS ecosystem over Android. And some of that is related, obviously, to what you mentioned, memory is constrained and the pull-in of trying to get that built.

But when we look at communications, there's a number of factors that could dampen the second half for us. Certainly, if you look at memory constraints, that is something that is impactful. Our move from our SiP business units or business support from Vietnam -- sorry, from Korea to Vietnam will also affect some of the potential revenue in second half. That's strategic. We need to make sure we move that to Vietnam, which is a lower cost region. So we have more space in Korea to expand in higher-margin advanced packaging. So that's very important. And then the build cycles, we may see a different build cycle on iOS this year.

I think there's an announcement from them sometime this morning, which will highlight the details. But the combination of things, we may see a more muted second half, fourth quarter in communications, but communications for us still year-over-year is a growth driver. The content per phone, really the complexity that's being integrated in communications is something that is also driving our advanced packaging needs. So that's -- we see a muted second half, maybe a fourth quarter, but it's certainly a priority for us to continue to stay in that market.

Understand. And then looking into 2027, I think it's pretty hard to have a clear view on that market. But if the dynamics continue with DRAM prices moving higher, how do you think your customers are likely to react to that market environment? What do you think it means for your business and unit volume?

So we participate in both iOS and Android premium tier ecosystem. We've seen iOS being more successful in securing the material and the parts needed to support their premium tier. So I think that when we look in 2027, short-term memory cycles may dampen maybe short term, but the fact is that the material will be available for those that secure it. So I think that we'll continue to support the premium tier, we'll see maybe a modest impact.

Yes. Got it. Okay. Then on the computing market for a second. That's obviously been very strong for you, as we know, your revenue was up 20% sequentially in Q2. You're guiding for another 30% step-up in Q3. Maybe unpack some of the elements of the growth you're seeing between 2.5D packaging, high-density fan-out and CPU product.

So computing is our largest growth driver now and certainly going into the future. So it's a very important market. We invest heavily for it. We have customers who are securing allocations. So what's interesting is that the technology that we're using to support our customers, it's really quite diverse. And not all of it is high-density fan-out, bridge technology, there's a lot of flip chip, a lot of wafer services. If you look at Amkor's support of this market, we were supporting 2.5D over a decade ago, long before AI even was something. So we've been well positioned in advanced packaging technology for a long time.

So as we move forward, we continue to see demand for more complex packages. As complexity increases, we actually position ourselves in the market better than some of our competition because of that ability to support advanced packaging technologies really across the supply chain. So we see -- I think we saw a 30% growth year-over-year from a compute standpoint. We expect that to continue at the same trend going into 2027. So we are very optimistic in our compute placement. But also, this is another area we talked about where supply is not holding up to the amount of demand. So we have -- as the complexity increases, there's more opportunities for us to not only invest but keep our lines highly utilized.

Got it. So you think you can hold that kind of 30% growth rate heading for compute into 2027.

Correct.

Okay. Great. Megan, I think you talked about a strategic partnership with NVIDIA. We referred to it before over the next several years. I think they're going to make a prepayment of $1.5 billion to help you with your Arizona facility expansion. Maybe help us understand the scope of that agreement. What products it all covers and what shipments are expected to start?

Sure. So we're very excited about our partnership with NVIDIA. Again, this is just a testament to customers really wanting to shore up their supply. As Doug said, the imbalance is unprecedented. So this multiyear strategic partnership has really aligned a technology road map and also enabling our U.S. expansion. So we have not disclosed specific products. It also is not indicative of a revenue stream. It's actually the partnership in order to provide that supply security.

We have shared that as the services are provided to NVIDIA, that will then be applied to their services over time. So depending upon the production levels, the timing, the speed, that arrangement could be anywhere from 5 to 10 years. But it really is a testament in the confidence to Amkor and their confidence in us being able to develop this technology. We've already proven that technology. We have engagements in production today and expanding in this critical U.S. market to enable an end-to-end supply chain is what we're really achieving together.

Yes. And then, I mean, help frame for us like how much bigger do you think this could potentially be than the $1.5 billion. I realize that it's still very early days. You're still a little ways away from revenue, but 5 to 10 years, it's a big time frame, maybe dimensionalize for this -- that for us and help us understand sort of relative to the Arizona capacity expansion, I'm sure it had some impact.

Yes. So it's really showing that they're an anchor customer and that they are committed to us expanding in the U.S. So that $1.5 billion is really going towards the $12 billion of expansion. That's how I would frame it. It is not necessarily a revenue stream or what it could potentially be. But by having that anchor customer and having that partnership to develop the next-generation technologies, that's what's going to really grow Amkor. And as Doug mentioned, we'll keep our eyes on what further expansion may be needed in the U.S.

Maybe I can just add another piece to that. So the technologies that we're going to be using for a majority of our customers in Arizona aren't new technologies. They're not licensed technologies. They're technologies that we have developed in our Korea location that we're already ramping to HBM volume. So it's a transfer. So it will shorten the cycle to be able to bring our customers up in Arizona because we're essentially transferring known technology, known processes and known yields. And it's also -- I know we talked about the $1.5 billion from NVIDIA, but it's really not a single customer discussion.

We have multiple customers with known technologies. They are securing allocation. And as current products ramp in Korea, those products will come up in the United States and Arizona. New devices, next-generation will come in after that. And then as those ramp, they get through qualification, they ramp for production. That's where the revenue really starts coming in the U.S. But because we're leveraging existing technologies and existing processes with existing relationships with these large customers, we expect the United States or Arizona to come up much faster than it would be if it was an external transfer of technology or a brand-new build, say, greenfield that we're starting from scratch.

Okay. Let's talk about the competitive landscape for a second. In compute specifically, TSMC was very early with their CoWoS product. You've been a fast follower with your 2.5D packaging. You've seen strong engagement with high density fan-out. Now Intel seems to be making some good progress with their EMMT product that enables the larger panel sizes. So how should investors be thinking about Amkor's market position? And where do you think you have a particular right to win?

So I think it's safe to say that the compute market, in particular, is a fast-growing market. And the ability for OSATs, foundries, whoever is doing advanced packaging, for example, cannot keep up with the level of demand. So we believe that the market opportunity is growing, and it will continue to grow. As I mentioned earlier, we've been doing this for a long time. We have known technologies, and we believe we're well positioned in that when a customer has very expensive silicon, limited memory supply, limited substrates, they need to go to somebody -- to a company that can produce high output yield. And otherwise, they're not going to be able to make their output demand.

So we feel that we're positioned quite well in this area. Certainly, there's new technologies that are being looked at. We continue to path find and look at those technologies also. And we will be in position to support the market when the market is ready for an HBM solution. It really -- it would be foolish for the market not to look at different options of technology because -- again, because of the constraints. But at the end of the day, it has to be manufacturable. It has to be high yield, and it has to have low-cost options. And this is somewhere we're -- we've been involved with and we continue to be involved with, with the largest companies in the world.

Got it. And maybe just finally touch on the automotive end market. Help us understand where you see that business trending given some of the stronger trends you saw there in Q2 and you guided for Q3?

Yes. So automotive is a nice story. We saw really quarter after quarter of reduction in automotive. And certainly, there was supply constraints or not constraints, but there's actually oversupply in the market. But automotive is our second largest market of growth for Amkor behind compute. So we're seeing a number of different reasons. One, as you look at automotive, really the complexity of the packaging needed for automotive is increasing. So ADAS and infotainment, electrification, those are all driving advanced packaging solutions. So that puts us in a very good position.

Also, our wire bond mainstream business that we've had supporting automotive for a long time, that is also recovering. So we're seeing a good momentum on our automotive. We expect that to continue. And really, it comes down to automotive is a different market than some of the others in that the device lifespan is much, much longer. So it's harder to qualify. It's harder to make sure you secure sockets. But once you're qualified, once you have reliable partners, those parts could last decades. And so we see a lot of momentum both on our legacy business, but also on the new technologies that are driving more advanced compute within an automobile. So that's a very nice trend we're seeing on automotive.

Great. Now I wanted to kind of shift back to the sort of factory footprint side of things for a second. You sort of precogently outlined the rationale for the Arizona build-out, proximity to TSMC, but there's other customers there, too, including Samsung and some others. Maybe talk about beyond the U.S. manufacturing, how important is proximity to front-end wafer manufacturing as part of the strategy and specifically in Arizona?

Yes, I can start on that, and then if you would like to add, Doug. So as you know, we are in very close proximity to TSMC in Arizona. When we were looking for the right footprint, we didn't only look in Arizona. We did look nationwide. But ultimately, it provided all the right ingredients with respect to land, infrastructure, community, workforce, et cetera. And then I would say the cherry on top is we're within 6 miles or so of TSMC. .

So that does provide a lot of value with respect to feedback loop, cycle time, logistics, et cetera. So there is a significant amount of value in proximity. But as Doug mentioned, we are not exclusive to one foundry. We can support multiple foundries and other foundries in the U.S. are able to use Amkor and our customers want options as far as how they're going to manage their supply chain. So I would say it's important. It does provide value, and we're going to be able to support all front-end partners at our Arizona location. Anything to add?

No, it's a good point. I mean if you just look at silicon, a foundry makes silicon, ships it. We process the silicon, and we put it in a part in a device. And so that structure, it doesn't maybe matter as much. But when you look at processing partners and being able to take silicon, do some processing, maybe send it back, have them do some processing, send it back, do additional processing. The close proximity makes a significant difference. Going into a truck 5 miles down the road versus going on a plane across the world, that could benefit the supply chain for sure.

Okay. Great. And then in terms of what else is happening in your factory network, you talked about the rebalancing of making space in Korea basically moved from SiP to Vietnam, as you said before. What other changes should -- I mean, I think that caused a little bit of questions from investors this past quarter. So going forward, what other changes should we expect as you rebalance the factory network.

Yes. So it's all about centralizing our products, right? So we develop new technology in Korea, and then we want to make sure that we have economies of scale for efficiency, profitability, et cetera. So that's really what drove the strategic decision that has been planned for -- since the beginning of Vietnam to centralize our SiP business. And it takes time.

Our customers need to move those products. That's what's creating a little bit of noise in this transition during Q3. As far as the rest of our factory network, we are continuing to expand outside of Arizona and Korea. We do have programs that are being expanded in Taiwan, which is a very important market for advanced packaging, but that's within the footprint. We also are expanding our advanced packaging capacity in Portugal. And Europe is also a very important region where customers are requiring regionalized support. And so that trend of geographic flexibility is we're seeing everywhere, not only in the U.S., but in Europe, in Asia. So all of those things are what's contributing to our decision. But no other major, I would say, changes in our footprint at this time.

Got it. Okay. Then at your Investor Day, you laid out financial targets for 2030, pretty ambitious targets, revenue over $11 billion, gross margin, 22%, earnings per share, $5. So maybe walk us through some of the elements and how you expect that revenue growth story, in particular, to sort of unfold off the larger base business you've got this year?

Yes. So that growth up to the $11 billion plus, there's really 2 contributors to that. The primary contributor is what we're seeing as far as the growth in AI and our compute business. That is, as we mentioned, over 30% in '26. We see similar growth into '27. That is the primary driver for that growth up to $11 billion. The second factor will be bringing on the Arizona facility.

And we have shared that time line as far as when we'll begin production in '28 and how that will scale and expecting that to be at full capacity by 2030, that will add about $1 billion to that growth for our revenue. The announcement for Phase 2, the timing for Phase 2. We anticipate breaking ground by the end of next year. That will then be a 2-year construction period. So we'll begin producing in 2030. So I would say there's some upside to 2030, but it's all dependent on the speed of the construction and the production ramps of our customers.

Got it. Okay. Now at the same time, on the gross margin side, you've talked about some of the dynamics of dilution as you ramp Arizona. I think you said you're also absorbing the start-up costs into OpEx initially until products get qualified, then they hit gross margin. So maybe help us understand the moving parts between OpEx and gross margins for '27 and '28.

Sure. So this is the same framework that we had when we opened our flagship K5 facility as well as Vietnam. When construction completes and depreciation begins on the building as well as other preparations for workforce, and production, those costs are in operating expenses. And so we would anticipate that we would start to see that -- those prep costs in '27 after we finish our construction of Phase 1.

We have shared that, that could have a dilution factor of 1% to 2% on operating income margin. Once we begin to qualify a program, those costs then move into cost of goods sold. So they'll still be in our op income margin, but they'll transition probably into '28 into COGS, and therefore, you'll see some of that dilution in gross margin. But that's going to improve as we scale to build the scale of the facility, and then we will have an accretive performance in 2030 once we pass that midpoint, which we believe the transition will be in '29 and then into 2030 at full scale.

2030 is when the gross margins for Arizona get accretive.

Yes. They'll start to be accretive exiting '29. But for the full year, it will most likely be neutral. .

Excellent. Then finally, just thinking about some of the free cash flow and CapEx dynamics investors should be watching for over the next 18 months or so. Sort of remind us of how you're thinking about those issues, especially in the context of Phase 2. And then how you think about buybacks and debt paydown over the, say, the next few years?

Sure. So we did announce that we have increased our investment in Arizona from $7 billion to $12 billion. that's really centered around refining our estimates around Phase 1 as well as the scale of what we're planning to build for Phase 2. So that $12 billion is a multiyear investment. Obviously, we've given our '26 guide. We're not going to be giving '27 guide or whatnot.

But to give you a flavor for how to think about that investment in the next '26, '27 is the finishing the construction of Phase 1. Beginning in '28, you're going to have a little bit of a stack. You're going to have the equipment coming on for Phase 1, but we're also going to have the construction of Phase 2. So I would see that the years '28 and '29 will be peak CapEx outlay of our investment in Arizona. And then when you get to '29 and '30, that will just be the equipment for Phase 2.

So to try to bring some magnitude to that, for the $12 billion, we would anticipate about 10% to 15% of that in '26 and '27. That will step up to about 20% to 25% in '28 and '29. And then when you get into 2030 and 2031, that will step back down to 10% to 15%. So it's a bell-shaped curve is how you would want to think about our investment in Arizona. So over time, with that investment, there will be some pressure on free cash flow. But we do see that as Phase 1 starts to ramp and becomes fully utilized in 2030, that's really going to provide an earnings engine that will help support the onboarding of Phase 2 as well. You asked about buybacks and priorities.

We did announce a buyback program. We expect to modestly execute on that really to offset dilution to stock-based compensation. And then as I think about debt priorities, our current debt levels are reasonable. Our leverage is reasonable. We will continue to have incremental debt capacity as our business expands, and we will keep our eye on our long-term goal of 1.5x or below for leverage.

Excellent. I think we're -- with that, we're basically out of time. But thank you very much, Megan and Doug for being here. We appreciate it.

Thank you.

Good day, ladies and gentlemen, and welcome to the Amkor Technology Second Quarter 2026 Earnings Conference Call. My name is Diego, and I will be your conference facilitator today. [Operator Instructions] 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.

Good afternoon, and welcome to Amkor's Second Quarter 2026 Earnings Conference Call. Joining me today are CEO Kevin Engel 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 reconciliation to the comparable GAAP financial measures in the slides. We will make forward-looking statements today based on our current beliefs, assumptions, and expectations. Please refer to our press release for a disclaimer on forward-looking statements and our SEC filings for a discussion on the risk factors and uncertainties that may affect our future results. I will now turn the call over to Kevin.

Thank you, Jennifer. Good afternoon, everyone. Thank you for joining. Amkor delivered a strong quarter, achieving Second Quarter revenue of $1.9 billion, up 26% year-on-year. Revenue growth was broad-based across our business with all end markets increasing year-on-year. Record revenue in Computing as well as Automotive Industrial markets reflects the strength of our customer engagements and the increasing value of the technologies we provide. Both advanced and mainstream revenue increased year-on-year with mainstream achieving its fifth consecutive quarter of year-on-year growth. This continued improvement demonstrates the breadth of demand across our portfolio and strong execution by our global teams.

Earnings per share was $0.70, a significant increase from the prior year, reflecting the benefits of higher utilization. These trends contributed to stronger profitability and are beginning to demonstrate the benefits of our strategic investments. The first half of 2026 highlights the breadth of demand across our business. Revenue increased 26% year-on-year with growth across every end market. Communications led the increase supported by strength in the iOS ecosystem. While Computing, in addition to Automotive and Industrial, each delivered strong double-digit growth driven by advanced technologies and increasing semiconductor content.

Consumer improved as demand continued to recover across a broad set of applications. Importantly, growth has not been limited to our advanced product portfolio. Mainstream revenue increased 21% during the first half of the year, and the overall average utilization percent improved from the 50s into the 70s across our manufacturing network. Several technology platforms are now operating at full capacity, reflecting strong demand and improved loading across the business. At Investor Day, we outlined a clear path to increasing earning power through higher utilization in a richer mix of advanced packaging technologies. The progress we achieved during the first half reflects disciplined execution against that strategy and reinforces our confidence in the long-term opportunities.

Semiconductor demand remains robust particularly in AI data center applications where packaging complexity and performance requirements continue to increase. As advanced packaging becomes increasingly strategic, customers are placing greater emphasis on manufacturing scale, technology leadership, and supply chain resiliency. Our global footprint and deep customer relationships position us well to support this evolving requirements. As demand continues to accelerate across AI and HPC applications, we are optimizing our manufacturing network to align capacity with the highest growth opportunities. This approach supports additional participation in high-value Computing applications while improving the overall mix of the business over time.

Now, let me share an update on our strategic initiatives. I'll begin with our first pillar, enhancing strategic partnerships in key markets. As we discussed during Investor Day, advanced packaging has become increasingly critical to enabling next-generation semiconductor technologies. As packaging complexity increases, the development cycle lengthens. Customer engagements occur earlier in the design process and extend across multiple product generations. These dynamics create deeper partnerships, improve planning visibility, and enable closer alignment on technology roadmaps and capacity requirements. Recently, we announced two significant partnership agreements that demonstrate this trend.

First, we announced a 10-year advanced packaging agreement with TSMC. The agreement establishes a framework to expand advanced packaging and test capacity while strengthening the U.S. semiconductor supply chain. Together, we are working to provide customers with more integrated manufacturing solutions, spanning advanced silicon fabrication through advanced packaging and test. By combining TSMC's leading-edge wafer fabrication capabilities with Amkor's advanced packaging and test expertise, we are helping build a more resilient semiconductor ecosystem in Arizona and enabling faster time to market for our customers. We also announced a multi-year strategic partnership with NVIDIA. This agreement focuses on advanced packaging and test supporting next-generation AI infrastructure.

This collaboration aligns long-term technology roadmaps, supports expansion of advanced packaging capacity and reinforces the important role advanced packaging plays in enabling computing platforms. While these agreements are important individually, together they demonstrate a broader industry transition. As advanced packaging moves onto the critical path of system performance, customers are seeking deeper engagement, earlier collaboration, and longer-term alignment with strategic partners. These types of partnership agreements are not unique to the U.S. supply chain as we have several Asia-based agreements. These capacity discussions outside of the U.S. manufacturing are building a high level of confidence in our long-term loading in our Asia facilities. Across our global footprint, customer engagements increasingly include longer planning horizons, capacity alignment discussions, and other forms of investments to help facilitate further growth.

The level of long-time collaboration and visibility we are experiencing today is meaningfully different from previous industry cycles. Beyond these announcements, we continue to strengthen relationships across the semiconductor ecosystem, including foundries, fabless companies, integrated device manufacturers, hyperscalers, and OEMs. As we help our partners achieve their technology and growth objectives, we continue to deepen relationships that create value for both parties and support durable multi-year growth opportunities for Amkor. Our second pillar is elevating our technology leadership. Our investments in advanced packaging and test platforms position Amkor to participate in early co-development activities that customers increasingly require.

We continue to see growing customer engagements across our leading edge packaging and test technologies with active programs spanning 2.5D, high-density fan-out, and emerging technologies such as co-packaged optics. These engagements extend across AI infrastructure, high-performance computing, and network applications, reinforcing our confidence in the durability and growth potential of our technology platform across our global manufacturing footprint.

These high-value advanced packaging platforms are being adopted to support increasingly complex computing architectures. We are engaged in several HDFO programs this year, and our newest data center CPU program began ramping in Q2 and is expected to continue scaling throughout the second half of the year. By combining advanced packaging and test capabilities through turnkey solutions, we can reduce cycle time, accelerate product ramps, and improve execution as packaging complexity increases. This integrated approach strengthens our competitive position while enabling the scalable and repeatable manufacturing requirements to support demand for next-generation AI and high-performance computing.

Our third strategic pillar is disciplined and intentional expansion of our global footprint. This pillar is about more than just adding capacity. It's about providing customers with geographic flexibility, supply chain resiliency, and regional execution where they need it most. Phase 1 construction of our Arizona facility continues to progress and remains a key component of our long-term growth strategy. The facility is designed to provide high-volume advanced packaging and test capabilities in the United States and support growing customer demand for regional semiconductor manufacturing. Our projections now show Phase 1 as fully committed, and we continue to evaluate future expansion plans as part of our long-term strategy to align our capacity with our customers' operations.

In Korea, construction remains on schedule for completion of a new assembly and test building on our Songdo campus by the end of the year. Planned expansion is also underway on our Gwangju campus where we expect incremental manufacturing space will provide cleanroom capacity to support data center and advanced packaging growth opportunities in 2028 and beyond. To round out our expansion plans, incremental cleanroom expansion and equipment installations are underway in Vietnam, Portugal, and Taiwan. In Vietnam, we are continuing to build out of our facility through a phased expansion approach as we increase SiP and NAND memory capacity to support Communications and Consumer end markets.

The SiP move from Korea to Vietnam enables additional capacity for our rapidly scaling Computing programs in Korea. The semiconductor industry is undergoing a structural transition as advanced packaging becomes increasingly critical to system performance and value creation. This transition is driving greater packaging complexity, deeper customer engagement, and increasing demand for regional manufacturing capabilities. Success in this environment requires scalable technology platforms, strong strategic partnerships, and geographical flexibility. Our strategy is intentionally aligned with our customer demand and industry trends, and we believe our execution against these priorities position Amkor to capture significant long-term opportunities, increase our earnings power, and create sustainable long-term shareholder value.

I will now turn the call over to Megan to provide more details on our Second Quarter performance and near-term outlook.

Thank you, Kevin, and good afternoon, everyone. Amkor delivered record Second Quarter revenue of $1.9 billion, a sequential increase of 13%, outperforming the high end of our guidance. Revenue upside was driven by strong demand within the Computing and Automotive and Industrial end markets. High factory utilization and favorable product mix contributed to results exceeding our expectations across gross margin and EPS. Revenue in the Communications end market increased 6% sequentially driven by double-digit growth in the iOS ecosystem. Android revenue declined 20% reflecting the impact of memory supply dynamics.

For the Third Quarter, we expect Communications revenue to decline in the high single digits sequentially which is a departure from the typical seasonal patterns. This outlook reflects three primary factors: first, the strategic initiative outlined by Kevin to move SiP to Vietnam; second, ongoing memory supply constraints; and third, build pattern changes. Communications remains the largest end market for Amkor and a core component of our long-term strategy.

Our global manufacturing footprint provides the flexibility to support both next-generation mobile platforms as well as rapidly growing Computing applications, aligning capacity with evolving customer requirements. Revenue in the Computing end market reached a new quarterly record in Q2, increasing 20% sequentially, driven by growth across a broad customer base for data center applications. Computing growth is expected to accelerate to nearly 30% sequentially in Q3, driven by AI data center demand and the HDFO CPU ramp Kevin referenced earlier. Revenue in the Automotive and Industrial end market also achieved a new quarterly record increasing 17% sequentially.

ADAS was the primary driver of growth supported by higher semiconductor content and strong demand for advanced packaging in next-generation vehicle platforms. Revenue within the Automotive and Industrial end market is expected to grow mid-single digits sequentially in Q3. Consumer revenue increased 15% sequentially due to broad-based demand across customers primarily within IoT applications. Revenue in Q3 is expected to grow in the mid-teens percent sequentially driven by continued strength in IoT demand. Across the portfolio, demand remained robust for our high-value advanced technology platforms supporting record revenue and improved profitability during the quarter.

Gross margin was 16.8%, expanding over 250 basis points sequentially. Gross profit for the quarter was $319 million, up 33% compared to Q1. Operating expenses for Q2 came in as expected at $119 million and included a $21 million gain on the sale of real estate. Operating income was $200 million, and operating income margin was 10.5%. Our effective tax rate for the quarter was lower than expected at 14% due to $14 million in net discrete tax benefits. Net income was $174 million, and EPS was $0.70. EBITDA was $400 million, and EBITDA margin was 21%. As Kevin discussed, our first half performance reflects strong execution across the business. Revenue increased 26% year-on-year, producing a record first half. Gross margin expanded 360 basis points.

Operating income more than doubled and earnings per share more than tripled compared to the first half of 2025.

The magnitude of these improvements demonstrates the leverage in our financial model as revenue scales and factory utilization improves. In early May, we issued $1.15 billion of 0% convertible debt, resulting in an increase in cash, liquidity, and total debt. This financing provides additional flexibility to support our strategic growth initiatives as we progress through our current investment phase. As of June 30, we held $2.5 billion in cash and short-term investments, and total liquidity was $3.6 billion.

Total debt was $2.5 billion, and our debt to EBITDA ratio was 1.8x. Now turning to our Third Quarter outlook. Accelerated growth in Computing and continued momentum in Automotive Industrial are expected to drive another solid quarter of revenue and improved profitability. Q3 revenue is expected to be between $1.95 billion and $2.05 billion. Gross margin is projected to be between 18.5% and 19.5%, driven by a richer mix of advanced technologies and continued operating leverage across the business. We expect operating expenses of approximately $140 million. Our full year 2026 effective tax rate is expected to be around 20%.

Net income is forecasted to be between $180 million and $205 million, resulting in EPS between $0.72 and $0.82. Our estimated 2026 CapEx spend remains between $2.5 billion and $3 billion. Approximately 65% to 70% is projected for facilities expansion, including Phase 1 of our Arizona campus. About 30% to 35% is projected for HDFO, test, and other advanced packaging capacity. The remaining spend is projected for R&D and quality programs. In closing, as the business scales, we expect that disciplined execution will continue to strengthen our financial performance. We delivered record Second Quarter results, and our strong Third Quarter outlook reflects our continued focus on our strategic initiatives. This concludes our prepared remarks. We will now open the call up for your questions. Operator?

Thank you. [Operator Instructions] And our first question comes from Randy Abrams with UBS. Please state your question.

Okay, thank you. Hey, I wanted to ask the first question on the smartphone outlook where I believe you're guiding down versus normal. You get the PCs and iOS builds. Could you go through between Android and iOS your expectation? And also, you mentioned one factor was the SiP moving to Vietnam. If you could discuss that, that is a timing that as you do the transition, it's a 1-quarter delay, and you ramp up later? So maybe as part of that, you could discuss implication with the lower Third Quarter base if it swings the buildup in Fourth Quarter.

Okay, thanks, Randy. It's good to hear you. So as Megan kind of went through, you can think of a few different dynamics going on, and I'll kind of touch on all 3 of them. Two of those, I would say, are more market-driven type dynamics, and then one that Amkor has a little bit more control of. So if you think of the market-driven dynamics, I think there's two buckets there. There's obviously material constraints. You can think of that related to memory and then memory pricing and potentially how that affects the end market, the selling of the phones per unit volume. And then the other is just typical build patterns that we're seeing. So I'd say that's probably about 50% of what we're seeing from a typical type of seasonal Q3 lift.

The other 50% would be driven by, again, this SiP move and you can think of that a lot about -- we've been very focused on our operational efficiencies. And one component of that is working on getting the right products that are in the right locations so that we can scale and really be efficient with those products over time. This helps us obviously stay competitive longer term, and it helps us also to optimize our cost structure at the same time. So you're right, this move, there's a little bit timing. We've been -- over the past year plus, we've been working with all of our SiP customers to migrate the products into Vietnam to really build the efficiency and scale in that Vietnam facility. And then on the flip side of that, as we move those products out of Korea, that's freeing up space for us to continue to scale our high-value advanced products.

Then the last part of the question, thinking about Android versus iOS. We're definitely seeing demand components in both of them. Megan highlighted for Android, even in Q2, we started seeing some weaknesses. I'd say we continue to see that moving forward, mostly driven again by materials and overall demand. And then iOS, a little bit different dynamics there. But again, overall, if you look at GFK and Gartner, they would expect unit volumes to be down this year. So we're definitely seeing some of that.

Okay. I appreciate the color. And I'll just ask one quick follow-up on that one. But just to be -- if that's an issue that is a 1-quarter timing, and you pick back up some of that half that has or that something may extend through this cycle, and then you kind of pick up more later? And then the second question, I wanted to ask on inflection of Computing. It looks like a very strong ramp of this initial big CPU project. Could you talk about pipeline where at the Analyst Day, you talked about other projects like the fan-out bridge, your expectation and where you see that coming in over the next year and how the pipeline is expanding into 2027?

Yes. So I think everything that we've announced related to all the individual products -- or projects for 2.5D, we talked about 11 customers, a lot of different programs. For HDFO, we talked about 5 customers, 10 active engagements. Across all of those, we still see traction to have 4 of these -- 4 in each, 4 2.5D, 4 HDFO products launching this year. The CPU program that we've been talking about most recently ramping today is definitely the largest from a scale perspective. And then the other ones will continue to ramp up throughout the course of the year.

If I think forward, you mentioned bridge-type technologies, again, that would be more of a 2028 type timeline. So still a little bit of time to go there. And then coming back to the SiP dynamics with the move in this one quarter, if we look across all the customers that are migrating, there's a lot of different phases that the customers are in. Some of them are already in volume production today. Others are ramping today. Others are in qualification. There is one application space where we see that this headwind will last longer. So it's not a 1-quarter dynamic. It's probably going to extend into Q4 and even into the first half of next year.

[Operator Instructions] Your next question comes from Craig Ellis with B. Riley Securities. Please state your question.

Thanks for taking the question. I wanted to start just by making sure I understood the SiP issue that Randy dug into as it relates to impact around the Third Quarter where your guidance is clear as you get ready for that transition. Was there any communications benefit in Q2, and as we look at the Fourth Quarter? Kevin, can you speak more specifically to what we should expect coming off of this initial impact with SiP move?

Okay. So first, I would say -- I wouldn't say there was any benefit for Q2, especially related to this transfer. I think we potentially saw a little bit of pull-in into Q2 in general, but I wouldn't say that was related to this transfer. If we look forward to Q4, we would expect that communications in general will continue to have some good terminology, but maybe a little bit of softness. So we wouldn't expect to see a significant lift like we typically would in the second half even going into Q4.

Okay, that's really helpful. Thank you. And then the second question is related to the NVIDIA agreement. So congratulations on signing an agreement that seems very significant. The question is this, as you do R&D work to develop technology with that partner, what should we think of as the impact to R&D and operating expense? And when would that happen for the technology development work? And then what's the timing on the $1.5 billion in receipt for that partnership? And when does it come onto the balance sheet? Thank you.

Okay. Thanks, Craig. I'll take some of that, and then Megan can add in. So first, around R&D. So I would say there's no step function change in our standard engagements for high-value advanced packaging versus this agreement with NVIDIA related to our R&D activities. So it's not like I would expect some huge step-up. We continue to work with all of our customers related to advancing the next-generation technologies. Typically, we spend between 3% and 5% of our capital on R&D activities. I would expect that level to continue. Related to timing, so the structure here is that this is a prepayment that would basically be received in 2027 and returned back to the customer as we provide the services in the U.S. So with that, the longevity of agreement can fluctuate a bit, we would expect it to be between 5 to 10 years.

And your next question comes from Ben Reitzes with Melius Research. Please state your question.

Hey guys, thanks a lot. Can we bridge the gross margin going up at the midpoint, 220 basis points sequentially? What's the impact of the SiP in that? And what is the utilization expectation as we go from Q2 to Q3 to get that much improvement? Thanks.

Ben, so Megan will provide a lot more detail on the numbers, but I just wanted to add a little bit of background or color. When we think about utilization, so again, in Q1, we were in the 70s. In Q2, we were in the high 70s. I think when we're working on moving the assets from Korea over to Vietnam and in some cases, incrementally adding additional assets, you can imagine there's assets in flight between cradling them up in one location, shipping them to the other location, uncradling, qualifying.

So to me, that's kind of stalled capacity that we're not really thinking about. So if we take that piece off the table, then I'd say utilization across the board is pretty high. Especially for the advanced application spaces, very high utilization. We still have some buckets of open capacity in some of our mainstream, even though we've seen improvements there, especially in the Philippines. So utilization overall is definitely on the profitability side, and then I'll let Megan comment on any additional color.

Ben, specific to SiP, we actually had an increase in our overall SiP portfolio between Q1 and Q2. So when you look at that over 250 basis point expansion, I would characterize two-thirds of that expansion was volume or utilization related, and one-third was favorable product mix. And so with that, we're getting great profit expansion at the gross profit line. Operating income is also increasing 100%, and EPS increased 100% as well with the fall-through.

Yes, sorry. So then going into the Third Quarter, bridging to the guidance, what is the impact of those issues, both utilization and the SiP issue, to get the big increase for the Third Quarter?

Yes. So Third Quarter, predominantly the impact on that gross margin expansion is related to product mix. We are having a very steep accelerated ramp in our compute portfolio. And then with the decrease in Communications, that is the dynamics around the product mix shift driving that profit expansion.

Your next question comes from Denis Pyatchanin with Needham & Company. Please state your question.

Great. Thank you very much. So I also had a question about gross margins, but it seems like it may have been partially answered already. So maybe you could just clarify a little bit about the mix and utilization impact. So going from Q1 into Q2, did I correctly understand that it was about one-third mix and two-thirds utilization? And then going from Q2 to Q3, the mix would be the bigger driver of the upside?

That's correct, Denis.

Wonderful. And then let's see for my follow-up, just about the kind of revenue dynamics between Q2 and Q3. Would you be able to say if there were any pull-ins from Q3 into Q2 on which technologies? Because it seems like the revenue did come in a little bit higher than some expectations perhaps, but I wasn't sure if there was things shifting around or if there was no activity like that.

Yes, I'll take that. So nothing obvious, no obvious pull-ins. Like I mentioned earlier, there could have been some comms pull-ins. But across the other markets, we did not see any pull-in dynamics there.

Understood. I think that's it for me. Thank you very much.

Your next question comes from Steve Barger with KeyBanc Capital Markets. Please state your question.

Hey, thanks. Over the past few years, in Q4, the gross margin steps up sequentially from Q3. And from where you're guiding this Q3 at 19%. So as the volume ramping compute and auto, and that's offset by some Communications weakness, is there any reason that we should think the seasonal pattern would be different this year? Do you expect that step up? Or how would you expect that to play out?

I would just say that it will be dependent on the mix. Mix and utilization are going to be the two primary drivers. If the utilization continues to remain high, and the mix stays about the same, we wouldn't expect any significant deltas from Q3.

Okay. The reason I ask is if you do get that same gross margin or a little bit better, if my math is right, you're going to end up this year around 17.5% gross margin, and an EPS would be plus or minus $2.50, which is where the 2028 targets were from the Analyst Day. So can you just frame up how you expect this year to play out versus 2027 and into that 2028 target just to help us think about that cadence?

Well, I think your math is right. So then it just comes down to next year, we need to be thinking about the U.S. manufacturing burden. So that's going to be a headwind. So we need to continue to -- when we looked at our longer-term targets, we tried to contemplate the headwinds from the U.S. that will be a drag for a little while.

The operating margin dilution from the depreciation?

Yes, Megan can.

Yes. And in '28, we will also have some of that in gross margin. So that's part of the bridge that you're trying to understand is why would '28 match '26 because there will be ramping underutilized Arizona manufacturing in both gross margin and operating margin in 2028.

Understood. Thanks.

Thank you. And at this time, I'm showing no further questions. I would like to turn the call back over to Kevin for closing remarks.

Thank you for your questions. Now for a recap of our key messages. Amkor delivered record Second Quarter revenue of $1.9 billion with record Computing as well as Automotive and Industrial revenue. We saw year-on-year growth across all end markets. The first half of 2026 performance demonstrates the strength in our customer partnerships, technology leadership, and a global footprint strategy.

Demand for advanced packaging continues to expand, and our advanced packaging programs remain on track to support growth in the second half of 2026. Recent strategic partnerships with TSMC and NVIDIA reinforce the increasingly critical role advanced packaging plays and strength of our long-term growth opportunities. We are executing with discipline against our strategic priorities and remain confident in our ability to create long-term value for customers and shareholders. Thank you for joining the call today.

Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Ladies and gentlemen, welcome to the stage Vice President of Investor Relations, Jennifer Jue.

Good morning, everyone. Welcome to Amkor's 2026 Investor Day. Thank you for joining us here in person and online. Before we begin, please note the safe harbor statement on the screen. Today's presentation includes forward-looking statements that are subject to risks and uncertainties, and we may reference non-GAAP financial measures. Reconciliations and additional disclosures are available in our SEC filings as well as on our website. We have an exciting agenda plan for you today, designed to be a forward-looking discussion on how the semiconductor industry is evolving, and how Amkor is positioning itself to drive long-term shareholder value.

We'll discuss our strategy across deeper customer partnerships, technology leadership and an intentionally built global footprint. You'll hear from several members of our management team this morning. Our President and CEO, Kevin Engel, will begin by framing the industry context and Amkor's strategy to lead the next era of advanced packaging; Farshad Haghighi, our Chief Sales Officer; will then discuss how customer engagement is evolving as we enhance strategic partnerships in key markets; Doug Scott, our advanced and mainstream technology leader, will walk through how we are elevating technology leadership with advanced packaging.

After a short break, Doug will return and to discuss our expanding geographic footprint and how that supports customer requirements for scale, resiliency and flexibility. Our CFO, Megan Faust, will then connect how we're turning strategy into earnings power. We'll conclude our presentations with a Q&A session featuring all of our presenters.

Kevin will then close out the program with why we believe Amkor is well positioned for long-term growth and value creation. For those of us joining here in person, will then host a leadership luncheon for continued discussion with our executive team.

With that context, I'll turn it over to Kevin to get us started.

Thank you, Jennifer. Good morning, everyone. This is our first Investor Day in almost 20 years, really pretty amazing. But before we begin, I'd like to take a moment to talk about our decision to have an Investor Day. First, the semiconductor market is undergoing massive expansion driven by technology and AI demand. Our addressable market is expanding along with it. It's important that you understand our strategy, our growth targets and the steps we're taking to deliver long-term sustainable growth.

As CEO, it's important that the investment community has access to me and understands a bit of my background that has shaped my style. I wasn't exposed to the semiconductor industry until after college. I was working for a consulting company, helping to design a gas distribution system for Mitsubishi Semiconductor. I was amazed by the clean manufacturing environment and the complexity of the tools and processes.

That introduction to the semiconductor space changed the course of my career. From then on, I was hooked on the technology. Not long after that, almost 30 years ago, I took a process engineering job at National Semiconductor. After all these years, I still love this industry. It's driven by continuous advancement in a never-ending pursuit of what's next. It requires leaders that can look ahead and make bold moves to stay in the game.

At Amkor, we see an industrial shift underway. A shift is making [indiscernible] advanced packaging central to value creation over the next decade. The semiconductor industry has entered an advanced packaging-led era. For decades, performance gains came primarily from transistor scaling. That dynamic is changing. Today, the most demanding systems, particularly in AI and high-performance computing, depend on multiple pieces of silicon being integrated together by the package.

In that environment, advanced packaging has moved on to the critical path of system performance and delivery. Packaging is no longer a downstream manufacturing step, it's increasingly pulled earlier into system architecture and design. This is the structural shift that we're focused on and one that we believe we're uniquely positioned to capitalize upon.

Let's talk about the elements that frame our strategy. The first is what it takes to win in this environment. Today, customers depend on deep supplier engagements earlier in the development cycle, coupled with proven technology platforms and a supplier with a global footprint that can deliver resiliency. And that is exactly who Amkor is. The second is how we're investing today to capitalize on the future of packaging. We're investing to scale because this advanced packaging led era has high value and is high investment. Winners of tomorrow are investing today to provide scale and technology quickly to capture primary market share. This is a deliberate multiyear investment decision that will create long-term customer and shareholder value. In this shift, it's being driven by several forces.

First, growth in the semiconductor market is strong. Not long ago, the industry expected a $1 trillion semiconductor market by 2030. That timeline has been pulled forward to 2026 by AI-driven demand; second, this is a technology transition that is underway. Most of you are familiar with Moore's Law. Moore's Law is an observation that transistor density would double every couple of years. Transistor drove system performance for years. This scaling has become harder and more expensive. So today, performance gains increasingly come from package architecture and integration. That pulls packaging earlier into the design path; and third, the supply chain is evolving. Customers are redesigning supply chains around resiliency, security and geographic flexibility.

That's how programs are planned, where manufacturing needs to happen and how partners are selected. When these forces converge, advanced packaging moves on to the critical path. And it's increasingly the packaging content per end system is increasing. With growth, technology transition and supply chain evolution coming together, our strategic direction is straightforward, an advanced packaging led era requires 3 things to scale together. It requires technology and advanced packaging platforms that are manufacturable, repeatable and reliable at high volume. It demands earlier and deeper customer engagements. Packaging decisions are increasingly made upstream and system design. Winning isn't about spot capacity. It's about being embedded early and executing consistently and finally, it come in with geographic flexibility. The ability to deliver those platforms with scale and resiliency across geographies where customers need them. And this is how Amkor wins, scaling technology, deepening partnerships and building a footprint designed for flexibility and geographic delivery.

In this advanced packaging led era, content per end system is structurally increasing as AI continues to move towards chiplet-based architectures, advanced packaging content per end system increases driven by tighter integration requirements, more complexity and greater system-level performance. AI accelerators, as an example, are increasingly built using multiple chiplets, integrated with high-bandwidth memory. Chiplets and HBM drive larger package sizes and increases package complexity.

In these architectures, advanced packaging capacity and execution are increasingly a gating factor. Even when wafer supply is available, system delivery depends on advanced packaging that can execute reliably at scale. Let's take AI adoption as an example. AI drives the most advanced packages with high complexity. And today, global packaging capacity is constrained. Data center scaling is increasing at a rate of over 20% annually as measured in gigawatts of capacity. The OSAT TAM is approximately $0.5 billion per gigawatt. That translates to an increase in TAM of over 3x over the next 4 to 5 years. This is a significant opportunity for Amkor. Our strategy embeds the structural shifts into execution and ultimately shareholder value. Our strategy is organized around 3 pillars. And importantly, they're designed to scale together. First, we're focused on deep customer partnerships because packaging decisions are moving earlier in the system design, customer engagements happen earlier, and the planning horizon extends. Value is created through alignment, execution certainty and the ability to support customers across multiple programs over time. Second is technology leadership. And advanced packaging becomes more system defining, customers need platforms that can execute reliably and repeatedly at scale.

Early co-development, proven technology scaling from concept to HBM and and turnkey execution is how we earn the right to participate in the most demanding programs. Third is the build-out of our global footprint. When packaging sits on a critical path, delivery proximity matters just as much as technology. Customers increasingly require regional execution, resiliency and geographic flexibility. Amkor's footprint is deliberately built to meet these needs at scale. And these strategic pillars are connected. Technology enables the solution. partnerships secure participation. and footprint delivers execution.

That's how we're positioning Amkor to win, to capture increasing advanced packaging content per end system and to do so in a way that supports durable multiyear value creation. In this slide, you'll see our financial framework. It also reflects the strategy as it scales. We're approaching this through a disciplined 2-phase model. The first phase is invest and ramp. This is where we are today, bringing capacity online, scaling capacity and scaling advanced packaging platforms and aligning our footprint to customer needs. This is a deliberate investment.

The second is ramp and leverage. As programs move from a ramp to high volume, utilization improves, the mix shifts towards higher value advanced packaging and productivity builds across the footprint. That's when the earning model strengthens. Taken together, this framework reflects a deliberate strategy to scale Amkor into a materially stronger earnings model over time, resulting in anticipated revenue growth of over $11 billion, gross margins over 22% and more than a 3x increase in EPS. I want to emphasize 2 points: First, these targets are underpinned by the structural drivers we just discussed. Advanced packaging content per end system, earlier customer engagement and execution of scale; second, this is not a single year outcome. It's a result of a multiyear strategy executed with discipline. Megan will walk you through this framework in detail.

Let's talk about how our revenue mix shifts based on our strategy and market trends. On the left, you'll see Amkor's percent of revenue by end market in 2025. Historically, communications has been our largest market. In 2025, it represented 46% of our revenue. In the middle, you'll see our market projection growth rates using Gartner as a starting point. We expect our all markets to grow, but at slightly different rates. We expect computing to grow faster than market. Communications and Automotive to grow with market and consumer to lag slightly as this area becomes more commoditized.

Our strategy enables us to capture more opportunities as these markets grow. Over time, we expect this mix to shift to the right. Computing grows at a faster rate and becomes a larger portion of our revenue mix. And these high-value packages bring incremental value to Amkor. Finally, I want to highlight something just as important as strategy and targets, the team accountable for delivering them. The strategy is being executed by an experienced leadership team with a deep background across advanced packaging, global manufacturing, operations, supply chain and financial discipline. You'll hear from Megan, Farshad and Doug today. Importantly, this team is aligned to execute on our strategy. I want to express my gratitude to them and the thousands of our colleagues working together to deliver on our customer promises. Let me close by reinforcing 3 key takeaways that frame our strategy.

First, the semiconductor industry has entered a structural shift. Advanced packaging has moved on to the critical path of system performance, integration and delivery. This makes our role in delivering our promises even more critical. Second, advanced packaging content per end system is structurally increasing. This is the economic lens, we believe matters most in evaluating shareholder value creation. And third, Amkor is aligned to capitalize on this shift. We are deepening customer partnerships scaling technology leadership and expanding our global footprint to bridge the packaging critical path. This is a multiyear value creation strategy grounded in execution and discipline. Farshad will now walk you through customer partnerships.

Good morning, everyone, and thank you for being here. I'm Farshad Haghighi, Chief Sales Officer at Amkor. I joined Amkor in 1994 after spending more than a decade in various engineering roles, at [indiscernible] and National Semiconductor. And that engineering foundation still shapes how I think about customer partnerships, especially when execution matters. Over the past 35-plus years, I have worked side-by-side with customers as packaging has evolved from a back-end step to a system defining differentiator.

Today, I will share how advanced packaging moving on to the critical path is changing how customers engage with us and why that leads to a deeper longer-term partnerships. Let me expand on what directly Kevin just laid out. What you just heard is that advanced packaging has moved on to the critical path of system performance and delivery. And that structural shift is fundamentally changing how customers engage with partners like Amkor. Packaging is no longer a downstream manufacturing decision. It is system finding and when packaging defines the system, engagement must start earlier in the process.

Let me frame that in 3 parts. First, the engagement is changing. As customers move to chiplet architectures, integrate high-bandwidth memory and design power and thermal solutions, they simply cannot afford late decisions or execution surprises. Packaging choices not directly impact performance, manufacturability, yield and reliability and ultimately, time to market. Because of that, customers are pulling us upstream into architecture and design much earlier than before. And that's a structural shift behind this transition.

Second, engagement is now vital. This is not about more meetings, it's about the co-development. Customers want product alignment across multiple generations. This means longer planning horizons and earlier agreement on technology, capacity and execution. The goal is to identify and resolve risk before the programs are ramping, not after. And that's why engagements move from transactional programs to a multiyear partnerships. And third, there is a direct economic benefit to this improved process. Earlier and deeper engagements provide better visibility into the customer road maps, timing and scale. And that visibility enables more disciplined capacity planning, smoother ramps and better utilization through the cycles.

The result is a more predictable and more resilient business model even as complexity increases. The takeaway is as packaging moves on to the critical path, customer partnerships become deeper and more strategic. And that shift improves both economics and execution for everyone involved.

Now let me elaborate more about the 4 key end markets we are serving and some of the mega trends that are driving those earlier engagements. Let me start with the fastest growing end market, where partnership dynamics are more pronounced today high-performance computing and AI. The growth in this market is fundamentally changing how customers partner with us. The reason is systems are getting dramatically more complex, more power dense and more tightly integrated. That complexity pushes packaging decisions earlier requiring deeper collaboration upfront. Compute performance is exploding from hundreds to thousands of zettaflops. Rack density is moving from tens of kilowatts to hundreds of kilowatts and ultimately, a megawatt. Tokens are the new unit of value in AI compute.

Advanced packaging enables token efficiency and is a system performance enabler. The ability to process tokens at scale not depends on heterogeneous integration, chiplets, 2.5D packaging, high-density interconnect, co-packaged optics and proximity to HBM. You simply cannot build or scale systems like this with a late-stage transactional engagement. This shift is pivotal packaging decisions become system defining, and it's no longer something you finalize at the end.

And that is where the partnership model changes. Customers are engaging us earlier into the critical architectural decisions and on power delivery, thermal management, interconnect density and manufacturability at scale. These require earlier and careful decision-making. Once the system is defined, the packaging strategy is locked. So engagement here is different. It's about codeveloping platforms that can scale from the first systems through full volume deployment across multiple generations. Many of the fastest-growing AI customers are hyperscalers and fabless companies that rely heavily on outsourcing. They depend on partners like Amkor for integrating testing and execution on a global scale. That naturally depends the partnerships we have with our customers.

Now let's turn into automotive where the partnership model is also evolving just in a different way. Automotive customers are engaging us earlier because architecture is changing. As vehicles move toward electrification and software-defined vehicles, semiconductors and packaging decisions are being made much earlier in the design cycle. System complexity is forcing deeper alignment upfront. ADAS, domain controllers, centralized computing and power modules all require advanced SoC packaging because those applications require long-term performance and reliability. Once designing these programs run for years, automotive life cycles are long, qualification standards are stringent, and reliability expectations are 0 defects. That naturally drives a multiyear, highly structured partnership and one that is hard to disconnect. And we're early technical alignment and execution discipline matters as much as the technology itself. That's why packaging, quality and executions are mission-critical as semiconductor content per vehicle continues to grow, customers depend on partners who can deliver consistent quality, yield and reliability at scale, over long production runs. Electrification depends that partnership even further. Power discrete, silicon carbide modules introduced new packaging and reliability requirements, which increases the need for early collaboration and long-term capacity alignment. This is where Amkor engagement model is strong.

The decades of automotive experience, we support customers from early design in and qualification through sustained production, building trust, durability and repeatable execution across multiple vehicle generations.

Now let's turn into communications, where at a high level, Amkor is everywhere in this smartphone. We support nearly all functions in the premium devices from apps processors and modems to RF front-end modules, sensors, storage and subsystem modules. What's driving change here is not unit growth, it's a content growth. Semiconductor content per smartphone is increasing substantially. As devices adopt more AI features and capabilities, advanced SoCs and more complex 5G RF semiconductor value per premium tier smartphone is increasing from $225 today toward $400 over the next few years. And that increase is enabled by advanced packaging.

Higher performance must fit in the same physical footprint. This means more integration, more miniaturization and more system in a package solution. This is where the partnership dynamics shift. In premium smartphones, customer engaged us earlier because packaging decisions directly impact performance, power, form factor and reliability. Engagement is build our own repeatable platforms, launch execution and consistent delivery through the seasonal ramps.

We're also disciplined in how we participate. Our focus is on premium and high-end smartphones, where the demand for advanced packaging increases and execution requires precision. Although communication has a different cycle than HPC, the engagement model is similar. As integration and content increases, partnerships deepen with OEM, IDM and fabless customers. Engagement is earlier because the execution consistency becomes a differentiator. And that is how Amkor creates value in this market.

Now let's look at IoT where everything is getting connected, and packaging is what makes that -- all that functionality fit in a tiny form factor. Engagement in IoT starts earlier because integration ease the product. Customers in consumer IoT devices like wearables, hearables, smart homes, health devices, all require extremely small form factors where multiple functions tightly integrated and packaging decisions directly shape that final product. Miniaturization and system integration are driving upstream collaboration. Customers must optimize power, connectivity, sensing, security and battery life simultaneously.

That forces earlier engineering engagement to develop solutions to optimize fit and performance. Complexity increases the need for trusted execution partners. As more sensors, wireless connectivity and security are integrated into a single module, customers rely on partners who can execute consistently. IoT programs reward repeatable platforms. While consumer cycles can be seasonal successful IoT platform scale across multiple SKUs and generations. Amkor's engagement model fits this market well.

We support customers through this early package architecture integration and volume ramps, enabling compact, reliable system in a package solutions that scale across multiple product families. Across all of our end markets, the strongest impact shows up where complexity, scale and continuity matters most. And that's exactly what I'll discuss next.

Now let's bring all this together and look at how these partnership dynamics play out across all of our end markets. And why technology and scale matters most in each. The strongest shift toward earlier and deeper and more structured engagements happening in markets where complexity, scale and continuity matters most. In computing, particularly in AI and other high-performance applications where system-level integration is absolutely mission-critical. These systems bring together multiple logic devices, high-bandwidth memory and robust power delivery into a single scalable platforms.

When the packaging is that central to how the system performs, customers simply cannot afford execution uncertainty as their programs ramp. That naturally drives the earlier engagement, deeper embeddedness and longer planning horizons. In automotive and industrial markets, that durability comes from a different set of drivers, but the engagement model is similarly structured. Qualification requirements are stringent, life cycles are long and supply continuity matters. Once the platforms are designing, they tend to run in 4 years, which supports multiyear planning and deeper alignment. Communication and consumer markets have a different cycle dynamics. But even here when advanced packaging is deployed at scale, execution consistency is crucial especially on product launches and seasonal ramps.

So across all these markets, the common threat is strong demand for execution certainty where systems are complex, where ramps matter and where continuity is the key customers require partners who can deliver with confidence. And that's exactly where Amkor's value early engagement, stronger partnerships and proven execution makes the biggest difference for our customers.

As engagements and architectures become more heterogenous and packaging becomes system defining when you engage become just as important as what you build. In these systems, key decisions, die partitioning, placement, interconnect density, power delivery and thermal paths are made early alongside the system architecture. Once those decisions are set, they largely determine not only the performance but manufacturability, yield and reliability at scale. That's why early co-development is no longer optional. It's central to success. Co-development is not a meeting cadence, it is co-optimization. It means engineering the package, materials and processes early and in parallel with the system design. With early alignment, you build impressive designs that scale with a proper risk mitigation.

From here, I will walk through how this co-optimization approach leads to scalable platforms and what it takes to enable advanced packaging for reliable, high-volume execution. This slide shows how customer engagement is evolving in practice as advanced packaging moves on to the critical path. When customers optimize for execution certainty, engagement naturally shifts earlier into architecture and design because that's where the manufacturability, yield and risk are addressed.

As a result, planning horizons extend and capacity decisions becomes pre-aligned to reduce execution risk and ensure consistency through the ramps. The key outcome here is visibility and predictability. Earlier alignment enables more deliberate planning, smoother ramps and better utilization through the cycles. This evolution from tactical access to strategic partnership is what enables deeper and longer-term customer relationships, build around confidence in execution, not just capacity.

Now let me pause and share a customer perspective that really captures why the partnerships matter. [indiscernible] Khan, the COO at Apple generously shared his vision confirming that advanced packaging is now core to system design. Collaboration must be deeper across the ecosystem and scale, quality and consistency are what customers need as architectures evolve. This is exactly the engagement model we have built and increasingly is now being deployed across geographies including the U.S. and watch the video.

[Presentation]

As you saw and heard in this video, Apple emphasizes that advanced packaging is a central part of a system design. Their message aligns perfectly with what you just heard today. Success requires deep collaboration across the supply chain and partners who can execute that scale with quality and consistency. As technology evolves, this approach is now being deployed to Amkor U.S. manufacturing location.

Now I would like to spend a minute discussing how this shift in customer behavior matters economically. The core impact of early engagement and deeper partnership is increased visibility. When customers align earlier and plan over longer horizons, it allows us to plan capacity more deliberately. That planning discipline improves utilization, especially during the ramps. And utilization is one of the most powerful financial drivers of returns in our business. There is a secondary effect as well. Risk is showed earlier in the investment curve. The result is growth as well as smoother ramps, better utilization and more profitable returns through the cycles. And that's why the evolution from engagement to commitments matters. It's the bridge between customer behavior, execution discipline and long-term shareholder value. And delivering that execution, certainty ultimately depends on having the right capabilities in the right places, which is why our diversified global footprint has become so strategic.

Now let me grant this discussion in reality. This engagement model and execution model is in just theory. It's how we work today with a group of leading semiconductor companies who rely on advanced packaging to deliver complex systems at scale. These relationships span multiple technology generations and multiple market cycles proven over 30 years of engagement.

The common threat is trust. Trust is built through execution, scale and reliability, especially when packaging sits under critical path. That is why the world's top semiconductor leaders choose to work with us year after year and generation after generation. And as the industry continues to evolve, these deep trusted partnerships will only become more important, driving innovation, reducing risk and enabling success. Now I would like to leave you with 3 key takeaways.

First, as advanced packaging is fundamentally changing how we engage with our customers. These are deeper, more strategic partnerships where decisions are made earlier. Second, Amkor is meeting our customers' evolving needs with earlier road map alignment, predictable ramps, quality and delivery to ensure critical needs are met. And third, and finally, all of this is improving the economics. We're reducing the risk, improving capital efficiency, utilization and accelerating profitability through the cycles. As the industry continues to shift, we are building a more predictable and more resilient business. Amkor is ideally positioned to capitalize on this growth and that is why we're excited about our future. Now to walk you through our advanced packaging technology leadership behind this strategy, I would like to hand it over to Doug Scott. Thank you.

Good morning, and thank you for joining us today. My name is Doug Scott, Corporate Vice President of Advanced and mainstream business units. 25 years ago, I moved from Seattle to Phoenix and started my career in the semiconductor industry. I began on the equipment side and then spent the last 21 years in device packaging. For the past 11, I've been at Amkor. During that time, I've seen record growth in semiconductors and advanced packaging and maybe most impressively, Arizona's rising importance in the global semiconductor ecosystem. Today, I'm excited to talk about 2 of Amkor's strategic pillars: technology leadership and geographic footprint. These pillars didn't just get us to where we are today.

They are fundamental in how we drive our next phase of accelerated growth. This is especially true now as AI-driven packaging demand accelerates, our industry is moving faster than ever. And Amkor is uniquely positioned to lead. Let's jump in. Kevin showed why advanced packaging is now on a critical path. And why packaging content per end system is structurally rising. Farshad then covered Amkor's strategic partnerships and co-development activities. My job is to make this tangible, Amkor sells, high-tech packaging and test services that are uniquely -- sorry, that are essential to turning raw silicon into usable high-performance devices. This is a very important point. So let me repeat that correctly this time. Amkor sells high-tech packaging and test services that are essential the turning raw silicon into usable high-performance devices. The clearest example is AI and high-performance computing, also called HPC.

These systems are being built as integrated platforms, not single chips. I'll focus on a few key areas. What's driving the architectural shift, what it demands from packaging and how our platforms execute at scale. In a packaging-led era, advanced isn't enough. It has to be built to scale from day one. When packaging is on the critical path, the win is industrialization, repeatable, reliable, high-volume execution. This slide shows Amkor's technology strategy for this reality. First, we engaged early with strategic customers. We develop and optimize the package systems, power, performance, form factor, while package architectures are still being made. In AI and HPC, you feel this immediately in power delivery, thermal dissipation and bandwidth. So co-development with our customers starts are early. Second, scale wins. Our road maps are platform based, including flip chip, 2.5D and high-density fan-out. That's how innovation moves into high-volume production with high quality and consistency.

Third, we invest to execute. We're accelerating advanced packaging and test investments to deliver full turnkey solutions that cut cycle time by removing logistic steps, eliminating time needed for shipments out of factory and shipments out of country and raises execution quality through real-time validation checks as programs scale globally. And fourth, technology leadership and build earnings power. It enables more complex, higher-value programs. And as they scale, it improves Amkor's value add to the market and drives margin accretion. So what changed? Architecture shifted and now advanced packaging and test our system defining.

For decades, computing performance came from transistor scaling, classic Moore's Law. Now the biggest gains come from package system architecture, multiple pieces of silicon integrated into 1 heterogeneous package system. That's more than more back-end packaging innovation, driving AI and HPC performance gains as transistor miniaturization hits both physical and economic limits. We have shifted from chips to systems of chips, packaging is the integration layer, optimizing bandwidth, latency, power delivery and reliability.

This powers AI training, inferencing, agentic AI and future quantum computing solutions. Here's what this looks like inside the advanced package. As you move from monolithic packaging to heterogeneous integration and beyond, size and complexity jump. In monolithic packaging, typically 1 die sits on a substrate. This single die package then goes on a printed circuit board with other die, including memory and passives. But notice the big performance shift comes from memory and I/O being closer to a logic die within the package. AI and HPC lead this shift, more chiplets, more memory, higher I/O density, integrated inside a heterogenous package.

This could be with silicon interposer, organic redistribution layer or integrated bridge technologies. Higher performance? Yes, but also larger packages, increased complexity and tighter process windows. This is true for GPUs, CPUs, XPUs, switches and CPO co-packaged optics. More die, higher interconnect density, more memory integration. That means yield sensitivity spikes, process control, test strategy, reliability qualification become nonnegotiable. That's why execution discipline matters. Scaling advanced packaging is an industrial challenge. It's no longer just an architectural choice and very few companies in the world can manage this. I've been focusing on AI and HPC, but this also applies with the increasing complexity we're seeing in automotive, connectivity, power, and system and package SiP modules. Amkor's value to the market accelerates as packaging complexity increases.

Advanced packaging only creates value, if you can deliver it end to end. Fast, consistent with high yield and at scale. That's why we're accelerating advanced packaging and test investments. It's full turnkey end-to-end support, wafer bump, wafer probe package assembly and final test, fewer logistics, condense cycle times, higher execution quality as program scale. As AI and HPC products ramp cycle time and yield learnings can be bottlenecks. Full turnkey support helps customers move faster without giving up reliability or quality. And as customers diversify supply chains, they need the same execution quality across geographies.

Turnkey offerings also reduce risk, which result in better outcomes at scale. A great example of this is Amkor South Korea K5 factory. This is where we have developed and scaled many of our advanced packaging techniques, test solutions and packaging solutions. The learnings generated in our K5 factory have been directly applied to bring up other Amkor locations around the world and will be used to enable our new Arizona campus with known advanced packaging technologies. Add it all up, co-development, road map alignment, scalable platforms and turnkey execution. That's a durable advantage. It's the Amkor advantage.

Now I want to spend a moment on Amkor's technology road map because it is intentionally platform-based. We've invested for years in scalable foundations, flipchip, 2.5D high-density fan-out. They hit the balance of performance, flexibility and manufacturability. These platforms let customers innovate at the system level on repeatable flows that scale across product families and sites. The benefit of this approach, equipment, fungibility. We can redeploy much of the tool sets across programs and often adjacent flows.

We flex capacity as demand shifts without rebuilding a factory for every design iteration, and we maximize the utilization of our investments. Flip Chip, either flipchip CSP or BGA remains a versatile, cost-effective solution. It is ideal for single die functional -- single functional die to substrate interconnects that don't require a heterogenous package inside -- our heterogeneous assembly inside the package. This package family will continue to hold significant market share in advanced packaging going forward. 2.5D is a great fit when you need high bandwidth die-to-die connectivity, typically logic plus memory. This package delivers high interconnect density with tightly controlled electrical paths, high-density fan-out delivers fine line redistribution and our integrated bridge technologies with high I/O density and strong electrical performance. It also brings the flexibility across product types, and end markets. That's why 2.5D and high-density fan-out keep showing up in AI and HPC applications. High bandwidth and controlled electrical pass are paramount.

As architectures evolve, Amkor engages early with our customers. But we also engineer for production, not just demonstrations. That next-generation box shown on the right is about early alignment, understanding customer needs, evaluating the newest technologies available and designing for manufacturability at scale. 3D stacking and co-packaged optics are 2 great examples, highlighting the increased packaging complexity and the need for early alignment to ensure processes are ready when the market is ready.

Financially, a platform strategy lowers risk and improved scalability. These are higher value-add platforms. And the margin is earned by ramping to steady utilization, high yields and true repeatability in high volume. Now let's talk about our advanced packaging pipeline. Amkor is well positioned to not only benefit from near-term advanced packaging opportunities, but also long term. And this is only accelerating as we deepen our partnerships with hyperscalers, IDMs and fabless customers.

We now have over a dozen 2.5D engagements. Four high-density fan-out RDL devices ramping to production this year, 2 for data center and 2 for PC. We expect our first high-density fan-out bridge package to ramp next year for our customer AMD. AMD refers to this as elevated fan-out bridge, or EFB. This CPU device will initially ramp in Amkor South Korea with planned U.S. onshoring at Amkor, Arizona, reflecting our collaboration with AMD to support Amkor's advanced packaging factory in Arizona.

And beyond our established pluggables business, we are developing 3 CPO opportunities. Collectively, these projects are billion-dollar opportunities over their product life cycles. Amkor is directly tied into continued growth opportunities in Asia and in the U.S. when our Arizona factory comes online in 2028.

Now a proof point of turning advanced packaging architectures into high-volume reality. Please enjoy a video of support from NVIDIA's EVP of Operations, Deborah Shokuist.

[Presentation]

NVIDIA's validation underscores two points: Deep technical capability matters and high-volume execution earns trust. As AI demand surges, our partners must move fast without compromising reliability, quality or manufacturability.

Now let's talk more about technology and Amkor's differentiated, high-value technology toolbox. This is a snapshot of what is required as architectures evolve, interconnect options, bonding process solutions, thermal management, substrate innovations and test program optimizations. Advanced packages are getting larger, more die are being integrated that demands expert level technical depth and tight process control.

This is where Amkor shines. We build on decades of packaging expertise. We engaged with industry leaders. Our R&D teams continuously evaluate new packaging processes and technologies. So we are ready when our customers need them. And we are expanding solutions across large body flip chip, RDL and bridge technologies and larger panel-based formats. In parallel, we work closely with customers and suppliers on advanced chip attach, thermal dissipation solutions, including materials development. AI-based defect and process monitoring improvements, and we are pathfinding innovations such as glass core substrates and hybrid bonding.

The point isn't that we're trying to do everything. The point of scale and deep involvement within the entire supply chain. Advanced packaging requires significant investment, breadth across the integrated stack and a discipline to industrialize these tools into repeatable, high-value processes.

And as you saw in the previous testimonials, customers value Amkor for this. That is how value is maximized for the market and for Amkor. As you know, OSAT stands for outsourced semiconductor assembly and test. And test strategy is just as critical as assembly for system performance and reliability. From wafer probe to burn in final test and system-level test, Amkor is deeply involved across the entire test flow. Aligning test and assembly is a core value proposition. Wafer probe ensures known good units before costly and logic memory die costly logic and memory die are added, burning and final tests validate reliability at the package level and system-level test ensures performance targets are met in real-world conditions.

Every test step is critical. But with the increasing cost of testers and the complexity of requirements, this creates a high barrier of entry and demand strong end-to-end technical execution. And that leads me to the final point of this slide. Amkor provides high value add, turnkey execution and support. Let's talk a bit more about turnkey. Turnkey means speed and accountability. We integrate the flow end-to-end, wafer processing, wafer probe, package assembly, final test. The goal is simple, cut cycle time and increase value. Customers want fewer handoffs, clear accountability and faster time to volume. Full turnkey delivers that, whether it's 2.5D, high-density found out, wire bond, MEMS and sensors or system and package SiP applications.

Every step in the turnkey flow matters. A typical high-density fan-out package uses dozens of materials. Wafer bumping and RDL creation can take well over 250 process steps. Yes, over 250 individual process steps. Test requirements can be extreme and time-consuming. That is why very few companies in the world can truly support high-yielding, full turnkey advanced packaging, especially in HPC. And that is why this reflects Amkor's technology leadership.

Now a short video to bring this to life, from architectural choices to manufacturing execution. As you watch, notice how these flows connect design enablement, with advanced assembly and test. This is what it takes to scale AI, HPC class packages, and it's the end-to-end execution customers value as programs ramp.

[Presentation]

Honestly, that's quite impressive. That's also technology built for scale and the execution that turns complexity into predictable high-volume delivery. Now let's tie all this to earnings. Quite simply, technology leadership drives earnings power. Let me walk you through this. On the input side, it starts with how we engage. We're doing early co-development with strategic customers, building scalable advanced packaging platforms and delivering full turnkey solutions where packaging and test are engineered together. That combination positions us early and keeps us embedded throughout the life cycle, translating into stronger business outcomes.

We drive higher content per package. We participate in more complex, higher value designs. So it's not just more programs. It's the right programs. And that's what drives financial impact. We see a more favorable revenue mix, stronger margin accretion as program scale and ultimately, stronger earnings power over time. So the takeaway is clear: disciplined execution across technology and customer engagements drive better mix, better scale and better margins. Megan will cover the financial benefits in a bit more detail later.

To wrap up, technology leadership at Amkor isn't capability. As Farshad highlighted, it's how customers work with us. When we codevelop early, build on scalable platforms like flip chip, 2.5D and high-density fan-out, and execute with full turnkey discipline, including test customers engage earlier, trust us with tougher programs and scale faster with consistent quality. That is why these investments matter. Amkor's unique ability to integrate the latest fab technologies into a highly complex advanced package as why we are winning and why we will continue to win advanced packaging opportunities. This enables strategic partnerships, not transactions, and puts Amcor at the center of advanced packaging deployment across the industry. With that, we have all earned a much deserved 15-minute break. When we come back, we will continue our discussions with geographic footprint, financial earnings power and then a Q&A session. Thank you, and we'll restart in a few minutes.

[Break]

Ladies and gentlemen, welcome back to the stage, Doug Scott.

Welcome back. Before I begin my next section, I want to recognize that Amkor's success starts with our world-class employees, everything we achieve as a direct result of your hard work and dedication. I'm very proud to be part of this team. Now let's continue our discussion as it relates to Amkor's expanding geographic footprint. As Kevin and Farshad highlighted earlier, customer behavior is shifting as advanced packaging moves on to the critical path and which advanced packaging platforms are available, when and where matters. Customer engagement happens earlier. Visibility improves. That visibility gives us the confidence to invest more in the right strategic regions.

Amkor's Arizona expansion is a great example of this in practice. I want to be clear about what our geographic footprint is. Our footprint is intentional and strategic. In the slides ahead, I'll show how we built this global footprint deliberately, scale it with discipline, and how this positions Amkor as the critical enabler of end-to-end semiconductor manufacturing where customers require it.

This slide is the core thesis of our global geographic footprint strategy. Our footprint is how we deliver supply security and resiliency. Geographic manufacturing flexibility is becoming a must for our customers as they are redesigning global supply chains. They expect the same execution standards and quality wherever their programs run. Each of Amkor's footprint decisions is deliberate, demand led and built to protect utilization and returns as we scale. The importance of being able to maximize outgoing device yield cannot be understated. Amkor's investments in automation, real-time process monitoring and AI-driven defect detection create reliable output that benefits the financial performance of our customers and Amkor.

In that context, advanced packaging and test go together. To enable end-to-end regional semiconductor manufacturing, especially in the United States, you need advanced packaging and test to complete the flow and ensure high-yielding output. This is the role Amkor plays. We have production scale today in several regions, including large-scale presence in South Korea, Taiwan, Vietnam and Portugal, giving customers real optionality. As we extend into the U.S. Arizona adds domestic, high-volume advanced packaging and test to our portfolio.

Our customers, partners and suppliers have all clearly stated the need for Amkor in the U.S. And this is becoming increasingly valuable to hyperscalers, automotive OEMs and defense-related supply chains. Amkor's expansion unlocks both known and unrealized opportunities where U.S. execution is required. There is a tremendous upside potential with this expansion. Our footprint delivers supply security and completes regional flows with the discipline that protects utilization and shareholder returns.

Next, I'll show how we scale, deliberately, demand-led and tied to visibility. We expand based on demand, not speculation. We scale tied to qualified programs and demand visibility while protecting utilization and returns. We expand when customers require it, but after we vetted time lines and returned thresholds. This is how we deliver for our customers and the capital discipline for our shareholders. It is important to highlight our existing strong presence in both Asia and Europe.

Amkor has scale, 9 factories -- sorry, 9 countries, 20 factories, 30,000 employees and long-standing relationships with the largest companies in the world. OSAT, Amkor founded the OSAT model 55 years ago. I would like to highlight 2 things from this slide. First, we already operate at global scale across multiple regions. And second, we invest in scale with discipline.

This slide highlights where we are expanding advanced packaging and test today. South Korea, Taiwan, Vietnam and Portugal give our customers options across Asia and Europe. South Korea is our existing high-volume advanced packaging and test location, along with our R&D center of excellence. Flip chip, 2.5D, high-density fan-out and new advanced packaging process developments have all started in Korea for Amkor. Taiwan has substantial scale to support leading-edge, advanced wafer level technology and test. Vietnam, the most recent region of our offering provides geo-diversity within with an attractive cost structure for several of Amkor's key technologies. And our Portugal location allows not only automotive supply resiliency within Europe but a location for advanced wafer level support. They are the foundation of our model. They bring the advanced packaging process maturity and operating discipline plus to bring the learning cycles we need to run complex advanced packaging at high volume with consistent quality and yield.

And that's how we think of the U.S. It's a significant extension of our existing model. Our global scale continues to drive volume and utilization and Arizona ads in region advanced packaging and test for U.S. required flows. This allows us to ramp up at the pace customers require.

Now I'll get specific on our new Arizona location. Amkor, Arizona is a significant investment that completes the U.S. flow, adding high-volume advanced packaging and test in region. Again, having leading-edge wafer fabs and downstream system assembly is not enough. The U.S. ecosystem is incomplete without high-volume advanced packaging and test. Amkor completes the end-to-end U.S. model delivered with the execution standards our customers require. It uniquely positions Amkor as the only large-scale OSAT with a high-volume advanced packaging footprint in the U.S. We are focused on providing advanced packaging solutions in Arizona with wafer bump, wafer probe, flip chip, high-density fan-out assembly and final tests being initially offered.

Operationally, this is a disciplined build, starting with the construction of 355,000 square feet of clean room space for our first construction phase. This new build will have the highest level of automation of any factory within Amkor. As we announced a few days ago, we are also securing an additional 67 acres of land adjacent to our 104-acre Arizona property, positioning Amkor for additional growth in the U.S. long term. A defined time line is underway with construction, workforce development, equipment install, line verification and qualification. moving quickly to high-volume production as programs clear [indiscernible] in 2028.

We scale Arizona with qualified programs, protecting utilization as capacity ramps and protecting returns before deploying more capital. Amkor, Arizona is the critical link for the U.S. semiconductor ecosystem. It completes the U.S. regional flow. It expands our addressable opportunities and addresses new real need in the market. It ties us into our customers' regional support pipelines. And it stays inside the same disciplined framework we apply across our global footprint. This slide underscores a key point. Regional manufacturing only works as an ecosystem. End-to-end regional supply requires coordination of wafer fab, advanced packaging and test and final system assembly.

Those pieces have to scale a lockstep to deliver consistent quality, reliability and execution. That is why footprint isn't just a geography discussion. It's an ecosystem decision. The value is plugging into an end-to-end regional flow and delivering the same execution standards from leading-edge wafers through finished systems. That is exactly why advanced packaging and test is the critical link, end-to-end regional manufacturing requires front-end and back-end coordination. Here's how Kevin Zhang, Deputy Co-COO of TSMC, describes the need for strategic alignment in the U.S. semiconductor ecosystem. "TSMC and Amkor have been long-standing trusted partners in Asia, and our collaboration in Arizona extends this partnership to the United States. Together, we combined advanced front-end fabrication with advanced packaging and test to support customers' needs for geographic flexibility across end-to-end semiconductor manufacturing."

The takeaway is simple. Regional supply chains require end-to-end alignment and advanced packaging and test completes this model.

Next, a short video that shows the physical scale and progress and a disciplined expansion that supports U.S. needs and requirements. As you watch, keep 3 things in mind: First, these are already operating within Amkor today, driving volume, efficiency and learning in advanced packaging and test; second, you'll see tangible execution as we connect Amkor's proven global expertise to U.S. manufacturing; and third, everything you see reflects our focus on protecting utilization and returns. It's about scale, execution and progress delivered with discipline. Let's take a look.

[Presentation]

Let me close with the key takeaways: First, our footprint is intentional and strategically sequenced. We're not chasing short-term cycles. Every decision is demand led to protect utilization and returns as we scale; second, advanced packaging or test are the critical link for regional semiconductor supply chains. As manufacturing regionalizes you must have scaled advanced packaging and test in region to support an end-to-end ecosystem. This is the essential role Amkor plays; third, Amkor, Arizona is demand-led and based on known high-volume technologies. It completes the U.S. ecosystem with scaled advanced packaging and test and unlocks new significant opportunities; finally, utilization is the guiding principle behind every footprint decision. With that, I will now hand off to Megan to detail how our disciplined geographic footprint, along with our technology leadership and customer partnerships, translates directly into earnings power.

Good morning. I'm Megan Faust. And when I joined Amkor over 20 years ago, I never imagined we would be having manufacturing in the United States. And as a native to Arizona, it is even more exciting that our U.S. expansion is happening right in my home state.

Today, I'm going to focus my time on connecting partnerships, technology and geographic footprint with our financial outcomes. As you've heard from my colleagues, we are strategically investing amid a structural industry shift to build a stronger earnings profile with key milestones, disciplined capital deployment and a clear path to durable shareholder value creation.

We think about our financial trajectory in two phases: The first phase is the invest and ramp phase; and the second phase is the ramp and leverage phase. From 2025 through 2028, and we are in the invest and ramp phase. This is when we make deliberate growth investments, bring capacity online, qualify programs, and scale our advanced packaging platforms. The timing of our investments and scaling is critical to optimizing financial outcomes. The goal is not simply to add capacity, but to scale deliberately, execute clean ramps and proactively manage risk as complexity increases. This phase includes upfront investment and cost as capacity ramps, particularly as our first Arizona facility comes online. But these investments are deliberate and aligned with customer demand. From 2028 onward, we entered the second phase, the ramp and leverage. This is where the model becomes increasingly powerful. Utilization improves as ramps mature. Our product mix shifts to higher-value advanced packaging and operating leverage compounds with automation and scale.

When we say full model leverage, we mean the combination of higher utilization, richer mix and operating efficiency working together. These levers translate into materially stronger earnings power. Each strategic pillar that you've heard about today ties directly to earnings. Partnerships improve visibility and reduce risk, enabling better capacity planning and higher utilization through cycles. Technology leadership drives participation and more complex, higher value-add programs, enabling margin accretion as they scale and footprint expansion unlocks incremental addressable market particularly where regional supply is required.

All of this is supported by strong balance sheets and disciplined capital allocation, which allows us to invest through the ramp phase while protecting long-term returns. I want to make one point very clear. We are intentionally investing today. So as these levers mature and compound our earnings power scales meaningfully over time. With that framework in mind, here are the financial targets that Kevin shared earlier.

Starting on the left, in 2025, we delivered $6.7 billion in revenue, 14% gross margin and $1.50 of earnings per share. The first phase in the middle of the slide reflects the invest in ramp phase. In terms of targets for 2028, we expect revenue to grow to $9 billion plus or minus $500 million as capacity comes online and programs move through qualification. Gross margins expand to 17.5%, plus or minus 100 basis points, reflecting early benefits from richer advanced packaging mix, partially offset by ramp costs related to our first Arizona facility. And earnings per share of $2.50 to plus or minus $0.25 reflects capacity coming online as utilization builds as well as initial ramp-up costs related to our Arizona facility.

By 2030, our financial targets reflect the ramp and leverage phase shown on the right. At this point, we expect our first Arizona factory will be fully scaled. Utilization will be maximized delivering strong incremental flow-through and our product mix will have shifted favorably.

At that point, we anticipate more than $11 billion in revenue more than 22% gross margin and greater than $5 in EPS or more than 3x our 2025 results. This is not a singular story, it's the compounding of levers that you've heard throughout the day, improved visibility as engagements move up much earlier in the process, higher utilizations as ramps mature, richer product mix due to high-value advanced packaging and stronger operating leverage through efficiencies and platform scale.

You'll notice we've included some key assumptions on the right to assist in modeling. First, we assume a continued mix shift towards high-value advanced packaging, which expands as margins -- which expand margins as these programs scale. Second, there are initial ramp costs in 2027 and 2028 and tied to the Arizona build-out. This will initially be reflected in OpEx until products are qualified and move into production. At that time, costs will move into cost of goods sold and begin being reflected in gross margin. Next, revenue growth accelerates in 2029 and 2030 as the first Arizona facility comes online. We have not yet included the second Arizona facility in this model. We have experience in this invest ramp and leverage framework. And that's what gives us confidence in our ability to execute and achieve these targets.

Let's look at some historical results. The semiconductor industry is cyclical. So here, we have aggregated a comparison of peak to peak for the years 2018 and 2022 right before entering a semiconductor cycle as well as the trough to trough for the years 2019 and 2024, the bottom of those respective cycles.

What this demonstrates is that as Amkor has scaled our financial performance through cycle has structurally improved. The key message, we continue to raise the bar with higher highs and higher lows across every major financial metric. Revenue, gross profit, operating income, EBITDA and EPS, you see a critical pattern. Both peak and trough has improved over time. This is a profound proof point that demonstrates our ability to execute.

In this approach, we focus on things we can control how we manage CapEx in a disciplined manner, moving away from customer dedicated lines. How we manage ramps with CapEx and labor coming online as close to launch as practical without impacting quality and execution, how we improve yields and productivity and how we allocate capital. This improvement isn't tied to a single market or cycle. It represents a focus on execution with operating discipline. We have strengthened the foundation of our business to enable further financial improvement especially as we continue to scale advanced packaging even in a more complex and rapidly changing environment.

This next phase of growth is larger and even more complex. Advanced packaging programs are more capital intensive and even more system critical. But we are entering this phase with a more resilient model and improved margin structure and a track record of executing ramps with increasing discipline. That's why we're confident that the investments that we're making now in technology, partnerships and footprint will translate into durable earnings power. That's the backdrop for the earnings framework and the leverage story that follows.

In addition to credible execution, Amkor has the financial strength and flexibility to support this next investment phase. As a reminder, for 2026, we guided $2.5 billion to $3 billion of CapEx spend. Let's review our liquidity and funding strategy for these investments. As of March 31 and pro forma to include the $1.2 billion of convertible notes we issued earlier this month, we had $3 billion in cash and short-term investments and $1.1 billion on our line of credit, which equates to $4.1 billion in total liquidity and with $2.6 billion of total debt, our gross leverage is 2.1x.

In the aggregate, this liquidity landscape enables significant flexibility in how we navigate funding our investments. We also have the capacity to increase leverage temporarily during peak investment periods. Our financial strength enables us to fund growth without compromising resilience. This gives us the ability to invest through the ramp using a disciplined capital deployment strategy. With that foundation in place, I'll now walk you through how we think about capital allocation. specifically how we deploy capital deliberately with demand visibility and return discipline at the center of decision-making. Our top priority is investing in organic growth that is aligned with customer demand. That includes expanding advanced packaging and automation, investing in global footprint to support regional supply chains, and continuing to fund R&D in partnership with leading customers. All of these investments are directly tied to programs, platforms and execution at scale, not speculative build out.

Next, strategic investments. We deploy capital selectively to support structural shifts in technology. This includes investments that enable regional semiconductor supply chains, particularly in the U.S. and other strategic markets as well as select tuck-in M&A where it meaningfully enhances technology, geography or customer alignment. These are targeted moves that strengthen our core strategy.

Throughout all of this, financial resilience remains nonnegotiable. We manage to a long-term debt-to-EBITDA target of 1.5x or below, and we maintained strong liquidity to ensure flexibility to invest through cycles. This is what allows us to invest with confidence during a ramp phase like the one we are in now.

Last, returning capital to shareholders remains a priority. Over time, we target a return of 40% to 50% of free cash flow. We remain committed to growing the regular quarterly dividend, and we have a share repurchase authorization of up to $300 million that can be used opportunistically and to offset stock-based compensation dilution.

This reinforces Amkor's credibility as a disciplined steward which is even more critical given the size of our Arizona investment. Arizona is a very important part of our financial model and a growth driver of our strategy as leading edge wafer fabrication and system assembly is increasing in the U.S., advanced packaging and tests are required to enable end-to-end flow.

Amkor is a critical link in adding high-volume advanced packaging and test. We are uniquely positioned as the only skilled advanced packaging OSAT that is expanding in the U.S. Let me repeat that. Amkor is the only scaled advanced packaging OSAT that is expanding in the U.S. Our approach to the Arizona campus is phased demand-led and aligned to customer programs. We have announced that there will be 2 phases to this expansion with an estimated total investment of $7 billion. Construction of Phase 1 is underway. High volume manufacturing for the first phase is targeted to begin in 2028 with full-scale build-out by 2030. At full scale, our current visibility suggests revenue of around $1 billion and gross margins exceeding 30%. The profitability of U.S. manufacturing has been a priority given the high cost of construction and the high cost of labor. We have designed an approach that will drive profit well above our corporate average, and it is centered around 4 factors: First, prioritize high-value advanced products which will benefit our product mix over time; second, high volume, low mix of products with turnkey services, which reduces changeover costs and improved cycle time and utilization.

Third, level loading throughout the year. This minimizes the impacts of seasonality on utilization; and last high automation. The Arizona factory will be our most automated site. We have fully considered Phase I in our financial model. For Phase II, we have begun site preparation. However, the timing for when to begin construction is still in discussion with our customers. Once we have finalized the ramp timing with products and scale, we will include it in our long-term model. This phasing is deliberate, and it is explicitly tied to customer commitments and visibility.

As Doug mentioned, we recently announced we have secured an adjacent 67 acres of land, further positioning Amkor for future growth. The funding sources for Arizona include not only our balance sheet liquidity and debt capacity, but also significant government incentives and partner co-investments. The Arizona campus is a critical component of building out the full U.S. semiconductor supply chain.

This is how our first Arizona facility fits into our financial model and how we expect the economics to develop over time. During the invest and ramp phase, we complete construction, install tools and begin to qualify the manufacturing lines. Utilization begins at low levels. Financially, this phase includes upfront costs, which start to build before the facility reaches scale. We anticipate a 1% to 2% dilution to operating income starting in 2027, which is dependent on construction completion and the speed of ramp up. This will improve into 2028 as we scale production. As we move through the ramp phase, utilization begins to build meaningfully as qualified programs scale into production and productivity improves as learning curves mature and automation scales.

We expect Arizona to reach breakeven around 2029 as these factors start to offset initial ramp costs. In the ramp in leverage phase and beyond, the model becomes increasingly powerful, sustained utilization drives fixed cost absorption, further product mix shifts towards high-value advanced packaging, improving margins and productivity gains compound through automation, platform reuse and operational scale.

By this point, Arizona is meaningfully contributing to our consolidated financial results. This is the same proven playbook that we have already executed in our most recent Vietnam buildout. Now let me walk you through how we anticipate revenue to grow from $6.7 billion in 2025 to over $11 billion by 2030. And more importantly, what will drive that growth.

As Farshad explained earlier, the key market driving our growth is the computing end market, focused on high-value advanced packaging for high-performance computing and AI-related applications. This market grows materially faster than the rest of the portfolio. The growth continues with the step-up in capacity for Phase 1 of our new Arizona facility beginning in 2028 and accelerating in 2029 and 2030. We're also excited about advanced packaging growth in the automotive and industrial market. Growth areas here include in-car computing, ADAS semi-content and continued adoption of hybrid and EVs. Communications will continue to be a large and important market for us.

While the overall growth rate is slowing, continued growth will be driven by on-device AI and refresh cycles. The consumer market will continue to grow modestly as more connected devices come to market. With that revenue backdrop in place, I'll now connect it to earnings power. Earnings growth comes from the compounding of levers. First, we have product mix. As we scale higher-value advanced packaging across our portfolio, particularly in our advanced packaging Center of Excellence in Korea, the shift in product mix is a significant factor in our margin and profit expansion; second, operating leverage, earlier engagement improves visibility. Visibility improves utilization and utilization drives efficient fixed cost absorption. Operating leverage also encompasses automation, and the benefits of scaling platforms across product generations. And third, we have the impact from the Arizona facility. As Arizona ramps, there will be temporary ramp-up costs such as depreciation and other incremental costs until that factory is at scale. In the invest and ramp phase, earnings growth is muted relative to revenue growth, and that's intentional. We are bringing capacity online.

Utilization is building but not yet optimized, and we are incurring depreciation and start-up costs ahead of full volume manufacturing. During this period, EPS expands from $1.50 to $2.50 by 2028. This includes dilution from the first Arizona facility as it prepares to scale. The full leverage model is not yet realized. As we move to the ramp in leverage phase their earnings profile changes materially. As the Arizona utilization increases and operating efficiencies improve around yields, automation and standardization, there will be meaningful margin and profitability expansion. The same revenue drivers produced significant earnings expansion. Here, we see EPS growth to greater than $5 by 2030, over 3x the earning power of 2025.

Let me close with 3 key takeaways. Amkor is on a multiyear value creation path, deliberately investing today so that the full earnings potential becomes visible as utilization, mix and productivity mature. Investments are disciplined and faced. Second, strong revenue growth and increasing utilization translate into more than 3x earnings power. And third, our global footprint and partnerships reduce risk, improve capital efficiency and support more resilient margins.

This is not just about where we're going it's about how we are managing the business as we get there with discipline, which results in a structurally stronger earnings profile. With that, I'll hand it back to Jennifer, who will begin our Q&A session.

Thank you, Megan. We'll now move into the Q&A portion of the program. This is an opportunity to go deeper into any of the topics that you've heard today, partnerships, technology, footprint or the financial framework. I'll moderate today's discussion, and we have 2 mic runners circulating the room. Please state your name and your firm before asking your question. Executives, please join me back up on stage, and we'll begin.

Jim Schneider, Goldman Sachs. Thank you for doing the presentation. We appreciate it. First one -- I actually have two. First one would be in terms of the financial model, Megan, thanks for giving that. How do you think about the level of kind of confidence you have in achieving the '28 and especially the '30 financial models? Should we be thinking about these as at least models or cross-cycle models? And how do you think about the resilience to a potential cyclical downturn?

Sure. Good question. So our view on these models is this represents the visibility of what we have in our portfolio and as well as our confidence in the growth. So trying to put a factor on that. We see these as models that we expect to execute against, and we would plan to beat those. So in your context, the -- at least, I think is how you framed it.

Yes. maybe add a little bit there. So the way [indiscernible] looking at programs, we really have high visibility and high confidence. We have other programs that I'd say are earlier in the pipeline, right? And so I think those will continue to evolve. Megan mentioned in her prepared remarks that we didn't put Phase 2 in the model. So again, that's another opportunity that we think about as something that as we get more confidence around when that is triggered, then we'll update the model around that. So I think the confidence there related to a cycle cycles can happen. And I think that's definitely something that we didn't build in a strong cycle in the downward direction. Obviously, we're in a very positive direction right now, and we would expect that to continue for some time.

And then maybe as a follow-up, just about Arizona specifically. How do you think about that facility suitability for -- I'm assuming it's mainly for [indiscernible] fab inside the United States, but how do you think about its stability from a cost perspective for products fabricated outside -- wafer fabricated outside the United States? And can you maybe also address how much potential there is for non-standard products such as, for example, Quantum products where government subsidy program was down this morning with respect to potential quantum products in the future.

Yes. So let me talk about maybe cost first. So we -- the investment community is pretty aware of most of the customers we're talking about for that site. I think the vision there is that there'll be a portion of their business in the United States and still maintain a higher level of business in Asia in that the -- as the market fluctuates, that they'll maintain the very high utilization in the U.S. and then fluctuate across Asia, again, with the goal of keeping the U.S. very highly utilized over time.

So to me, when we think about the applicable less of the U.S. going for products going overseas, we don't typically see that in our business model today. That may change over time. But today, we're more focused on U.S. on-shoring activities. When I think about different product types, CPO is one that's an example of, I think, longer term, we'll be probably supported in our facility. Quantum is still relatively early on what those package structures will look like. I think if we think about 1 dimension of we want to support what's important for national security in the U.S. But on the other side, we're very focused on high volume, low mix. That's really critical for us to make sure that, again, we get the highest level of utilization to support the cost structure we have in the U.S.

Second question, Steve.

Steve Barger from KeyBanc. Megan, the 2030 plan looks like they anticipate 600 or 700 basis points of margin expansion from 2025. You talked about both scaling and operating leverage. Can you just talk about how much of the margin expansion comes from utilization versus better unit economics?

Sure. So if you think about the slide we showed you with the invest ramp and the ramp leverage in that first section, you're going to have more mix impact to margin. followed by leverage, which would include utilization. So that utilization is going to be a bigger factor in that first phase. And the second piece of that, you're going to have more on the operating leverage and less on the product mix because we'll have leveled out at 2028 and then that's where you're going to get, I'm going to say, less volume and more leverage as we're scaling from '28 to 2030.

Overall, from an Arizona perspective, that is providing a significant impact to that earnings expansion in that ramp and leverage piece of the model.

And to that point on Arizona, just thinking about Phase 2 and the 67 acres to the extent you're willing to talk about it. the demand environment is obviously really strong. You showed the number of engagements that you have with customers. Do you have any early look on timing or customer conversations in terms of when they're going to want that capacity and what the CapEx requirements might be?

So maybe let me start on the customer dynamic and then Megan can talk about CapEx. So when we think about Phase 2, first of all, I would say the discussions with the customers are progressing pretty pretty rapidly. Like you said, the demand is definitely there. We're in an environment now even for Phase 1, where it's about how can we go faster to really ramp up the capacity and scale as quickly as possible. So stay tuned for Phase 2, but I think the momentum is definitely there. The additional land is really about optionality for the future. So we couldn't see an environment where, obviously, TSMC is continuing to invest in the U.S. We have other foundry sources investing in the U.S. co-packaged optics and other things. So I think over time, there will be more opportunities, and we wanted to make sure that we had availability to scale if we needed to. So I think that's the overdrop of what we see in the U.S. and then maybe...

Yes, just to comment on the visibility with respect to those customer programs and the timing. I think the key message today is these engagements with our customers are giving us that visibility so that as that CapEx is needed, it's not about placing a bet, it's about an arrangement, and we're going to time those to be as close to those programs as possible. We've disclosed what programs that we're going to see in production in 2026. Doug talked about that. We talked about a program that we expect coming online in '27. But the idea was to show you that the pipeline, the level of pipeline and the nature of customers that are in that pipeline.

Charles?

Charles Shi from Needham. Two questions. The first one, I think 1 of the most incremental thing we heard today is that HDFO program -- HDFO Bridge program, you got the AMD as a lead customer. Can you talk about -- provide a little bit more context, how did this program come along? And trying to zoom out a little bit compared with the 2.5D program, which did have the AI accelerators programs in there, the HDFO program seems like it's very, very CPU-centric. And it may not necessarily be a bad place to be probably a good place to be, given the lots of discussion about CPU or agentic AI. But why is it evolving the program evolved into this like it's becoming a pretty CPU-centric program? What do your customers see the competitive advantage of the HDFO program? That's the first question.

Yes. So maybe I can start and then Doug can talk a little bit more about the technology advantages. If we look at the customer base, you're right in that the first programs were ramping in that HDFO platform are CPU-based. Again, 2 of those for PCs. The ones that we announced today for AMD is data center related. And then, obviously, we have 2 other data center for the organic RDL type structure will be non-bridge that are ramping this year as well for data center. I think what has happened is we see obviously, for AI training, very GPU focused, as you get more into agents and agentic AI, then the CPU workload is increasing significantly.

I think we've heard that from all of the suppliers of the CPU structures, whether it's AMD, NVIDIA or Intel. So I think that dimension is what we're seeing that the demand there is just really accelerating and that's creating an environment where we're expanding in Korea. We've talked a little bit about the footprint that we have going on in our existing building that we've announced. We've also been looking at doing additional bolt-on building within our Guangzhou facility to expand that location. And then longer term, obviously, the U.S.

So that we really feel is a multiyear journey. But that platform in general will extend to other technologies and other application spaces. We don't see it as just a CPU technology. And maybe, Doug, you can add a little bit more to that.

Yes. So I mean, this is -- this goes back to our platform-based technology and our early co-development, right? So we've been supporting 2.5D applications for almost a decade. And certainly, it was a great application when AI originally rolled out a couple of years ago. The same equipment is essentially used for RDL based technologies for high density for RDL and Bridge. So we look at the progression of complexity within the packaging spaces, an incremental increase of what we currently offer. And so when we look at what we're currently supporting, we do see a lot of CPU opportunities. Most of the advanced technology opportunities we are seeing for advanced packaging are right now focused on CPU. But certainly, as I mentioned in my presentation, the processing, the technology certainly could roll out to other spaces. But it's really coming down to as the packages get more complex, fewer companies are able to support it and certainly, we're positioned there.

Maybe a second question maybe for Megan. Looking at your expected revenue for the Phase 1 of Arizona, and $1 billion revenue run rate expected, but let's say that once you ramp up the second phase, let's time that by a $2 billion run rate, but compared with the $7 billion CapEx, it feels like that number is maybe a little bit light. And is it some kind of the revenue run rate -- expected revenue run rate number feels like a little bit light. Is there some kind of conservatism built into that? Do you see -- should there be more upside to that $1 billion per base revenue run rate? And any thoughts behind that number?

Yes, two thoughts there. One, it's a lot more expensive to build in the United States. So trying to compare the $7 billion to 2 phases compared to, say, are Vietnam built, they're not comparable. The second aspect is, I'm looking at profit. So while the $1 billion might seem light I'm looking at 30% gross margins. That's how we're ensuring that this business is going to be able to provide the return that we expect over time. As far as whether it's conservative or not, this is based on our visibility of those programs. We have not yet ordered all the tools for that first phase. We're still in discussion with customers on the nature of those programs and scale, but we knew we needed to give you some visibility as to what we were thinking for that top line.

And don't forget the incentive. The incentives definitely help there as well to offset some of that cost.

We'll do an online question. "have you considered pausing or decreasing the dividend to fund your growth?"

Megan, You want to take on?

Yes. So no, we have not considered pausing or stopping the dividend. We're committed to continuing to grow our regular dividend over time. And just stepping back to our capital allocation priorities. Organic investment is our priority. We'll evaluate other strategic investments, financial stability. And then, yes, we're committed to bringing returns to our shareholders.

It's Ian Lieberman from Talos Asset Management. I had a few. The first question I had was, I guess, as we look out to 2030, do you have a view in terms of where testing revenue would come in as a percentage of the mix versus packaging here?

Yes. So let me take that one. So today, we're in low teens from a test versus total revenue. We do expect that to increase over time. So what we see is, especially as we start seeing more OEMs engage. So if you go back to, as an example, whether it's car manufacturers or data center, hyperscalers now, hyperscalers starting to get involved with doing chip design, typically, they don't have a test footprint. So they're looking for options to where OSATs can support that type of business. So that will help us with the test attach rate on this market that we're saying is going to be our fastest-growing market. So we would expect that to increase the overall test percentage over time. What that will look like, I mean just to kind of give you a gauge, I mean, we're envisioning in the mid- to high teens as we go into that 2029, 2030 timeframe.

Great. Okay. Second question I had was if you look at the 2030 Arizona slide, there's a little pocket up there that says multiyear contracts with top customers. If I think about that statement relative to the $1 billion statement, do you guys have visibility that as you look out over the different programs on that different slide that, that $1 billion is, I don't want to say mostly in pocket, but you have excellent visibility as it relates to Phase 1 of Arizona?

I would say we have very good visibility. When you look at these structures with the customers, most of are contractually-based structures. Again, those can look like multiple things, whether there's loading agreements or prepayments. So we feel very confident with the customers that we're working with, with Phase 1. We want to get to that level of confidence for Phase 2.

Great. And then the last question I had was on the 2028 guide, just wanted to understand a little bit more on the $9 billion in so far as right now, whether it's maybe the upcoming quarter or prior quarters, but run rating at $8 billion. What went into your thinking for the $9 billion on the 2028? Is there a capacity element that you're capped? Is it something else that we should be thinking about that informs your view on on that relative, obviously, to the opportunity in, call it, Phase 2 into 2030?

Yes. For me, there's a couple of components there. Again, we wanted to put numbers out that we felt was achievable. We were very comfortable with. Again, when we look at opportunities that are out there, there are more opportunities. We see challenges on scaling. Definitely -- we've talked about some of the space dynamics to where we're trying to increase our space pretty aggressively. So there could be some dynamics there. But again, when we look at it, it's more about giving this community achievable numbers, and we have high confidence in.

We'll take another online question. We have a couple on Arizona. Megan, can you be more specific on how the ramp costs flow through the income statement in '27 and '28 for Arizona?

Sure. So once the Arizona facility completes and that triggers depreciation expense, we will see those costs begin in OpEx, specifically in SG&A. This is consistent with when we brought our Vietnam facility online. As we are getting ready to ramp those costs will be in OpEx at the time that we qualify our first program those costs will then all move into cost of goods sold because we now have cost of manufacturing. We expect that will happen sometime in 2028 depending upon the speed of those qualifications. So there will be a beginning in '27 in OpEx. That will be a dilution impact. As we move into '28, that will continue in OpEx, and then it will shift up into cost of goods sold. But for the full year of '28, we do anticipate continued dilution, albeit probably less than 27 as we'll start some production in '28.

One more on Arizona. For the additional land purchase announced this week, is this opportunistic in that, that land is available? Or do you see accelerating business and potential that you could start an additional phase?

I can start. I think we touched on it already a little bit. I mean the opportunity we definitely see is increasing. So I think from a customer perspective, there's definitely more opportunity, but the actual purchase of that land was more about the future, making sure we had optionality in the future, and we'll see what that timing looks like. So no firm plans for that additional land today.

Sara in the back.

Thank you. So we're laying out aggressive plans for adding capacity aligned with major customers. We've seen a lot of these customers sort of help fund these projects. Maybe help us understand the calculus behind raising other forms of capital versus getting direct investment from customers? How are you weighing those 2 options? I'm sure you kind of have both in the table.

Megan, do you want to take that.

Sure. So Suraj, we're definitely looking at all of those options. I'm sure you're probably referring to our capital raise we had just a few weeks ago. That's 1 component. We have some commitments already that were in the form of advanced payments, and we are in discussions today with other customers with regards to other commitments. So from my perspective, we're utilizing all of those different tools in order to fund that and to ensure that we're as financially flexible as needed in order to capture this growth.

We'll take another online question. This one's for Doug. Doug, can you talk about your capacity as it relates to 2.5D, HDFO and Bridge, including flip chip and wafer level, which areas are currently constrained and which areas are underutilized.

Okay. So when it comes to wafer-based processing, high-density fan-out processing, advanced assembly, there really are 2 pieces. There's the wafer-based processing and there's the on-substrate assembly. When we have high demand and we have fungible programs, that same equipment is used across the board. So we're seeing high utilization across our advanced packaging within Amkor, and we continue to invest in the equipment to bring our capacity even higher to support our customers' demand. So I would say specifically that question, we are looking at increasing our spend to meet our customers' demands as long as we can financially justify the returns from those opportunities that exist in the market.

I have another question for Doug. You mentioned advanced packaging opportunities of $1 billion plus in collective revenues. Can you discuss the cadence that these projects moved into production and the revenue potential for the Advanced Packaging group.

Sure. So our engagements are with very large customers who have very high demand. We have platforms that have been either in production or in qualification for a number of years. So we're able to engage with those customers, begin qualification very quickly. Pass qual, [indiscernible] go through customer characterization and qual and then ramp. So really, it comes down to making sure that we understand the customers' time line for ramp and how do we invest to make sure that the equipment and the processes and the equipment and the people are in place that. But certainly, we are working with customers continuously on that, and that's part of what you've seen from our increased capital intensity this year and what we're looking at doing next year and the following years.

Nakul in the back.

Nakul With Tulane Capital. I think you guys had a slide up there about all the advanced packaging programs that's in the pipeline. Maybe just a clarification on that. I think conversations before you guys have talked about maybe $400 million, $500 million of advanced packaging revenue, I think, in the compute business. I just wanted to make sure one, if that's in the right ballpark. And then maybe among those active programs that you indicated on that slide, maybe just a rough revenue contribution this year and when that full pipeline comes in, is that the -- that's the number that's going to like $1 billion roughly? I just want to make sure I understand the evolution in rough quantification of that?

Okay. Let me start there. So what we've talked about for this year is a tripling of that advanced packaging revenue this year. And you're right, that's all in that compute market that we highlight. And then I think if you look at our -- that circle chart that I represented that had our 2025 revenue and then the 2030 mix, what you'll see is that computing market is what's growing significantly, and that's obviously which Megan had in our bridge as well. If we look at that growth, the majority of that growth would come from this AI dataset type space. We wouldn't expect the PC market to have significant incremental growth from where we are today. So I think for you to kind of get some numbers around that, you need to kind of look at what that growth trajectory looks like in the compute market for us. And then you're right, these $1 billion opportunities that Doug was talking about are more directly related to data center. There's other applications in there, but these larger opportunities are some of the CPU opportunities that we've been talking about.

We'll take another online question. With the uptick in industry growth in advanced packaging, should we think about a higher capital intensity rising from low teens. Do you see high potential to need to lift capital intensity or raise spending to meet some of these opportunities?

Megan, do you want to take that?

Sure. So many of you who know us, our historical capital intensity has been in the low teens. We've been very consistent in that 12% to 13%. And then '26 increased significantly with our construction in Arizona. We'll expect that to continue into '27 and '28 as we bring that factory online. So when we look at a more normalized but different mix of products, which is going to be more heavily weighted to the compute segment and the products that Doug talked about. We do see that being more capital intensive, but we see that moving up into the mid-teens, maybe mid- to high teens. That would be without significant expansion but we are able to do what I would call modular expansion, whether that's putting up another building on an existing footprint or building out another module, that can all be managed within that mid to high teens capital intensity.

We'll take another online question. Can you clarify how Amkor is thinking about your geographic capacity allocation across your advanced packaging sites, Korea, Vietnam, Portugal and U.S. as customers diversify supply chains.

So I think the way that I look at that is we're in a unique environment to where advanced packaging -- the most advanced packaging capacity is constrained. When you look at the competitive environment, when suppliers that can do these most advanced packages, some of them are in Taiwan, the only option outside of Taiwan is Amkor and Korea. And that's created an environment where customers that want some level of diversity outside of Taiwan, they're looking for opportunities for us to support them in Korea. So that's why we're expanding there, especially on the most advanced type packages. When we think about Portugal. Portugal is a little bit more about supporting the European ecosystem. So that's a little bit of automotive based, some other types of applications. So it's advanced but not the most advanced type technologies. Vietnam is slightly different. That's about migrating some of our SiP type packages as well as memory from Korea into Vietnam, where there's a pretty attractive cost structure and that allows us to have more space in Korea to grow for the most advanced packages. And was there another region you mentioned?

It was the advanced packaging. So it's [indiscernible].

Yes. And then obviously, the U.S. longer term is going to be a bigger, bigger play. And then we are also investing in Taiwan. I think it's important to continue to highlight that Taiwan is very important for us as well. That's where a lot of our advanced packaging, a lot of the wafer-based processing is as well.

[indiscernible] from Stifel. Simple, high level, as we think about CoWos moving co-op, what does that look like for your road map?

Yes, you want -- Doug, do you want to take that?

Sure. So certainly, there's a transition from essentially wafer-based processing to on-substrate-based processing. That will continue to migrate that direction as the technology is required. Cost is still a big play. So the key is to highly utilize existing lines, look at what lines -- or look at what technologies can't be supported if those lines and then you invest in essentially new technology. So that will certainly be a play going forward. But when you look at the total market, there might only be a piece that fits onto that initially. And there's a wide range of other applications that could certainly fill your existing lines. So as we mentioned, utilization is key, but we also actively work with our customers, suppliers and the industry to see what's next to make sure we're ready when the next step is needed, we are in place to support it, not necessarily as the pipe cleaner, but certainly as a fast follower. So it's certainly coming. The package is getting larger or more complex. The question is when, and then really it comes down to when does it make financial sense for us to invest in to ramp. So it's certainly one of the technologies we continue to monitor.

We'll do Steve in the front.

Just a question on auto. The content per vehicle story has been in place for several years, but it's been a tough business before kind of the recovery year this year. What gets you back to sustained double-digit growth. Is this content or share? Or do you expect production increases.

I'd say a little bit of everything, right? So if we look at what we've seen in the last couple of quarters is that mainstream is starting to recover. So these are the more legacy-type packages. So that's been -- like we've talked about, that's been the slow kind of step back up. I think we've -- as well as you guys in other earnings calls, I've heard that from the IDMs in that space that, that market is starting to get a little bit better. Inventories are more under control. The advanced products for us are continuing to grow pretty aggressively.

So we definitely see that and there's -- some of that's related to the customers that we support and them really prioritizing that, and that's a focused growth area for them. Others in that, again, that content per vehicle is increasing. So I think that trajectory is going to going to continue. So we definitely see that, that is, at least today, our second fastest-growing market. And as long as there's not any major issues across automotive in general, we would expect that to continue.

We have a couple more Arizona questions. We'll do one that's quick. "have there been any discussions with the federal government for an equity stake to help fund [indiscernible] build-out?"

So maybe I can take that. So the first thing I'd like to say is the federal government and the state government in Arizona have been really supportive of our project. I mean, so it's been really, really nice to actually to work with both parties. They've been really supportive of what we're trying to do. When it comes to an equity position, there's been no discussions around that. So I'd say I just park that to the side. But I think the overall support from the administration has been really supportive.

And then the other Arizona question is regarding Phase 2 timing and how that may impact the model that we've put out today.

Do you want to talk about that?

Yes. So as I mentioned, we are already underway in what I would call site development. So we definitely see Phase 2 as a not if, it's just when. However, the framework for that phase is underway in discussion and it's really going to be dependent on the nature of the customer programs, the scale, et cetera. That impacts not only the construction, how the building is fit, but also then the tools and so all of those aspects go into estimates.

So from a timing perspective, it's unclear yet when we would be announcing what Phase 2 would look like. But given that site preparations are underway and customer dialogue is underway, I would expect that would be upcoming. So we'll keep you posted when we're ready to update our model with Phase II.

We have more online questions. We have several regarding potential upsides given the high demand and momentum there seems to be on CPU with our top computing customers. Can we talk about how much is built into our model versus upside potential?

Yes. So again, I kind of tried to address that a little bit earlier. We see that when we set the targets, we wanted to put in programs and we had high confidence, we had good visibility into. There are other opportunities out there. So I think there's definitely opportunities for other programs, and we'll have to see how those play out. And we'll update this community as those become a higher level of confidence.

Okay. One more. "What's the most underappreciated aspect about Amkor as you speak with the investment community? Are there any misperceptions that you commonly encounter?"

So when I look at why -- 1 of the reasons we wanted to do this is that, again, it's been over 20 years. So it's pretty clear from listening to the investment community that our long-term vision wasn't totally understood, and we wanted to make sure that, that visibility was out there. The shift in the semiconductor and packaging market is really fundamental. If we go back 10 years ago, 15 years ago, nobody thought about packaging from -- in the design perspective. It was literally you designed the chip for the performance. And then once you start the chip, okay, throw it in a package and just put it on a motherboard or whatever. That is completely changing now, and it's really fundamentally different with these chiplet-based architectures, where the package now is really integrating everything together.

That shift should not be misunderstood. And it's really driving fundamentally our collaboration with the customers. So I hope we got that point across today. I think that's the biggest message we want to get across is that, that market dynamic is fundamentally changing.

Okay. One more just came in as CPO. "as CPO architectures evolve, how does management view the increasing complexity of optical and system-level testing relative to package processing itself?"

Sure. So yes, I mean, CPO introduces I guess, processes that are typically used in traditional packages, especially fiber attach and -- but there's benefits to CPO, obviously, from a thermal and power standpoint. So is going to be a package technology that will continue to [indiscernible] into the market, different processes, different techniques are used to build those processes or build those packages. We certainly have been pathfinding and investigating those for a number of years. Had we invested in CPO when we were first asked to invest in CPO 10 years ago, we would have lines that were underutilized for 10 lines -- 10 years. So it's really important to understand where the technology is, when it needs to ramp and then be there to support it. So we have 3 engagements in CPO right now. We're actively working with our customers and making sure that we have the processes and technology and expertise to support those. But it's -- yes, it's I guess it's a progression and the complexity that we're seeing in packaging and it's certainly an area that we continue to investigate and we will scale in.

Any final questions in the room?

I'll take it if we have the time. Doug, you mentioned visibility extending. Is that over or under 2 years.

It's over.

By how much are you willing to quantify?

We won't estimate from our customer perspective. I think what we see is there's clearly more momentum today than there has been in the past 10 years. I think that -- just switching to optical within the data center is going to be fundamental for power and speed and other things. So it will happen, how fast it accelerates will really depend on how our customers decide to adopt that technology.

And then just 2 rapid fires. Are you talking to hyperscalers directly? If so, how are those conversations looking relative to historical? And the second would be clearly with the quantum news today, clearly, with what we're seeing with the likes of Intel and such, Arizona is becoming an area, geographically speaking, of national importance. How is that playing into the customer conversations you're having, particularly with CapEx rising for multiple players in that location?

Yes. So hyperscalers first. I'd say Yes, I touched on that earlier. As OEMs I'll put hyperscalers in the OEM bucket. As they develop their own silicon, they're working with their -- they're fabless companies, essentially, right? So they need to work with foundries and OSATs to build those parts. So there's definitely more direct communication with the hyperscalers. And they're all obviously in growth and investment phase. So a lot of good opportunities there.

When it comes to the U.S., I mean you mentioned Intel, when we think about the U.S., there's multiple foundry sources within the U.S. We talked last year, always on with Intel. They're Foundry Direct Connect Day talking about emib and how we are supporting bringing that technology into Korea for end of this year capability-wise. So I think when we look across the foundry space, obviously, we're collaborating with a lot of companies and how that's going to develop in the U.S. We've talked about our core fundamental customers that are really driving the growth there today. But I would envision over time that, that mix will change in the customer base in the U.S. will just grow.

Okay. Kevin, that looks like our last question.

Okay. All right. I hope you all now have a better understanding of our vision and path forward. To summarize, the semiconductor industry has entered a structural shift. Advanced packaging is no longer a back-end step. It's on the critical path of system performance, integration and delivery. That shift is being driven by AI, heterogenous integration and supply chain design, and it's not cyclical. It's a meaningful shift that we believe is sustainable. What you've seen today is how Amkor is positioned inside that shift. We are scaling deliberately in partnerships built on early engagement and execution certainty in platform technologies that can execute at volume in a footprint designed to deliver resiliency and scale where customers need it.

Importantly, this is a multiyear value creation strategy. We're investing today with discipline so that our full earnings power in our model becomes visible as program scale, utilization builds and mix strengthens over time. We believe Amkor has something significantly and fundamentally rare in the industry, deep technology, proven execution and a clear, disciplined path to stronger earnings power. That will wrap up our WebEx today -- our webcast today. Thank you very much for joining us.

Good day, ladies and gentlemen, and welcome to the Amkor Technology First Quarter 2026 Earnings Call. My name is Diego, and I will be your conference facilitator today. [Operator Instructions] 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.

Good afternoon, and welcome to Amcor's First Quarter 2026 Earnings Conference Call. Joining me today are CEO, Kevin Engel; 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 slides.

We will make forward-looking statements today based on our current beliefs, assumptions and expectations. Please refer to our press release for a disclaimer on forward-looking statements and our SEC filings for a discussion on the risk factors and uncertainties that may affect our future results.

I will now turn the call over to Kevin.

Thank you, Jennifer. Good afternoon, everyone. Thank you for joining us today. Amkor delivered a strong start to the year, achieving record first quarter revenue of $1.68 billion, up 27% year-on-year. We saw growth across all end markets, and we're encouraged by the breadth of demand we're seeing across our technology platforms. Communications delivered the strongest growth and mainstream posted its fourth consecutive quarter of both sequential and year-on-year growth.

Leading chip companies continue to trust us for their advanced packaging and test needs. We are clearly benefiting from our partnerships and our leading technology as we execute on a growing set of advanced packaging programs.

Earnings per diluted share were $0.33, significantly higher than last year, reflecting disciplined execution, and continued progress on our margin initiatives. Overall, this was a quarter that reflected momentum in demand, disciplined execution by our teams and continued preparation for the advanced packaging ramps we expect in the second half of the year.

As we discussed last quarter, overall semiconductor demand is robust. The industry backdrop remains dynamic. We are closely monitoring export controls and evaluating trade policies. We see supply dynamics around advanced silicon, advanced substrates and memory and are managing these risks with agility alongside our customers and suppliers. Some customer supply materials are being delayed, causing nonlinear loading. This has been expected, and we are prioritizing production where materials are available to minimize impact.

Uncertainty related to the geopolitical events in the Middle East have increased over the last few months. To date, we have not seen any supply disruptions related to these dynamics. However, conditions in the region are putting additional pressure on material pricing. We're working closely with our customers to offset these increases across the supply chain.

Now let me share an update on our strategic initiatives. First, elevating technology leadership. We continue to invest in advanced packaging platforms, including HDFO, flip chip and test. These are critical to next-generation AI and high-performance computing. As discussed last quarter, we are engaged on several HDFO programs this year. and the newest data center CPU program is expected to be ramping this quarter. Our preparations in Korea remain on track to scale this program into high volume in the second half of the year. Overall, we see increasing opportunities for the compute market from a diverse customer base.

Second, expanding our geographic footprint. In 2026, our priorities include meeting construction milestones of our Arizona facility and expanding manufacturing space in Korea. In Arizona, we are excited to see the progress as we wrap up foundation work and move towards building steel construction. Construction of Phase 1 is planned to be completed in 2027. In Korea, the new test building is on track for completion at the end of this year. This will provide incremental space to support data center demand going into 2027.

Third, enhancing our strategic partnerships in key markets. We continue to strengthen collaboration with customers across the ecosystem, including foundries, fabless companies, IDMs and OEMs. As part of our partnership engagement model, our customers are making contributions that help align technology road maps, support our capital investment and enable rapid ramps as new capacity comes online. Across all 3 pillars, we remain focused on margin improvements driven by operational excellence, increased utilization, favorable pricing and a sustained mix shift towards higher-value advanced packaging. Our mainstream factories in the Philippines are seeing improving demand, and we're continuing to optimize cost in Japan. Utilization of our advanced sites in Korea and Taiwan is increasing, improving profitability.

In just over 3 weeks, we will host our 2026 Investor Day. This will give us an opportunity to provide a deeper view into our strategic pillars. We will explain Amkor's position as the semiconductor industry turns to advanced packaging for value creation. We are well positioned for this shift, and we are at the beginning of a multiyear value creation journey. We're excited about our future. We look forward to sharing more of our story at the event on May 21.

I'll now turn the call over to Megan to provide more details on our first quarter performance and near-term outlook.

Thank you, Kevin, and good afternoon, everyone. Amcor delivered record first quarter revenue of $1.68 billion, increasing 27% year-on-year. Revenue was above the midpoint of guidance, driven by stronger-than-expected performance across all end markets, except computing, where we saw softness in PCs and laptops. The communications end market was the largest contributor to our year-on-year growth, increasing 42%.

We saw healthy demand across premium tier smartphones, especially iOS due to our strong footprint in the current generation. Android demand also remained healthy. For the second quarter, communications revenue is expected to be stronger than seasonal increasing mid- to high single digits sequentially, driven by continued strength in the iOS ecosystem. Revenue in the computing end market increased 19% year-on-year. Record revenue within AI data center applications was driven by broad-based strength across multiple customers. This was partially offset by softness in PCs and laptops. Computing is expected to grow mid-single digits sequentially in the second quarter, driven by the ramp of the new HDFO data center CPU device that Kevin mentioned.

Automotive and industrial revenue increased 28% year-on-year. ADAS and infotainment demand drove record revenue for advanced technology in this end market. The recovery in the mainstream portion of automotive and industrial continued with Q1 marking the fourth consecutive quarter of sequential growth. Revenue within the automotive and industrial end market is expected to grow mid-single digits sequentially in Q2. Consumer revenue increased 4% year-on-year due to broad-based improvement in demand across customers. Revenue in Q2 is expected to grow low teens percent sequentially driven by wearable products. Gross margin of 14.2% exceeded the high end of our Q1 guidance range primarily due to favorable product mix. Gross profit for the quarter was $239 million, up 52% from last year due to increased volume and focused cost management.

Operating expenses were $139 million for Q1. Operating income was $100 million, and operating income margin was 6%, an improvement of 360 basis points year-on-year. Our effective tax rate for the quarter was 12.8% lower than our full year target of 20% due to discrete tax benefits recognized in the quarter. Net income was $83 million and EPS was $0.33, EBITDA was $285 million and EBITDA margin was 16.9%.

As we have grown revenue by delivering high-value advanced packaging technology to our customers, we are benefiting from the operating leverage in our model. In addition, our actions to structurally manage costs are showing up in our results, demonstrating our ability to drive sustained margin improvement. As of March 31, we held $1.8 billion in cash and short-term investments and total liquidity was $2.9 billion. Total debt was $1.4 billion and our debt-to-EBITDA ratio was 1.1x. Our strong balance sheet provides the financial flexibility and liquidity for this next investment cycle.

Now turning to our second quarter outlook. Building on the strong momentum in the first quarter, Q2 revenue is expected to be between $1.75 billion and $1.85 billion, representing a 7% sequential increase at the midpoint. Gross margin is projected to be between 14.5% and 15.5%. We expect operating expenses of approximately $120 million which includes a gain on the sale of real estate of approximately $20 million. Our full year 2026 effective tax rate is expected to be around 20%. Net income is forecasted to be between $105 million and $130 million, resulting in EPS between $0.42 and $0.52.

Our 2026 CapEx estimate remains at $2.5 billion to $3 billion. As a reminder, 65% to 70% is projected for facilities expansion, including Phase 1 of our Arizona campus. About 30% to 35% is projected for HDFO, test and other advanced packaging capacity. The remaining spend is projected for R&D and quality programs.

We anticipate elevated CapEx spend for facilities expansion through 2027 as we complete Phase 1 of our Arizona campus. At that point, we will begin recognizing depreciation and other start-up costs as we build and train the workforce ahead of production in 2028. Similar to our Vietnam ramp-up phase, these preparation costs will be recognized in OpEx until programs are qualified for production at which point they will transition to cost of goods sold. As a result, we anticipate this will start to dilute operating income margin by approximately 1% to 2%, beginning in 2027 and improving in 2028. Once at full scale, we expect Arizona will be a significant driver of operating income margin expansion reflecting the benefits of high-value advanced packaging at what is planned to be our most automated factory.

To wrap up, we are pleased with our first quarter performance. and the momentum we are building in 2026. We remain confident in the full year outlook we provided last quarter, with revenue growth driven by acceleration in computing, and strong growth in advanced automotive. Our focus and discipline as we execute on our strategic pillars positions us well to continue generating improved financial results and sustain shareholder value.

I would like to emphasize Kevin's remarks regarding our upcoming Investor Day. We are embarking on a multiyear value creation journey, investing today to drive materially stronger earnings power in the future. We look forward to sharing more with you at our event on May 21. This concludes our prepared remarks. We will now open the call up for your questions. Operator?

[Operator Instructions] And our first question comes from Jim Schneider with Goldman Sachs.

Given your commentary on some of the customer supply materials being delayed as well as some pricing pressure that you expect could happen. Can you maybe kind of discuss what on-net you expect to happen in terms of gross margins in the back half of this year? I mean it seems like there are some things very much in your favor increased loadings, better mix. Maybe talk about from the Q2 baseline you just guided to what the sort of puts and takes are in terms of net impact on gross margins in the back half?

So maybe let me -- and thanks, Jim. So let me start maybe with a little bit more detail on the material supply dynamics, and then Megan can cover the margin and profitability perspective. So I think when we look at the materials, obviously, we've highlighted that memory, advanced silicon, substrates, we are seeing dynamics there. Different -- slightly different dynamics. I'd say the 1 that we were able to kind of really see from a supply perspective is the advanced silicon. Sometimes when it comes to memory, we're not quite sure how customers are moving demand around depending on their supply, but we definitely see that from advanced silicon.

So basically, what dynamics going on there is we have these situations where there's forecasted material, the wafers or the memory doesn't show up. And then we luckily we're in such a demand profile situation such that we have other material that we can typically load, so we haven't really seen a utilization impact, but that is creating a dynamic to where some of the demand is getting pushed forward. So we're definitely seeing that. And overall, we feel that this supply dynamic for Q2 will be similar as Q1. And we'll continue to manage that way. But Megan, can you talk a little bit about the margin profile?

Sure. So given that environment, we're also in what we would say a constructive pricing environment. So we have been working with our customers to manage some of these pricing pressures. So considering that aspect, we expect that would cover most of those cost increases. So as we look out to the second half of the year, we're still seeing our gross margins being able to rise in that mid- to high teens level given the increase in utilization as well as the ramp expected for our compute segment surrounding the data center. That will have a favorable impact on product mix in addition to that being more high-value advanced packaging. So those 3 elements, pricing, utilization and product mix are all going to support that lift in the second half. .

Yes. And maybe let me add a little bit more on pricing to give you a little color there. So when we go back to Q1, we started some pricing activities then that was early on focused on Japan. We had talked about some of the dynamics for Japan in the past. But what we've been doing over the last quarter is we're working with most, if not all, of our customers to look at pricing dynamics throughout the course of the year. I think, in general, customers understand that the environment is such that costs are going up, and we're seeing some ability and willingness from customers to help us in those dynamics. So we expect to see pricing will kind of increase as we go throughout the year. So that will just help offset some of these cost increases that we're seeing on the material side.

That's great color. And then just to clarify, in terms of the computing ramp you're expecting in the back half, should we expect that to inflect in Q3? Or is that more of a kind of Q4 weighted event?

So it's going to continue to ramp throughout the year. I'd say the ramp, specifically for the CPE device will start this quarter, but we'll start seeing meaningful revenue contribution in the third quarter and then just continues to ramp beyond that even going into 2027 and beyond.

Your next question comes from Ben Reitzes with Melius Research.

I wanted to clarify your comments around the 1- to 2-point hit that comes at some point in 2027 due to the ramp of, I believe, Arizona. And when exactly should we think about that timing to op. And then how should we be thinking about the offsetting revenue impacts there? Because I assume that there's quite a bit, but I'm not sure what -- if it hits right on time or if there's a delay. And I know you only guide 1 quarter at a time here or not that far out, but I'm wondering how you would advise us to model that as we look into 2017, which is going to be a really strong year for the space.

Yes. So thanks. Megan will go through a little bit of the details on the timing. I wanted to kind of step back a little bit and give you our color here. We wanted to make sure that the investment community understood the way we were looking at the dilution and the cost impacts. And part of that is thinking about obviously the building depreciation versus the equipment depreciation. And obviously, the equipment depreciation cycle is only a 7-year cycle. So that will have a larger impact as we really bring in equipment. So we wanted to just make sure that the investment community understood these dynamics and understood the timing and then, Megan, can you give me some more color there?

So Ben, as far as the exact timing for when in 2027, that's expected to hit, it's a bit too early our estimates can shift based on the timing of equipment delivery as well as the speed of qualification process. So as a reminder, this impact is really following the same framework as what we experienced in Vietnam, where those costs will begin in OpEx. And then once we call our first program, those costs move to cost of goods sold, and then those will be in margin.

So as far as that 1% to 2% impact on operating income margin that was anticipated to be a full year impact based on our estimate of currently when we believe those costs will begin. And then we see that improving in 2028, which is when we're going to start scaling. And that leads to your second part of the question. We will see some modest revenue in 2028. That will then scale in 2029, where we believe exiting '29, we will have meaningful revenue such that moving into 2030, we would experience the full impact from the Arizona facility. And all that obviously is subject to customer qualification, et cetera, but that's what our current plan shows.

Okay. And then just with regard to the CPU ramp. This is a new product and whatnot. You've talked about it being higher margin. How should we think about -- and you already mentioned, Kevin, that it's going to sustain and get bigger in 27. Do you see a strong pipeline for the CPU business, both ARM and maybe even x86, and just how would you characterize that win? Is it the first one? Is that the only 1 you have visibility on? Or is this a category that could become a meaningful contributor even beyond the big 1 that you got?

Yes. Thanks for that. I would say, in general, strong tailwinds, obviously, the one device that will ramp first, we see a lot of opportunity there. again, really ramping even beyond 2026. Other customers, we are engaged. So there are other activities going on there even in some of the more advanced package types, kind of again, kind of looking more into 2027 for the more advanced packages. But if we look at our -- this HDFO platform in general, whether this is a swift technology, similar to TSMC's are or whether it's a cool, Amkor's technology. the customer engagements are broadening. So those platforms now we have over 5 customers that we're engaged with, different levels of qualification. And then obviously, just to go back to the 2.5D, the silicon interposer type technologies.

Again, while we're ramping down the legacy volume customer, we continue to see more customers engaging there. So that customer base, we had talked about before being half a dozen, I would say, we're over half a dozen now. So across that whole platform, that's where we're really looking at the -- when we look at our investments in equipment for this year, vast majority of that investment is going into these types of platforms in Korea and then some of the other wafer-based activities in Taiwan.

Your next question comes from Randy Abrams with UBS.

Yes. Okay. I wanted to ask a follow-up question on your loading level. Was it picking up across mainstream events. If you could give a sense of utilization or headroom to grow to take on projects both in Korea, Vietnam, just ahead of Arizona. And then if we look at the Phase I, it looks like it adds about 10% to your network in terms of floor space. Should we think that's approximate revenue power or doing advanced packaging, should we take a different approach to revenue if you bring on Arizona.

Okay. Yes. Thanks, Randy. So first, utilization. So at a high level, our Q1 utilization was in the low -- and if you compare that to Q1 last year, we were in the 50s, so pretty significant improvement year-on-year. When we think about Q2, we'll still be in the 70s. It will be a slight improvement, but a little bit of an increase from Q1. And then when we kind of think about how that split, I think we talked about this a little bit last quarter. The advanced lines are filling up. And some of these areas, are getting to levels of high utilization. And then we still have some factories more on the mainstream side where utilization is low. I think we're seeing improvements in the Philippines and mainstream, but some other factories where we have some additional space to improve utilization.

Then when we think about these more advanced programs prior to the U.S. factory coming online. For Korea, space is something that we're monitoring very closely. You may recall, we're building a new facility there now. That facility will be completed at the end of this year. So that will give us some headroom going into 2027 to continue to ramp. And then when we look at Vietnam, we talked a little bit about this in the past. We're migrating some of our SiP products from our Korea facility over to Vietnam. That will help provide additional room in Korea and then we're also obviously improve our utilization in Vietnam. So we have continued room in Vietnam to grow from a space perspective. That building, we even have some clean room space that's yet to be facilitized. So we have headroom there. And then just to summarize again, Korea, we're expanding aggressively. I think that's an area where we see just a tremendous amount of demand going through this year and into next.

Great. I appreciate the color on that. And then for the Arizona, maybe just a followup to the first question, Arizona, if you could run through it on the scale that, that could add? And then the second question I wanted to ask on the -- just a bit more on the computing. I think one side with the traction that Intel seeing on EMI, if you could talk about opportunity, timing or potential to take on either foundry or internal business. If that's an opportunity. And then just curious a bit more on the CSL or S Connect, how that's coming together with a lot more projects seem to be moving in that direction.

Okay. Okay. Yes, Randy. So for Arizona, you're thinking right. I think we had mentioned roughly from a revenue perspective, we can be in the $1 billion run rate kind of range about 10% of our 2025 revenue to 0 to a little over 10%. So I think you're thinking around the right levels. Then when it comes to EMIB, I don't want to talk too much about that. Obviously, we had talked about how in the past that there is a collaboration with Amkor and Intel related to providing some additional outsourced modeling for EMIB, I'd say that activity is continuing. I don't think I want to go too much more into detail there.

And then on the Cs, as I mentioned a little while ago, we do have 1 CPE product that we're working on with our customer. I think I would say we're still a little bit early in the development cycle with that customer, so it's going to take some time. I would say that's more likely a 2027 discussion. But because of this the constraints in general in the supply chain and in the packaging space, these customers are very motivated to try to move as quickly as they can to develop these new technologies new supply chain options. So we really feel that's a positive benefit for us.

Your next question comes from Peter Peng with JPMorgan.

Just on your advanced AI advanced packaging, I think last quarter, you mentioned that it can grow year-over-year. To what extent is that a demand number? Or is that a supply constrained number? I just want to get a sense of how much you guys can improve that number over the course of this year.

Okay, Peter. So yes, I'd say we're still on track for tripling. I'd say the opportunities are there to grow beyond that. I'd say there are several dynamics that can affect it. like you said, potentially silicon supply memory supply, also just our ramp profile. Obviously, we're bringing on equipment as rapidly as we can to support these ramps. So I think either 1 of those could affect it. We'll see how the year progresses. But I think at this point, we're still very confident in that tripling.

Got it. And then I think last quarter, you guys mentioned that the computer is going to grow 20% and then the high end of the automotive is going to grow pretty strong and then rest of the business is kind of this low single digits. But if you kind of look at your communications, right, you guys are setting up for a strong growth. So one is, do you still see low single digit as a reasonable assumption for the remainder of the business? And if so, does that imply that you guys are probably taking in some sort of deterioration in your communication markets for the second half of the year?

Yes. So I would say, if we look at communications today, a little bit stronger than we were thinking last quarter. So I'll say that. I think we guided single digits. I don't know that we've said low or mid, but we said single digits. I'd say now we're feeling a little more confident that, that market is going to be higher into low double digits. So I think that's positive. We are obviously looking at first half versus second half, the dynamics there. Typically, that second half lift is very high. We're anticipating potentially a slightly less boost in the second half related to that this was a very strong cycle we're coming off of the first half. We're seeing a little bit of strength, a little bit more than we would have anticipated. So we're a little bit hesitant to say that the first half, second half dynamic will be the same for this year.

Your next question comes from Craig Ellis with B. Riley Securities.

Yes. Kevin, I'll start with 1 there and just dig a little bit deeper into what you guys are seeing. So I think -- and the data that we track, it sure looks like the supply chain built above seasonal for both smartphones, mid- to high end and PCs mid- to high end through the first quarter and our read is that, that's persisting in the second quarter. And some of that relates to memory and other component availability and there are some other things that are in place. So the question is this, can you quantify the extent to which the communications business, it may be tracking a little bit better and are you hearing any concerns from your customers about the build intensity in the back half of the year. And I was a little bit surprised to see that notebooks weren't a little stronger. Intel's client computing group comes to mind as an area of strength there. Is there something programmatic that's happening inside of that business? Or what do you see going on?

Okay, Craig. I'll actually start with that one, and I'll ask Megan to help me a little bit on the communications side. So on the PC, yes, I'd say there's something a little bit different going on there. If we look at the unit volumes that we're seeing from the customers that we're supporting, it's still holding in there. So we've talked in the past about how the transition to ARM-based PCs, how more of a preference towards a premium tier that we think that will buffer us somewhat from the material constraints. And I'd say we're seeing that. One of the biggest dynamics that we're seeing is we have a customer where they were rebalancing their supply chain a bit and so we saw increases in a different market and then slight decreases in the computing in the PC space. So overall, that customer is growing significantly, but they decided to prioritize a slight different market. So I'd say that's a bigger dynamic than actual PC unit volume. So I definitely don't want to signal that we're seeing strong PC sales. So that's the first one. Megan, can you comment a little bit on?

Yes, Craig. So if I understood the question around comps, I mean, we did -- we are seeing both with our Q1 actuals and our Q2 guide the communications market coming in stronger than we expected last quarter. And just to reiterate Kevin's comments about the full year shape for comms because of that strength coming off a very successful last fall launch, we don't anticipate that the second half growth over the first half will be as pronounced because we see the first half being, I'm going to say, much stronger. And then for the full year, we do see a better outlook on comms rising into the high single-digit plus. Did that answer your question, Craig?

Yes, it does. And then the follow-up, I'll direct to you, Megan. So we're looking for $2.75 billion in CapEx this year. It looks like we spent about $275 million in the first quarter. So how should we think about the linearity through the year with the balance of the CapEx investment?

Yes, sure. So the first quarter came in a little bit lower than what we were expecting. I will point you to the balance sheet. Our CapEx payable did increase $200 million. So that's really just timing of when those payments will be made. But as far as the shape of the year, it looks like it's going to be more of a 30% first half, 70% second half year for CapEx.

Your next question comes from Denis Pyatchanin with Needham & Company.

I think sort of maybe partially answered in the previous question, but maybe for your end markets, could you please like rank order the expected growth or visibility going through the rest of 2026. And for all of these end markets are high memory prices showing any impact on demand at all?

Okay. Thanks, Denis. So we don't want to start. So if we look at the -- trying to rank them a little bit. So the compute segment or market, as an example, we're still seeing plus 20% in that kind of a rate for the full year. Again, a couple of things there. As we mentioned, tripling on the advanced side for the data center and then muted on the PC side related to the dynamics we just spoke about. For auto industrial, we had talked about pretty strong growth there, definitely on the advanced side, a little bit modest growth on the mainstream. So that's the wire bond type packages and again, what's going on there, the dynamics you're aware of, increases in ADAS, in car computing, those types of applications. And then the more traditional drivetrain type of CPU, those types of products, they're just a little bit more muted, but at least recovering.

Then when we look at the rest of the market, we had signaled again single-digit growth. We've been talking about how comms is looking a little bit better, potentially approaching double digits. So we feel better there. But in general, still a lot of different dynamics. It's hard to gauge how memory is going to impact things. I'd say a lot of customers obviously are talking about memory, prioritizing, looking at different supply chain options -- optionality for them. But in general, we're still seeing pretty strong demand.

If we look at impacts related to material supply. I would try to give that a range of around $50 million to $100 million for and again, that likely is just a pushout of materials, and then we would expect a similar level in Q2. But again, we'll see how that develops over time.

Great. And then regarding the operating margin impact from the Arizona facility, maybe so if we look at the positive side going into 2028, how big of an impact can we expect there? Like what are your expecting Coos product margins? Are they significantly higher than the current corporate average? Maybe like on a related note, what are we thinking about the financing mix for the overall $7 billion outlay.

Sure, I can take that. So as far as the business that we are operating in our Arizona facility, that will be at a, I would say, meaningfully higher than our corporate average. So as far as impact on '28, we don't want to give too much detail here. We'll save that for our Investor Day and long-term outlooks. And then your second part of that question was about funding. So we had outlined a $7 billion investment for the 2 phases in Arizona. We have several, I would say, opportunities to help fund that. Just as a reminder, we do have government incentives in the form of chips grant funding of $400 million as well as the 35% investment tax credit. So together, that's a pretty meaningful support of $2.8 billion.

In addition, we are working with our customers on different forms of support. And so that is a second part. We have some that have been executed and others that are currently in discussion. And then on the Amkor side, we have quite a bit of liquidity. We have, I would say, debt capacity. And so we're evaluating what we may need to do there as well in the future. But as far as our 2026 investments, our current liquidity provides ample flexibility for us to manage that.

Your next question comes from Joe Moore with Morgan Stanley.

You talked about export controls as a factor you're considering -- can you talk about what the variables might be there? Is that more around the AI-centric stuff or anything else that we should be aware of?

Joe, I think what we were trying to signal more there was around pricing that basically between -- so -- well, I guess, 2 dynamics. One related to the Middle East and what's going on there. And as oil prices continue to rise and just commodity pricing in general, whether it's precious metals, things like that. Those are putting pricing dynamics in play for our suppliers. So that's one dynamic that we're watching very closely. And then the other one is just in general, whether it's trade discussions going back and forth between the U.S. and China related to different AI products. But I'd say that is at least become more normalized now for us. So we see the demand in fluctuations, but for us, there's -- whether it accelerates from a restriction perspective, or it loosens, I think we're ready to kind of balance that. It's not a not a dynamic that has a huge impact on what we're looking at today.

Thank you. And at this time, I'm showing no further questions. I would like to turn the call back over to Kevin for closing remarks.

Thank you. Now for a recap of our key messages. Amcor delivered a strong start to the year, achieving record first quarter revenue of $1.68 billion, up 27% year-on-year, with growth across all markets. Utilization is improving, even as material supplies are constrained in the industry. Over the past couple of quarters, we have been preparing for growth in our advanced packaging portfolio. we are ready to support a strong Q2. Key product ramps are coming in the second half of the year. Our footprint is expanding to meet customer needs going into 2027 and beyond. Thank you for joining the call today and we look forward to seeing you at our Investor Day. Goodbye.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Okay. Welcome back. I'm Joe Moore, Morgan Stanley Semiconductor Research and very happy to have with us today the management team of Amkor, Kevin Engel, newly CEO of the company; and Megan Faust, CFO. Thank you guys for being here.

Perfect. Good morning.

So maybe starting with that, leadership transition, you're coming in as CEO, but I know you've had a long time with the company. I think we overlapped at National Semiconductor one time 30 years ago or something.

Yes, a long time ago.

But -- so even in this job for a short period of time. Can you just talk about big picture, how you think about the opportunity at Amkor? Any big changes from what you guys have been doing over the last few years?

Yes. So I think about our -- again, our strategic pillars. I think that's the fundamental of our business. And I'll try to tie these 3 pillars into what we're doing today and how that's really relevant for some of the key growth markets for us in the coming years. So if you think about our first pillar, elevating our technology and leadership, and that is really fundamental. And you think about advanced packaging, and that's really what's accelerating the growth for the AI market. There's also a good bit of advanced packaging and communications.

So a lot of areas there that we're really focused on partnering with customers to make sure we look at their road map trajectory, make sure we're able to provide the technologies that they need to move that -- their devices forward. Then we have expanding our global footprint, which for us is also a key pillar. If you look at -- especially if you think about advanced packaging, outside of Taiwan and China, Amkor is the only OSAT that offers advanced packaging outside of that region.

So for customers looking for supply chain diversity, resiliency, we offer that technology in Korea and then obviously, in the future in the U.S. So that's a fundamental pillar for us. And then the third would be enhancing our strategic partnerships with our customers. And again, they kind of all tie together in some ways because those partnerships tie around where the customers want packaging done, and they also tie around that technology alignment. So those partnerships are very important for us to set the path forward. So I think those are the pillars that are going to continue to drive us forward as we think about the next 2 to 3 years.

Yes. Okay. The investment in the U.S. stands out, and I know you just reported and had a pretty big CapEx kind of guidance for the year, speaks to, I guess, your conviction around the growth opportunities that are there. But can you talk about that? Can you talk about the decision to invest in Arizona generally and then to sort of maybe step up the investment as we're seeing with these CapEx numbers?

Yes. So obviously, we've been working very closely with our customers on that. I think if you look back, this is a facility where we're not really focused on building and they will come. It's really looking at the customer dynamics, working with the customers to make sure we build the scale that's needed to support that demand ultimately the customers see. So when we look at that step-up in investment, that was again around really that push from the customers to build scale, obviously, support some level of manufacturing in the U.S.

I don't think anybody envisions that vast majority of the manufacturing will back, but a portion where you want a full turnkey flow from the silicon all the way to the packaging, and that's what we're focused on. And I think if you look across those customers, it's really that partnership kind of goes back to that third pillar, which is really critical. And also the technology pillar in that the U.S. will be our more advanced packaging technologies.

So if you think about construction, we broke ground in October last year, and we've been -- we've basically finished the grading of the site. We've been pouring concrete, kind of an interesting fact. Some of our larger pours it's 300 to 400 concrete trucks that come in over the night to do these things and the concrete slabs are between 4 and 6 feet thick. So a lot of activity there. That's exciting. And then over the course of the next couple of months, we'll start going vertical. So that will be, for me, a very exciting time where we start seeing the steel going in. So exciting.

That will give -- construction will be completed around mid-2027, and then we'll start moving the equipment in and start to build out production in 2028, early 2028. And when we look at this Phase 1, again, we're taking a 2-phase approach. Phase 1 is the first building under construction today. That will -- once it fully scaled, it would be around 25,000 wafer per month capacity. And then Phase 2 would basically be roughly the same size and scale.

The value proposition of sort of being the only person packaging outside of China/Taiwan, it seems clear. How much of it is going to have to be geographically matched to the region where there's manufacturing. Obviously, there's significant buy-in to wanting this done in the United States from your customers versus just why isn't being in Korea enough to kind of mitigate the risks of some kind of geopolitical issue in Taiwan?

Yes. So I think there's a couple of dynamics there. I mean, I guess the way we view it is Korea for us is a little bit of a short midterm bridge to the U.S. Korea, if we look at the opportunities we have there, it's really been accelerating as, again, customers want diversity. So if you look at our investments this year on the equipment side, it is predominantly going into Korea as well as into Taiwan to continue to scale in Taiwan as well. And then -- so we see a path to where Korea will support kind of the Asia ecosystem.

We have a facility in Portugal, which will support this European ecosystem. And then ultimately, longer term in the U.S., have that support structure. I think if you look back and kind of think about how countries are viewing it, obviously, countries are really viewing AI as a national security item. So even countries and sovereign nations are also looking at how they have some level of that supply chain within their regions.

And you talk about having a commitment from customers to do this. You're not just building it in anticipation. They know they want to be here. How much of that is tied to TSMC's expansion in Arizona? Obviously, Apple is a major user. And are those customers willing to pay more for something to be packaged in that region because of the geographical preference?

Yes. So let's approach that in a couple of different ways. So those 2 customers have made some public announcements around our partnerships. There's another one that's made some public statements. But ultimately, there's a long list of customers behind that, mostly in the computing segment that want some optionality in the U.S. So I think that's exciting. When we kind of think about how that will continue to evolve over time, it will -- the technology suite, the advancements are going to continue.

And from a customer commitment perspective, I think the way we view that is there's lots of different levels and different structures of commitments. They can be take-or-pay type agreements. They can be upfront investments related to either capital or they can be prepay agreements. So each customer has a slightly different dynamic there and how we're structuring those agreements. But ultimately, when we think about TSMC as a leading foundry partner with manufacturing in the U.S., there'll be a pivotal customer. And then we would expect that other wafer sources could also participate in that facility.

Okay. Great. And then with regards to it, just because the capital spending number is pretty topical, can you talk about the balance sheet as you sort of spend that money and how you think about your allocations of capital going forward?

Sure, sure. No problem. So we've been preparing for this investment for quite some time. So we spent a lot of time in 2025, strengthening the balance sheet. So we ended the year with $2 billion in cash and short-term investments. We also have a $1 billion unused line of credit. So we had $3 billion in liquidity exiting '25. So that was really in preparation for funding this capital. But we really have a lot of flexibility in how this is going to play out.

As you know, we do have significant grants and investment tax credits that will help support the U.S. expansion with the $7 billion that we've outlined for this campus, that would then equate to potentially $2.8 billion in government support. So that's one thing to keep in mind. As Kevin mentioned, customer commitments would come into play. And then from an Amkor financing or how we would manage the balance sheet, whether that's cash on hand or cash from operations, our leverage is really low right now. Our debt-to-EBITDA leverage is 1.2x. So we have plenty of debt capacity.

So we're really going to evaluate the right tool, the right timing based on the visibility and what's really going to maximize value to the shareholders. From a capital allocation perspective, really investing in the business, and we're signaling that with our accelerated investments in '26. We think this is a critical time to invest to capture that growth that's necessary. From a strategic investment, we really categorized in the second pillar that regional expansion.

So that's demonstrated by both Vietnam and then our Arizona facility. And then we're going to optimize the debt structure, the towers, the cost of debt. And last, we're going to continue to return capital to shareholders. And we expect that we'll modestly grow that dividend even through this investment period.

Okay. Great. Maybe just talk about the business environment. Are there areas that feel incrementally better, incrementally worse than a few quarters ago? Obviously, advanced compute is on everyone's mind, but just how are you thinking about 2026?

Well, I think there's a few things there. I mean compute, we've talked about. I mean, I think that's obviously a significant growth driver for us. We signaled we would anticipate about a 20% growth year-on-year in compute. And again, that -- our compute market includes PCs as well as data center. So PCs, we would expect to be more modest and then obviously, acceleration in the AI and data center area. So that's exciting.

If we think about automotive, a couple of dynamics there. On -- we think of that in market in 2 kind of pillars as well. There's mainstream or wire bond type applications where there's a lot of IDM internal capacity. And then you have the more advanced technologies, more flip chip and other type of technologies going into in-car computing, infotainment and ADAS applications. That advanced segment is growing very quickly. So that's a very exciting area for us.

And if you think about what's driving that growth, even if unit car sales are relatively flat, the addition of additional compute power and the additional ADAS functionality in the cars has continued to accelerate, then obviously, you have albeit maybe slower, the migration to hybrid and EVs, which typically has more semiconductor content as well. So that advanced area is growing quickly.

If you think about the mainstream side, that for the past several years has been a story of inventory control at the IDMs and OEMs. I think that's finally starting to normalize, and we've seen 3 quarters -- quarter-on-quarter growth in that area. So again, kind of slowly crawling out of that trough there. That's helping us with our Philippines factory where we're seeing relatively high loading. So that we would expect to continue. So for us, automotive is still an exciting area for this year.

Communications, we'll see how that market develops. I think there's a lot going on there, which kind of maybe leads into some of the challenges we've seen over the past quarter or so. And that comes around memory. Obviously, all customers are concerned about memory. Amkor typically doesn't procure the memory. It's consigned to us. But again, if the memory is not coming in, then obviously, we can't build the parts. So customers are definitely trying to balance there.

And in some cases, what we're seeing is for customers where maybe they don't have all the memory they want, then they have to prioritize which products they want to support with that limited memory. And typically, in the communications area, at least, that will go into more premium tier applications. And typically, we have a higher penetration rate or footprint in the premium tier. So balancing act there.

Silicon supply on the advanced nodes, I'd say, that's also an area that seems to be a bit constrained. For us, typically, how that manifests is lumpy loading. Foundries typically will ship a little bit more in bulk and when they get in that type of dynamic. So we tend to see maybe more supply 1 week than we need and less supply than we need the next week. So that's all about agility and trying to manage our capacity along with this lumpy loading.

Then the third kind of constraint that we see now is on the substrates, so advanced substrates. And that's -- from the growth in AI, put some constraints on some of the materials, and we're seeing that trickle down in communications and some other areas. But at least that one, I'd say, most of our customers saw that constraint coming. So they've been working on dual sourcing and other supply chain options.

And then we have strong relationships with our suppliers. So today, we feel that's manageable. And then obviously, over the weekend with the war breaking out, what's that going to do for oil prices, and then oil prices will typically trickle down to plastics and things like that from a cost perspective. So there could be some inflationary pressures there. But again, obviously, that's very early to tell.

Yes. Yes, I've never really seen this many different supply constraints emerging when the sort of broad markets were just okay, but it's like one thing, it's driving shortages of everything?

Yes.

Very interesting. Okay. Maybe talk about advanced packaging as a driver. You've got 2.5D, high-density fan-out. I know for many years, it's been a priority for you to increase your exposure to those technologies. Can you talk about how that's going?

Yes, sure. So if we go back a couple of years ago, we had a rapid growth in the 2.5D supporting some of the GPU business. And we had always kind of said that 2.5D would be the first technology, then it would transition into this HDFO technologies. And we're definitely seeing now across this year, a rapid growth of the 2.5D. We've talked about roughly tripling that revenue this year compared to last year. So a good dynamic there.

And then we've talked about how -- for us, we view really that bucket, 2.5D and HDFO is one set of capacity because we can very quickly move assets between one or another. So even as potentially one technology shifts or there's a challenge on supply or geopolitical issue, we can shift that capacity to the other quickly. So I think that's exciting for us to see that growth. And we talked about -- for that HDFO platform, 2 CPUs that we were ramping -- going to ramp this year. So we've been investing heavily there. As we talk about capital investment, obviously, the U.S. manufacturing site is a big piece of that investment. But amongst just the equipment piece and the equipment, which is roughly a 40% increase year-on-year on equipment spending, that's predominantly going to Korea to support these HDFO type platforms.

Okay. And when you talk about the 2.5D and the migration there, it does put you sort of into an area where you're competing with foundries a little bit. But talking to TSMC and others, it seems like they're very happy to have you here. Can you just talk about how that business is going to get split going forward?

Yes. So I mean, first, I think it's important to realize foundries are our customers. So there's a strong customer dynamic across pretty much all foundries. Then obviously, like you said, with TSMC, obviously, we have a partnership around the U.S. I think when you think about technologies and then again, this technology leadership position that we try to make sure we're enhancing and moving forward and elevating, there's technology leadership related to, I would say, less leading node where these are things like think power modules, SiP where you're continuing to expand and provide advantages within the package, but it's not necessarily driven by advanced node.

So I'd say the foundries in that case, typically don't participate in those types of innovations or accelerations of packaging. But when it comes to packaging that is fundamental to chip sales, especially advanced node chip sales, to me, I think a lot about market adoption. So in the early phase of a new package, typically, there's a very high investment time or investment period. And typically, the customer mix and the product mix is very small. So the foundries will participate in that area to develop that advanced technology, make sure they're able to sell their silicon.

And then as that technology matures and starts to grow and scale between maybe different markets, additional customers, that's when typically the OSATs will come into play because ultimately, customers, end customers, large ones at least want dual supply chain optionality and the foundries recognize that. So for us, these technologies that emerge over time, we want to be the leading OSAT, fastest follower to some of the foundries when they develop these new technologies.

And the growth opportunity is clear, but I guess, is there a risk that you don't want to be overflow capacity for them? So are you sure you have committed business for the customers?

Yes. So again, I think there's multiple models there. There's models where the foundry may be the customer, and then there's a lot of other models where the end customer is a direct customer. So obviously, when the end customer is the direct customer, then you're not in an overflow model. So it's very different there.

Okay. And then can you talk about the -- are there geographic dynamics that enter into that? Do you end up serving one geography of AI chips with those markets? And just any of the geopolitics affect you guys?

Yes. So I think it comes more down to device level. I think there are some device levels that can be true either in computing and communications to where a specific device is targeted for a specific region. And I think that comes down again to agility, being able to move capacity and make sure that you have a broader customer base. So maybe one device tails off, something else can ramp up to replace it. So for us, that's -- I'd say, that's kind of standard business.

Okay. And then can you talk about the margin impact of advanced packaging? I assume it's helpful over time.

Sure, sure. So the targeted margin for high-density fan-out 2.5D is well above our corporate margins. Really, the technical complexity, high investment creates barrier to entry, and there's very limited OSATs that are capable of doing full flow and then tight capacity. So the margin profile is high. In those early, I would call, ramp-up investment qualification, you are going to have some dynamics where you're not going to have those margins right away. You need to build scale, you need to get the yields, you need to have the increased utilization.

So that's what we called out as part of the Q1 impact on our margins. But with the, I would say, 2 products that we see ramping in the second half and the scale that we're expecting, we'll be able to have the margins that we're expecting at scale by the end of this year. And without giving guidance on our margin expectations from a full Amkor perspective, this movement to a more favorable mix of what we would characterize as high-value advanced packaging, we believe we can achieve in that mid- to high teens gross margins in the second half based on our line of sight today.

Okay. Maybe we could go a little deeper on gross margin. You were higher than that a couple of years ago. Is that possible for you guys to, at some point, return to those levels? And kind of what are the puts and takes around that?

Sure, sure. Absolutely. So we anticipate that we can achieve margins, what I would call, pre-semi cycle, which has been a long time. And that semi cycle was so prolonged, it really drove our mainstream utilization down for a very extended period. And that's what we're still experiencing today is very low margins in that part of our business. Utilization is really our key lever to profitability. We're a very high fixed cost business model and so we need that utilization and leverage to return. So that's one aspect of what we're expecting to happen.

In this low utilized environment, we are taking the opportunity to streamline, specifically in Japan, our mainstream locations. We have identified one factory that we are closing down. So we're in the process of moving that business to our other sites and working with our customers. In addition to that, we have a couple of other dynamics that are now shifting, and they're really centered around our strategic priorities we've talked about.

Our Vietnam facility is now, I would say, hit a great milestone in Q4, where we're at breakeven. That had a 90 basis point impact to our 2025 gross margins, but we're in an inflection point where we're going to see that start to really benefit moving into '26. We're expecting to double our revenue and that scaling in Vietnam specifically is going quite well. We have a great pipeline, lots of customer interest, that's a great region to ensure supply security. And then we've talked a lot about high-density fan-out and the expectations of that product mix shift and the benefit of that margin on our bottom line. So overall, we're -- we see all the ingredients to be able to return to those prior gross margin levels.

Yes. And then you're moving into higher and higher margin segments, you're spending a lot more on capital, you're providing geographic flexibility to your customers that they've asked you for. So it seems like you should get paid for that at some point.

Yes.

Maybe going back double-clicking on some of the end market commentary. On phones, I appreciate some level of caution because there's a lot of issues out there with memory. But your biggest customer seems fine so far. The second biggest smartphone customer makes memory. So that -- you hope they'd be okay. So I guess we've heard about disruption in the China Android market, which isn't really a big market for you guys. So just how worried should we be about this memory stuff? And is it really as simple as if it affects Apple, it will affect you? Or is it more broad than that?

Yes. Well, I think we've said we would expect in communications to be single-digit growth. So I don't think we're projecting significant softness or anything. I think if you look at Q1, as an example, where we guided there, we see significant growth year-on-year in communications. And I think there's 2 pieces there. There's the exit of a strong launch last year that's kind of continuing into Q1. And then there's also regaining of the socket that we talked about historically. So those are boosting our Q1 numbers pretty healthy.

And if we look at our position within that market and the different sockets, we feel pretty good about where we are today. Every year, every cycle, there's different nuances on which customers win, which sockets. And some customers, we may participate, other customers, we may have a smaller footprint. So the share moves around. You have to stay hungry with these customers for sure and be aggressive. But in general, we feel pretty comfortable. And then we'll see, like you said, how the supply chain dynamics work out if there's major headwinds there or not. But at least so far, we're not seeing that.

And you had a wearables ramp last year, you have other growth opportunities within communications that are important to know?

Yes. I mean -- so that we would call it our consumer market, wearable applications. And yes, so they're positive here, last year there. And again, for that market, we would expect kind of low digit, mid-digit single growth. So again, that is very heavily tied to just consumer spending, the consumer buy these wearable products. So again, we'll see how that progresses throughout the year.

Okay. And then in automotive, you talked about some of the dynamics there that are driving multiple trends within there, but your conviction in that as a long-term growth driver?

I think it's significant. I mean, again, especially for this advanced, if you just -- I mean, I think we can all think about over the past 5 years, how much the car has changed related to when you sit in the car, the electronics that are in there, my current model car, you walk up to it -- similar to a Tesla, you walk up to it, it unlocks the car and automatically recognizes your profile. It's harder when you do valid parking, by the way. So you've got to have a key for your valet. But those types of trends, we would expect to continue. The computing in the car is going to increase. I mean this is even without starting to talk about autonomous driving and those types of things that to me is even further down the road.

And then finally, on compute, the AI compute, I think, everybody knows is very strong near term. I think that strength is pretty durable beyond this year. What limits your participation in it? How big can you get in the specifically call-out types of markets?

Yes. So I think what's limiting us today is more footprint related and maybe a little bit resources related to R&D. These are all -- all these NPIs are pretty intensive when it comes to the qual cycle, building out a very robust product that meets the quality, the yields that a customer wants. So that takes time, and it takes a pretty strong lift from your R&D team. So we've been focused on some of the significant growth drivers for us related to that. There's other opportunities that we could have support. We want to make sure we are successful on some of the larger opportunities.

Then space, we've talked about that a little bit in the earnings call that we've been focused on a few things in Korea related to space. One, last year, we increased our footprint within the existing building. Then we broke ground on an additional building last year. So that will be completed towards the end of this year. So that gives us an additional space to continue to ramp going into 2027.

And then we've also started to -- or accelerated, I would say, migration of some of our SiP type products from that Korea facility over into Vietnam, which again frees up additional space for these advanced products. So it's about managing all that timing and how fast we ramp. And again, that's what allows us to increase that capital spending that's going predominantly into Korea for advanced packaging. Then longer term, obviously, the U.S. is going to be a significant growth driver for us.

Okay. And this utilization equation seems kind of challenging because you do have all these different types of capacity. So I assume there's local levels of utilization that are significantly different depending on what we're talking about. Is that fair?

Yes, yes. So I mean, even when you think about advanced packaging, we're well utilized in that space. So that can be in the higher 70s, low 80s exiting '25. But even in our mainstream locations, we can -- we still have some that are in the 50s to the low 60s. So in the aggregate, we were for the full year '25 in the mid-60s utilization. So there's still a lot of leverage out there for us to benefit from.

Helpful. So last question from me, and then I'll open it to the audience. Can you just talk about -- thinking about this business over the next 3 to 5 years, the strategic importance of the back end the government focus on it. I think originally, the subsidization commentary was entirely around front-end wafer manufacturing, but obviously, there's a lot of focus on you guys now. Can you just talk about how you see those priorities improving over the next few years?

Yes. So the first thing I would say, we're playing an Investor Day in May. So we'll definitely look at longer-term targets and give a lot more visibility into what the business looks like. I think in general, what we see is -- at least related to government dynamics, I'd say there was a heavy push going back when the CHIPS Act first started, like you said, the first focus area was the front-end silicon, then kind of trickled down the supply chain. So obviously, we were engaged there.

I'd say today, there's -- that's more of just a monitor and make sure the support is still there. But that's not what's really driving our investments today. I'd say it's more around the customer dynamics, the customer pull. If we think about our speed for Arizona, it's really more constrained by us and our ability to -- how many products and technologies can you ramp at one time. Customers want us to go faster in the U.S. So I think that pull from the customer perspective is definitely there.

And then obviously, like we talked about mainstream, it's a matter of balancing some of those factory capacities, making sure we're consolidating and supporting the right businesses that's heavily automotive focused. And then all the other areas, I think we feel pretty good about kind of mid-growth to significant growth depending on the market in different regions. So long term, we feel the future is bright, and there's a lot of opportunity there.

But you're seeing this kind of more of a mandate from your customers rather than anybody at kind of the government?

I would say, at this time, yes. Yes.

Yes. Okay. All right. Very helpful. Any questions from the audience? We'll wrap it up there. Okay. Kevin, Megan, thank you very much.

Thanks, everyone.

Thank you.

Good day, ladies and gentlemen, and welcome to the Amkor Technology Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Diego, and I will be your conference facilitator today. [Operator Instructions] 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.

Good afternoon, and welcome to Amkor's Fourth Quarter 2025 Earnings Conference Call. Joining me today are CEO, Kevin Engel; 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 slides. We will make forward-looking statements today based on our current beliefs, assumptions and expectations. Please refer to our press release for a disclaimer on forward-looking statements and our SEC filings for a discussion of the risk factors and uncertainties that may affect our future results.

I will now turn the call over to Kevin.

Thank you, Jennifer. Good afternoon, everyone, and thank you for joining us today. Before I get to results, I want to begin by saying how honored I am to speak with you for the first time as the CEO of Amkor. I'm grateful to the Board for placing their confidence in me to lead the company into the next phase of our journey. I want to acknowledge [ Giel ] for his leadership and vision, which guided us to where we are today. Having spent more than 2 decades with Amkor, I've seen firsthand the strength of our people, the trust of our customers and the ability to evolve with the industry adapting with agility, and executing through market transitions and periods of uncertainty. Amkor is an exceptional organization with a team dedicated to delivering customer value and advancing leading-edge technologies. My leadership approach is grounded in transparency, disciplined execution and a strong customer focus. I'm energized to lead Amkor as we enter the next chapter of growth.

I'll turn to our fourth quarter performance. Amcor delivered strong fourth quarter results to close out a dynamic year. Q4 revenue was $1.89 billion, and EPS was $0.69, outperforming the high end of our guidance. All end markets exceeded expectations with the largest upside coming from communications, driven primarily by strong iOS demand. For the full year, revenue grew 6% to $6.7 billion. Computing continued its multiyear acceleration. Automotive delivered strong advanced content growth. Consumer demand improved and communications stabilized with a key socket game. Our team executed exceptionally well, navigating shifts in the market conditions, a fluid geopolitical environment with agility and precision, which enabled us to deliver strong fourth quarter results. As we look back on 2025, it was a year marked with meaningful progress across each pillar of our strategy. We delivered record advanced and computing revenue. driven by deep customer engagements across AI and HPC. We successfully ramped our first high-density fan-out programs into high-volume production, expanding across multiple customers and positioning our platform for strong tailwinds in 2026. Operationally, we made solid progress in Vietnam, reaching breakeven in Q4. We also broke ground on our Arizona campus with construction of Phase 1 now underway. Collectively, these accomplishments strengthen our strategic position, expanded our global footprint and reinforced our alignment with the fastest-growing megatrends shaping the semiconductor industry.

Now let me share an update on our strategic initiatives. Our strategy remains firmly grounded and well aligned with current market dynamics. As we move into the next phase of growth, we see opportunities to further strengthen our execution while staying anchored in our 3 strategic pillars: first, elevate our technology leadership; second, expand our geographic footprint; and third, enhance strategic partnerships and focus markets. These pillars have been central to our progress, and we'll continue to shape our path forward. As we support accelerated demand for advanced packaging and deliver greater resiliency, flexibility and value to our customers.

On technology leadership, we will continue to invest in advanced packaging platforms, including HDFO, flip chip and test, which are critical to next-generation AI and high-performance computing. In 2026, our focus is on launching new programs across these platforms. We have 2 additional programs and final qualification for HDFO supporting AI data centers. In addition to the 2 HDFO PC devices we've discussed previously. Our Korea team is preparing for launching both programs into high volume in the second half of the year. The majority of our 2026 equipment investment is focused on HDFO and test. As AI and HPC demand continues, we are well positioned to enable the next wave of advanced products. We are expanding our footprint to provide customers with diversified regional options for advanced packaging and test. Our presence across Asia, Europe and soon the U.S. gives customers meaningful supply chain flexibility. In 2026, our priorities include: meeting construction milestones of our Arizona facility; expanding advanced packaging capacity in Korea and Taiwan; and continuing to scale in Vietnam. The ongoing ramp in Vietnam including the migration of SiP products from Korea is expected to free up manufacturing space in Korea for HDFO and test growth. This provides needed flexibility until our Arizona facility comes online. We're also working closely across the ecosystem with foundries, fabless companies, IDMs and OEMs to align technology road maps and scale capacity. In 2026, our focus is on enhancing these partnerships with clear milestones and investment commitments. For example, One of the HDFO CPU devices ramping this year includes customer commitments to support our capacity investment, demonstrating how tightly our 3 pillars come together to support AI market expansion. Across all 3 pillars, we remain focused on margin improvement driven by operational excellence, optimization in Japan, Vietnam ramp-up efficiencies, a more favorable pricing environment and a sustained mix shift towards high-value advanced packaging. We look forward to sharing more details at the Investor Day in May.

For full year 2026, we expect revenue growth to be driven by continued acceleration in computing, but expected to grow over 20% and continued strong growth in advanced automotive. The remainder of our business is expected to grow in the single digits. We continue to monitor export control and trade policies as well as dynamics around substrates, advanced silicon and memory supply. We have considered these items in our guidance for Q1. With a strong technology road map, targeted capital investments and deep customer partnerships, Amkor is well positioned to enable the industry's next wave of innovation.

I will now turn the call over to Megan, to provide more details on our fourth quarter performance and near-term outlook.

Thank you, Kevin, and good afternoon, everyone. Fourth quarter revenue was $1.89 billion, down 5% sequentially and up 16% year-on-year. The sequential decline reflected typical seasonal trends in communications and consumer, following strong Q3 builds partially offset by continued strength in advanced automotive. In communications, revenue grew 28% year-on-year in Q4 and 1% for the full year, reflecting a stronger footprint in the current generation of iOS phones and healthy demand across both iOS and Android ecosystems. Computing revenue increased 6% year-on-year in the fourth quarter and 16% for the full year, driven by strength in AI-related PC devices and networking infrastructure. Automotive and industrial revenue increased 25% year-on-year in Q4 and 8% for the full year, driven by strength in advanced automotive content for ADAS applications. Mainstream automotive continued a gradual recovery in Q4, marking the third consecutive quarter of sequential growth. .

In consumer, revenue declined 10% year-on-year in the fourth quarter, reflecting the product life cycle of a high-volume wearable product introduced in the second half of 2024. For full year, Consumer grew 9%, with growth driven by both a full year of the wearable product and a broad improvement across traditional consumer applications. Gross profit for the quarter was $315 million, which included a benefit of approximately $30 million from asset sales, as noted in guidance for the quarter. Gross margin was 16.7%. Operating expenses for the quarter were $130 million. Operating income was $185 million and operating income margin was 9.8%. Our effective tax rate for the quarter was 4.8%, primarily due to discrete tax benefits related to the recognition of deferred tax assets.

Net income was $172 million, resulting in EPS of $0.69. The EBITDA was $369 million, and EBITDA margin was 19.5%.

Now let's turn to our full year performance. 2025 revenue increased 6% to $6.7 billion. All end markets grew, and we achieved record revenue in the computing end market. Advanced packaging revenue also set a new record, growing 7% year-on-year, driven by growth in computing, automotive and consumer. Full year gross profit was $939 million and gross margin was 14%, which includes a 90 basis point headwind from the ramp-up of our Vietnam facility. Operating income was $467 million and operating income margin was 7%. Our full year effective tax rate was 15.4%, lower than anticipated due to the discrete tax benefits recognized in the fourth quarter.

Net income for the year was $374 million, resulting in EPS of $1.50. EBITDA was $1.16 billion, and EBITDA margin was 17.3%. Capital expenditures for 2025 were $905 million, lower than our guidance due to the timing of cash payments for our Arizona facility. These investments remain in our plan and will shift into 2026. Full year free cash flow was $308 million. Throughout 2025, we proactively positioned our balance sheet without its strength and flexibility, meaningfully enhancing liquidity. At year-end, we held $2 billion in cash and short-term investments and total liquidity was $3 billion, a 30% increase from the prior year. Total debt was $1.4 billion and debt-to-EBITDA ratio was 1.2x.

Now turning to our outlook. Q1 2026 revenue is expected to be between $1.6 billion and $1.7 billion, representing a 25% year-on-year increase at the midpoint. We see strong growth year-on-year in communications, computing and the automotive and industrial end markets. Gross margin is projected to be between 12.5% and 13.5%. We expect operating expenses to increase to approximately $135 million as we continue to invest in R&D for anticipated growth. Our full year effective tax rate is expected to be around 20%. Net income is forecasted to be between $45 million and $70 million, resulting in EPS between $0.18 and $0.28, a strong start to the year. 2026 CapEx is expected to increase to a range of $2.5 billion to $3 billion. 65% to 70% is projected for facility expansion, including Phase 1 of our Arizona campus. About 30% to 35% is projected for HDFO, test and other advanced packaging capacity. The remaining spend is projected for R&D and quality programs.

In closing, our fourth quarter and full year 2025 results reflect Amkor's focus and discipline on executing our strategic pillars. We enter 2026 with strong momentum, a clear strategy and an investment agenda to enable our next chapter of growth.

This concludes our prepared remarks. We will now open the call up for your questions. Operator?

[Operator Instructions] And your first question comes from Charles Shi with Needham & Company.

Thanks for taking my question, Kevin, Megan, especially Kevin, I'll work on board are looking forward to working with you going from here. Maybe the first question regarding your CapEx guidance, obviously, that's well above what we thought. And -- so when you announced -- when Amcor announced the plan in Arizona, that was a $7 billion total CapEx investment. So we automatically start that was like more incrementally, you're going to do that over multiple years. But if we kind of have to guess that embedded in your pretty large CapEx guidance, a good amount of that investment going to be a little bit more on front loading than we thought. So I wonder, is there something we kind of missed or what has changed over the last 3 or 4 months, I did notice you mentioned that there was a customer commitment for data center HDFO project that it feels like that has played the role there. Mind, if you give us some sense on why the CapEx numbers are so high? And what's the reason for that?

Yes, sure.

Thanks, Charles. Good to hear from you. So I think you kind of have to break it into 2 pieces. If you look at the CapEx projection, again, what Megan highlighted in her prepared remarks, it was about 65% to 70% of that is for facilities. So then you take that percentage and let's talk about the U.S. spend. So when we talk about the U.S., the $7 billion, we talked about a 2-phased approach. Phase 1 is you can think about about half of that $7 billion. And then the construction is about 60% of that. So -- and then if you think about the construction time frame that we talked about, we talked about the building being completed in 2027, basically around middle of the year. So if you kind of overlay that together, you can imagine that between this year and the first half of next year, you get an idea of that capital spending for the Phase 1 build out. In general, if you talk about the other portion of the CapEx, the 30% to 35%, that's equipment, I think there's a couple of key things to highlight there. Obviously, that's not equipment for U.S. manufacturing. That's all in support of Korea, supporting the HDFO and [indiscernible] as well as 300-millimeter capacity expansion in Taiwan. That is an increase year-on-year, pretty significantly, about a 40% increase on equipment, and that just highlights the strong demand that we're seeing in this advanced packaging area.

On the commitment side, let me touch on that. So obviously, we're not going to talk about the details of commitments. But in general, that comes in multiple forms. There could be items like a prepayment agreement or loading agreements, other things that give us confidence that we're going to have high utilization in that facility once it's ready.

Maybe a follow-up question on the CapEx. So at least for our Arizona facility, you do have a 35% investment tax credit. You may also have the Chips Act, the direct funding that's available to you. We know that the U.S. company benefiting from those programs, there's a little bit of varied in terms of how they guide CapEx. Some we're guiding growth CapEx, so we're guiding net CapEx. So Megan, this is a question for you. Is -- what's the number CapEx number? Is it the gross? Or is it the net? And if it's gross, how should we think about how to flow through the benefits government subsidiary -- subsidies into the numbers, into our models?

Yes. Great question, Charles. So those government incentives as well as the investment tax credits as well as the grants. Those are going to come in on [ Atlantic ]. So you're highlighting a really good point that the Arizona CapEx is going to be front-loaded. And so our Arizona investment most likely could peak in '26 because we'll start to have those benefits come through subsequent to the investment periods. So to come around to your original question, there's really minimal offsets in our guide with regards to benefits. And going forward, we will net those. But this is a net position, but there's really minimal in the 2026 guide.

[Operator Instructions] And your next question comes from Craig Ellis with B. Riley Securities.

Yes. I wanted to follow up on some of the full year end market color, which was very helpful. And [indiscernible] Kevin, welcome. Good luck in the role, and I look forward to working with you. So I'll start with computing. In the 20% year-on-year growth, can you help us with color on how the potential size of the 2 data center HDFO programs might compare to the existing PC-related programs. And as you look at the data center contribution in 2026, would you expect those programs to be at full volume by the time we exit the year? Or are they still ramping as we exit the year? Just some additional color on how that plays out will be helpful.

Okay. Craig, as we think about the compute segment, maybe I'll focus on the [indiscernible] color first. We talk about 20% year-on-year growth for the year. What we're talking about there is, again, you need to remember that compute is obviously PC as well as data center. If we look at the PC market, in general, that's showing some headwinds. So I'd say that's relatively soft compared to data center. And if we pivot that over on to the technology side, when we look at the 2.5D and HDFO platforms, we're expecting that to nearly triple over the course of this year. Commenting on the devices that are ramping, we would expect 1 of those to be in very high volume. It will be a pretty steep ramp. The other one is also ramping to project if it will really be full volume towards the end of the year, but definitely meaningful revenue contribution.

Got it. That's helpful. And then Megan, going back to 1 of the questions Charles asked just on investment. It certainly seems like you'll have a lot of help from credits and government funding next year. But to the extent that you would need to augment your current cash balance with supplements, are you able to take advantage of debt markets that historically have been very attractive, such as Japan to provide any additional cash as we work through this first phase of increased investment.

Craig, yes. So as we have mentioned, a significant portion of funding will come from government incentives on the total project. So that could be upwards of $2.85 billion. I also want to comment before we talk about the debt capacity that we do have, I would say, commitments from customers. Also, we have some that have already been executed and others that are in discussion. So we expect that, that will also contribute to funding. And then as it relates to the Amkor finance piece, we have been preparing for this for some time, to give us, I would say, the flexibility on how to manage that. So yes, we do have access to debt capacity in various forms, especially being at only 1.2x debt to EBITDA. So we are evaluating those options carefully, and we will manage that in order to optimize that return to shareholders.

Your next question comes from Randy Abrams with UBS.

Yes, my first question wanted to just touch more on the outlook outside of the advanced packaging. The other segments for the single-digit growth. Can you talk about the puts and takes within that for comms, the iOS versus Android and also the SiP programs, if you expect much on the consumer or communication SiP and then into the auto industrial. I just want to see a bit more color what you're seeing across the other markets outside the compute?

Randy, so let me have a couple of comments here. So some of this will be more market-driven data rather than what we're seeing internally, but let me give you some color at least. On comms, obviously, market data would project that the phone units are roughly flat. I think there's some potential benefits there as there continues to be more of the shift towards premium tier. And typically, that would benefit Amcor due to our content in the more premium phones. When we think in compute, again, the PC market projected to be slightly down on units. So that's a little bit of a headwind, but then we continue to expect the shift to AI applications as well as more [ ARM-based ] where, again, that benefits Amkor a little bit. Basically, because we're moving from a vertically integrated kind of IDM model versus outsourced -- sorry, outsourced fabless company type model with ARM. Then on auto and industrial, again, expected overall unit sales in cars to be roughly flat, continued migration over to hybrid NEVs. That's helping to continue to increase the semi content per car. So we basically are seeing on the mainstream side, very slow recovery. We have seen 3 quarters of positive direction in mainstream, and we expect to continue that slow progression out of the trough. And then on the advanced side, again, think about things like computing in the car, ADAS, infotainment, that's an area we're seeing very strong growth for this year. So very, very positive momentum there. So I think overall, and then on the consumer side, again, I think that will be heavily driven by consumer sentiment and new product launches potentially. But in general, what we see across that kind of non-AI, non advanced auto area is that it will be single-digit type growth.

Okay. And if I could follow up, then it might be a question more for Megan on the outlook for the margins. I think first, just into first quarter, is that the leverage effect in the onetime coming out for the lower guide for Q1. And then as we go through the year with the mix more toward the advanced packaging, which I think you said is accretive, but want to see as it ramps in the ramp-up phase, if you're at the point it's accretive, how to think about the incremental leverage with the stronger growth out of the compute segment.

Thanks, Randy. Yes. So for Q1, the guide at the midpoint of 13%, there is the, I'm going to say, asset sale that happened in Q4 that's going to impact that flow through. Without that, the sequential flow-through would pretty much be in line with our 30% model. We are -- sequentially, there is some favorable product mix and then that's being offset by some incremental costs. When I look year-over-year, there is a, I would say, material content impact as well as some potential currency headwinds that are impacting that. So Q1 is typically our seasonally lowest top line but also bottom line. As it relates to the full year, we're able to see good progression in the profit initiatives that Kevin had outlined in prepared remarks, such that we would anticipate being able to achieve that 30% incremental flow-through, absent the onetime asset sale.

Your next question comes from Ben Reitzes with Melius Research.

Welcome, Kevin. Good to be talking with you. I wanted to ask about comms again because I know it was mentioned in the prior question, but be a little more specific because [ Qualcomm's ] guidance obviously indicated a much -- a pretty severe decline in the Android, and you tend to have much higher exposure to the -- your large customer and the premium tier. So just wondering if you could be a little more specific about the guide for the quarter and the year in terms of comps. It would seem like it'd be a significantly -- meaningfully better than flat just given those premium tier and who you're exposed to, but I just wanted to be sure.

Yes. Thanks, Ben. So a couple of things. I think when we think about iOS, obviously, and I'll talk more about Q1 at this point. If I think about iOS, we're exiting a pretty solid cycle in the phone launches. So I'd say that we're pretty positive on what we're seeing for Q1. For Android, you're right. I think what we're seeing is that -- and maybe this is related to memory and other things, but we're continuing to see relative strength in Android and maybe a little bit of a step down. But in general, nothing that's concerning for us. And again, that could be related to the shift to more premium where we participate a little more heavily.

Okay. Got it. And then with regard to the Arizona project, do you mind just clarifying a little bit more on your partnership with TSMC. How is that progressing? What -- how does that impact that CapEx guidance of yours? And how is the partnership going? Obviously, significant shortages being reported out of them or like be some, and it seems like they really need your help. So just hoping for a bit of an update there on them.

Yes. Thanks for the question. Obviously, U.S. manufacturing is still a couple of years away. So when we think about the constraints today, slightly different dynamics, we're trying to support those dynamics out of our Korea facility a little bit out of Taiwan as well. When we think about the partnership with TSMC, I'd say that discussion continues. We have a very strong ongoing relationship on technology as well as what type of manufacturing is going to be needed in the U.S. And then you can imagine that, that collaboration also kind of spirals down to the end customers that are going to ultimately benefit from that U.S. supply chain. If we -- if I think about the overall interest level for the U.S., it's continuing to increase, if you go back to our -- as an example, our groundbreaking, October last year, that groundbreaking had many customers that attended that, just again, reinforcing their interest. And it was really across all of the markets that we support. So as communications, comms, automotive as well as even customers that support consumer products. So we feel really good about the momentum from the customer perspective and expect that to increase as we start to build out the facility.

Your next question comes from Steven Fox with Fox Advisors.

First question, Megan, I'm kind of struggling with the plan for the balance sheet for the coming year. Fully recognizing that, obviously, you're going to have government benefit inflows after you put the cash out. But relative to doing a couple of hundred million dollars of free cash flow in [ 2005 ], and I assume excess cash on the balance sheet. Can you maybe help us maybe prepare for how much of a debt increase you're going to have to do during the year, the timing and how quickly you've been deleveraged after that maybe in '27? And then I have a follow-up.

Yes. Great question. So as it relates to our approach for funding, we are, I would say, pursuing various different mechanisms. I'd mentioned earlier that we're in discussions with customers, and so we're evaluating that in parallel with what -- if any, we would need to do this year with respect to the balance sheet. So there's not any updates on timing or magnitude at this time. As you mentioned, we do have significant liquidity that exists today. So we are confident in how we'll be able to manage the balance sheet and that CapEx need for 2026.

I guess just a couple of things, maybe you could help with. Can you give us a sense for what you can run the business on like how much cash you need to run the business in '26? And should we be thinking of a better material increase in interest expense later in the year? And then just a follow-up on the business in general.

Sure. I'll answer your second question first because I think it's important to note that we'll actually expect a decrease in interest expense even in the event where we may increase debt. And that's associated with capitalizing interest as far as the construction project. And then the first part of your question really centers around the amount of cash that we would say we'd be comfortable having on the balance sheet. And I would say we can operate with $500 million on the balance sheet, that's a comfortable level for us.

Great. That explains a lot. And then just from a bigger picture with the expansions that are going on in Korea, and I guess, more broadly with the advanced packaging. I know you mentioned sort of a 3x increase year-over-year. Like how do we think about sort of that flowing through in terms of the curve of ramping and whether there's any kind of income statements -- income statement impacts or margin impacts that we should consider as you ramp?

So let me -- so I'll start with the profile, and Megan can talk a bit more about the other financial aspects. So if you look at the ramp profile, again, we have these PC-related products that are ramping earlier in the year were already in production today. Then as we get into the second half of the year, there'll be a pretty sizable step-up in the CPU data center type devices. So I would expect it to definitely be back end, second half loaded related to revenue growth. And Megan, can you add anything on the...

Sure. So those investments that we've been putting in place even second half of '25 and I would say the equipment will be front-end loaded in '26. That is going to put pressure on depreciation expense, and as we ramp those, as Kevin mentioned, in the second half of the year, we will see efficiencies such that we will be able to get some accretive outcome from those products.

And your next question comes from Steve Barger with KeyBanc Capital Markets.

And I'll echo the congratulations to you, Kevin. Maybe first for Megan. As you think about revenue growth and mix for 2026, do you expect to recover the 90 basis point headwind from ramping Vietnam last year? Meaning you can get gross margin back in line or better to 2024s 14.8%? Or will something in mix make that hard to get all the way to?

Steve, great question. So we are seeing a great ramp in '26 as far as our visibility today. So yes, I want to reiterate Kevin's remarks that we did have I would say, breakeven in Q4, which was a significant milestone for us in Vietnam, and we see that continuing in Q1, which usually is the lowest quarter. So that's a really good foundation. As it relates to the whole year, if you think about with or without, I think you've nailed it, there will be a product mix story in Vietnam related to the products that we have there, which is SiP, but what we will have is, I would say, good fall-through to the bottom line as it relates to that business. So we are going to have, I would say, not meaningful gross margin impact, and it's more about product mix at that at that point going forward.

Got it. And Kevin, with compute showing the strongest growth this year, can you just help nail down what you expect for AI-related packaging revenue this year? Or maybe what AI-related advanced packaging revenue as a percentage of total revenue is. We get this question a lot from investors and just any light you could shed on that would be great.

Yes. Not a whole lot more color I can give there. I can -- obviously, compute in general, exited '25 at about 20% of revenue. So you can take that. And then, obviously, there have been some estimates that we've given in the past related to the growth rate for the advanced going back into last year. That's about all I want to show. I mean [indiscernible] we talk about, but definitely, we're going to see -- continue to see accelerated growth in that data center even PC area.

And your next question comes from Peter Peng with JPMorgan.

Congratulations. I'm looking forward to working with you more closely. Just on your computing, you guys are ramping pretty aggressively and you talked about 3x. I guess maybe if you can talk about whether with any constraints and how much capacity you have to capture additional opportunities. Yes.

Yes. Thanks, Peter. So when we think about limitations, I won't see necessarily constraints, but limitations on growth. I'd say there's a couple of things there. So Obviously, labor in general, and this is predominantly on the R&D side. We think about the amount of NPIs that customers want to run, making sure the [ calls ] are successful. And that is creating some constraints where we're prioritizing larger opportunities, specifically in Korea. I think another dynamic is space. In the prepared remarks, we talked a little bit about how SiP is migrating over to Vietnam that helps to free up space in our Korea facility. Also, over the course of 2025, we basically converted some of our existing building space into clean room area. So we saw a little bit of an increase in space in '25. And then we're continuing to build out a new building where we had the groundbreaking last year. And that new building will come online as we exit 2026. So overall, by the time we exit 2026, we'll basically be increasing our Korea space around 20% since the beginning of '25. So space is definately an area that we're accelerating and then obviously, the equipment delivery. As Megan said, that will be more front-end loaded in the year to make sure that we're able to support the second half launches.

Got it. And then in your prepared remarks, you also talked about 2 additional programs and final qualification. Can you maybe provide some color whether this is existing customers for any products, these are new customers? Any color on that? .

They're existing customers, but they're -- 1 of them is new to the HDFO platform. So I'll say that. They both -- we've mentioned before, they're both CPU-related. And yes, so a lot of positive momentum that we've been working with these customers for quite some time on rolling out that next-generation technology to them.

And at this time, I'm showing no further questions. I would like to turn the call back over to Kevin for closing remarks.

Thank you. Now let me give a quick recap of our key messages. 2025 was a pivotal year for Amkor. We delivered strong results, advanced our strategic initiatives, and we positioned -- we strengthened our position in the fastest-growing areas of the semiconductor industry. As we enter 2026, we are doing so with strong momentum, a clear strategy and deep engagements with partners across the ecosystem. Our first quarter guidance is $1.65 billion, reflecting a 25% year-on-year growth rate. I'm confident in our ability to execute with discipline and for Amkor to enable and capture the next wave of advanced packaging growth. Thank you for joining the call today.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Welcome. I'm Joe Moore from Morgan Stanley. Very happy to have with us today the CEO of Amkor, Giel Rutten. Thanks for being here today.

Thanks, Joe.

So maybe we just jump right into questions. If you could talk about your Arizona facility. In early October, you broke ground on the Arizona facility, increased the investment to $7 billion across 2 phases. You had comments from Howard Lutnick, Vincent Wang. This is clearly a really important project. Can you talk about why this is the right time for sort of packaging to be in America?

Yes. I think this is indeed a very strategic and important project for Amkor. We see that the supply chain for semiconductors is changing and reshoring manufacturing back into the U.S. is very critical. Government is pushing, but also customers are pushing to reshore manufacturing capabilities back into the U.S. for -- not to ensure that when AI is getting deployed deeper into the economy that governments keep control of their core technology. And that's the strategic rationale behind it. It's an important investment. It's a 2-phase approach. Of course, we're not going to invest the full, let's say, $7 billion at day 1. It's 2 phases. It's a step-by-step investment. And we will put only technology in place that is differentiating and that's needed to be in the U.S.

Great. So you did mention Apple and NVIDIA as supporting key customers. Can you talk about what those conversations are like? And to the extent that they're looking to reshore their supply chain, how is that a motivation to you...

Well, we have conversations with these customers and also with TSMC on multiple fronts. It's about capacity that we were going to be put in place, the need for the volume over the next couple of years, the technology requirements, what product families our customers planning to manufacture in the U.S. and what assembly and test capabilities do they need in the U.S. And with TSMC is on technology alignment between their silicon nodes and our packaging capability that we're going to put in place, also to make a seamless technology transition from Asia into the U.S. possible. I think these are the conversations, and they are -- actually, they are pretty much in detail, and they're ongoing in a 3-party mode as we speak.

Great. And can you talk about the profitability generally of doing this in Arizona to the extent that the costs are higher, but there's important strategic priorities, would your customers be willing to pay more to have the product?

Yes. I mean the technology, and that also holds for our customers, the product portfolio that will be manufactured in the U.S. clearly has value add by the location in which they are manufactured. So customers are seeing the strategic advantage to have that capability in the U.S. And we're going to put our most advanced technology in the U.S., mostly catering for the AI proliferation into data centers as well as edge devices. And that, of course, in the end, these devices will constitute the, let's say, cornerstone of the transition into a digital economy, which also for government is gets very important to control that supply chain.

Great. Your revenue and gross margin have a fairly seasonal component with a lot of fluctuation from half to half. Are you able to use this Arizona, the scale of this opportunity to kind of level that out? Just how does that affect you overall?

Yes. Our current view is that the manufacturing services that we offer in Arizona will be accretive to our corporate gross margins. That also relates to the financial support that we're getting, the pricing power that we believe that we have in the U.S. We will implement the factory with a high degree of automation to mitigate the higher labor cost. So the overall business, as we see it, a combination of support from government, customers, high level of automation and premium value-added technologies will make it accretive for our business.

Okay. The $7 billion investment over several years is a lot of money for a company of your size and scale. But I know there's also a sharing of those costs and investments. Can you talk about that a little bit?

Yes. Let me talk a bit on the investment level in the U.S. $7 billion is indeed a significant investment. we increased our investment from $2 billion that was our initial plan to $7 billion because we see over the last 1.5 to 2 years that the demand for local manufacturing in the U.S. is significantly increasing. Was it limited and very focused to 1 or 2 customers 2 years ago, the appetite is really increasing now, and we see that also reflected in TSMC increasing their investment level from $80 billion initially to $163 billion currently. So that scales up. And if we want to keep pace with that scale, that scale requirement, if you want to take most of the volume that's being generated by TSMC and assemble and package that, I think we see an opportunity to increase our scale also.

Now if we take a little bit the support structure for this financing, I mean, public knowledge, we received $400 million from CHIPS funding. Of course, that's milestone related. In the U.S., there's strong support even by the latest administration for 35% investment tax credit. If you take that combined, that adds up to close to $3 billion of support in the U.S. And there are other ingredients that we work with customers currently to participate in different models that could be prepayment, co-investments, and we see that customers understand that, that's needed in order to start building an ecosystem in the U.S. So we're pretty comfortable. And of course, we highly appreciate the support that we get from the government in the U.S.

Great. Well, congratulations. It's an impressive project that you guys are doing there. Maybe talk about some of your end markets, starting with compute. Your compute revenue was up mid-teens in 2024 and again in '25. Can you talk about your role in the compute markets?

Yes. I mean, proliferation of AI into data centers as well as into edge devices going forward is accelerating the compute market, not only with respect to growth, also with respect to innovation. Innovation is accelerating. And we started off with what we call 2.5D with our lead customers, and I think that was 2 years ago. In the meantime, we achieved a couple of important milestones. We broadened our customer base from our lead customer initially to 4 customers currently, basically engaging with all the key leaders in the compute market. We also broadened and deepened our product portfolio, our technology portfolio, started with 2.5D or CoWoS.

We are currently -- this year, we ramped up already the first product for what we call high-density fan-out, which is equivalent to TSMC CoWoS-R, and we have multiple products in the pipeline for further ramp. So we see strength in the market initially, of course, in data centers, but more and more interest in edge devices, whether it comes AI-enabled PCs, smartphones where a new architecture will be launched in 1 or 2 years from now, automotive, connected cars or self-driving cars. So all of these AI features, once they proliferate, will drive more semiconductors and all these semiconductors need advanced packaging. So we currently built a project pipeline that is pretty strong, diversified with a deepening technology base.

I spent time with TSMC a couple of weeks ago, and we just talked about the CoWoS market and your role. And they seem quite enthused to work with you guys. Just how should we think about this? This has been a market that they served initially broadening out with more suppliers. How do you see your role with them? How do you see that cooperation going forward?

I mean we have a long-standing, I would almost say, multi-decade engagement with TSMC, where we engage on technology sharing, but also making sure that there is sufficient capacity in the industry. It started with bump. It started after that with test with flip chip technology, and we're now moving more into the CoWoS domain. We have a strong cooperation in the sense that our strategy is to be complementary to what TSMC is doing. We don't see TSMC as a competitor. Our goal is to be complementary to what they're doing, and that can get more shapes and forms.

I think if they choose certain technology areas, that we could be complementary on other technology domains like, for example, high-density fan-out currently. That seems to be more attractive for OSATs than for foundries. In the U.S., we're definitely complementary from their U.S. investment, and we have a clear alignment in the U.S. on scale technology. We even signed MOUs based on which technologies to ramp in the U.S. by which time line. So close cooperation, it will continue. And I think we have a common goal is to build a complementary ecosystem in the U.S. And there's one thing we want to avoid is to overcapacitize or to undercapacitize. So that's very important.

And on that note, has CoWoS utilization put pressure on your gross margins? And there are other dependencies, whether it's regional dependencies or customer dependencies there?

I mean the AI market has been very dynamic over the last 1 to 2 years. I mean, if we take elements like trade restrictions that restricted exports of certain products from U.S. companies into China, all of that impacted the supply chain and some of these also impacted our business. We were able to maintain a high level of utilization of the assets by shifting products around and working with customers. The way that we put our manufacturing lines together is that they are -- the individual equipment is highly fungible. So when we switch from, for example, CoWoS-S or 2.5D into CoWoS-R, we can utilize the equipment and make it fungible to shift from one technology or one product portfolio to another. So in that sense, we are slightly differently, let's say, positioned than narrow focused companies. So we can -- we have a broad portfolio of technology, and we can shift capacities around pretty easily.

And then by customer, NVIDIA is about 85% revenue share2 of AI accelerators, but much lower -- much lower unit share given the high prices. So there's a lot of other opportunities, a lot of investor enthusiasm as well for ASICs and other programs. Can you talk about your prospects to continue to broaden that out?

Yes, we see the core of -- well, first, let's step back. I mean, the AI market and the growth of AI as is reflected in semiconductors is still in the early stage of growth. Two years ago, AI was very low volume, hardly there, and you see that reflected in how the share price of some of these companies developed over the last 2 years. So we are in an early stage. And we also see that, that newcomers with new solutions like ASICs take certain positions, very pointed point solutions, and they are creating alternatives for general purpose GPU devices in data centers and in other products. So we believe we have a broad engagement. We work with both ASIC companies as well as with the GPU companies. There's a third category of customers that we believe are important, and these are the -- what is labeled the hyperscaler companies.

So these are Microsoft, Google, Facebook, Amazon Web Services. All of these companies have their own internal semiconductor activity, and they develop their own products. They're all architected around an ASIC model, and they are customers for Amkor also. So we are engaging with the major players there. One thing to see, Joe, here is from an opportunity perspective. If you go back 5 years ago in the first rollout of cloud compute and cloud storage, it was a vertically integrated market that was owned by Intel. Now the new market is basically all an outsourced manufacturing market. And that's a huge opportunity for a company like TSMC and a company like Amkor that the future of cloud AI or AI on the edge is supported by an outsourced semiconductor manufacturing base. And that's a huge change and in that sense, a huge opportunity for us.

Yes. That's great. Maybe we could pivot and talk about smartphone. Your business there -- sorry, my voice a little -- a long day.

The business there has been kind of flat. You've had some ups and downs with your major customer. Can you just talk about the trajectories there and your prospects for next year?

Yes. I think on the smartphone market, we see 2 elements. First of all, let's -- a few comments on the iOS ecosystem. And I think that was -- it's publicly known that there was an architectural transition where one critical slot, we temporarily lost while the customer changed their architecture, and we worked with them to co-develop the solution. That's back in the current generation phones. The iPhone 17 is fully covered by our solution. So that's good. First half of this year, we still were on the old lower run rate. Second half, we are back. If you look to the communication market in general, third quarter, we had an all-time record quarter. And the fourth quarter, we guided a 20% year-on-year up.

So we definitely see that we are -- that the market is good and our share in the market is completely recovered. On the Android side, Android went through a couple of very difficult years. There was inventory in the China market. Some of the Samsung projects were not that successful, but we're currently seeing Android coming back strongly, and we hold a very strong position in the high end of Android. So the combination actually is a good starting point for this year, for 2026.

Okay. And as you think about next year, one of people's concerns is memory pricing going higher. Do you see that causing any hesitation in builds? Do you think there could be any demand side impact from that and just -- it's not just that the price is going higher and there's an elastic impact. I'm actually hearing about situations where people are worried about even being able to build stuff given the challenges.

Yes, the higher memory prices, in our view, could and maybe will impact some segments of the smartphone market, but certainly the consumer market. We expect an impact mostly on the low end and mid-range of the phones. If you take the memory part of the bill of material in the low-end phones, it's about 20% of the bill of material is memory. In the high-end phones, it's less than 10%. Also on the high-end market, I think we see that some of these customers have long-term contracts with memory companies. They have more buying power on the memory side, and they can demand a higher price for increased memory in their market. So we see an impact mostly on the low and mid-range part of the mobile phones. For consumer, the same thing holds. I think if you're operating at the low end of the consumer market, it's tough if you need memory.

We also expect that memory prices stay up there for a while. And we also see that, for example, on the NAND market that, that will be a tight supply because currently, the preference for memory makers is to invest in DRAM, specifically because AI is using a lot of DRAM and in high-bandwidth memory, same thing. So the preferred solution is not NAND flash, and that creates a shortage there, and that could impact the phone market also. So multiple dynamics. In the end, I think for us, for Amkor, if it doesn't result in a market decline, it's good. I think we're mostly focused on NAND flash, and we see that price sensitivity is improving in a sense that customers are not that keen to get a lower price, but they more want to secure supply.

Okay. I want to go into the financials a little bit. Let me see first if we have questions from the audience.

I'll just keep going. So from a financial standpoint, you increased your 2025 CapEx from $850 million to $950 million last quarter. How do you think about capital intensity going forward?

I mean, so far over the last, let's say, years, we were operating or we operated the business at a capital intensity of -- in the low teens. And we see that, that may increase slightly basically because of the investments we're making in the U.S. Although Amkor has a track record of being a very prudent company in spending cash. So we try to manage it in a very prudent way. And I mentioned some of the cash contributions earlier on, and we're happy to be able to that. So for -- with respect to slightly higher capital intensity, we prepared our balance sheet in order to cater for that. So we have a very strong balance sheet with over $2 billion of cash on our balance sheet. So overall, I think we can we can carry this.

Okay. Great. And then the revenue performance has been strong, but gross margins have been generally under some pressure. You were at 20% 3 years ago, you're at 15% now. And you've talked about some improvement, but kind of gradual. Can you talk about long term, is there a path to back to 20% gross margins? Or is that sort of an anomalous point in time?

I think our ambition definitely is to go back to that level, Joe. I mean there are a couple of important ingredients currently that have a downward pressure on margin. The first one is the underutilizing -- underutilization of our mainstream manufacturing lines. Mainstream basically is catering for industrial and automotive business, products like microcontrollers, analog components that go into industrial and automotive applications. After COVID, there was a significant surge in inventory, and that took a while to build that down. And we see that coming back the last, let's say, 3 quarters, we see year-on-year growth. For a company like Amkor, an OSAT company, manufacturing or factory utilization is the key element of profitability.

So with heavily underutilized lines below 50% utilization in our mainstream business that puts pressure on our margin. And we believe that going forward, that will improve. On top of that, we make some specific organizational adaptations, specifically in Japan to rightsize our Japan cost base. So that combination is an important thing. There are 2 other elements that will contribute to a positive or will have a positive effect on our margin. One is our Vietnam factory. I think we put that into production last year. We're ramping up Vietnam currently. We expect Vietnam as an organization to be breakeven early part of '26. And from there, we can start building up to have a positive gross margin contribution from that. We have a lot of interest of that factory that we can offer customers a second source to their China manufacturing. And 5 of our top 10 customers are currently qualifying our Vietnam factory.

So we are -- we believe that once we're going through that initial curve that Vietnam will be accretive to our corporate gross margin. Fourth element is on -- or third element is on advanced packaging. I think we invested a lot, not only in capital investments, but also in people to staff for advanced packaging ramps. And while we're still building the scale, we believe that once the scale is there, that, that will become significantly accretive. So overall, we believe that with these 3 activities and actions in place that we will get back on historic levels for our gross margin, Joe.

And your gross margin guidance for the next few quarters, what's kind of contemplated for those utilization variables? Do you -- and you're sort of trying to be conservative about where that may go? Is there a possibility of upside if the utilizations end up higher?

Well, currently, we see performance, and we stick to our guidance. We guided the, let's say, the $1.8 billion to $5 billion for the fourth quarter. So I don't want to see that. But if we take a step back, then we see a more positive trend than we expected when it comes to mainstream utilization of these lines, and that gives us good hope. Keep in mind that our mainstream factories are generally highly depreciated already. So once we fill these factories, I think the gross margin is definitely very rapidly goes above corporate gross margin.

Okay. Very helpful. So final question. You're retiring at the end of the year. And I know you've achieved a lot here. If you think about the next 5 years, can you just talk about generally where you see Amkor?

Well, I mean, I can say whatever I want now. It's not up to me. I believe that Amkor is part of the semiconductor supply chain. And there are a couple of macro trends that are dictating the industry forward. They are irreversible. I think people can say, well, maybe this happened, but there are certain known elements in the industry. And that -- and they are in line with Amkor's strategy. I think the technology innovation is accelerating. If we see where AI is going, what happens in data centers, where the compute power that's required is needed. I think you need significant acceleration in innovation, both on the compute side, but also on the power management side. I think this is ongoing. We invested a lot in that, and we believe that, that will move forward.

The second core pillar besides technology for Amkor is regionalization of manufacturing, where governments realize now that you cannot be dependent of 1 or 2 Asian countries when it comes to core technologies that are the foundation of a digital economy in the future. So you need to get control. It was a little bit of far-fetched idea 2 years now, but it's sinking in currently, and we are investing in that. I think we have started to invest in that 4 years ago. We acquired a factory in Portugal, for example, in Europe to support the European automotive industry. We're building in the U.S. We are upgrading our Japan manufacturing base, and we built Vietnam as an alternative for China manufacturing. So that regionalization and the criticality of regional supply chains will continue. It will not be reversed. I don't expect tomorrow that everybody says, well, okay, let's go back to manufacture everything in China.

I don't think that, that's smart, but also I don't think that politically, that's an acceptable solution. And then the third element, which is very important is relationships with customers and relationships in the supply chain with partners like foundries. More and more, the business develops in a virtually integrated way that there is a very deep cross-linked cooperation between customers, suppliers in the supply chain just to avoid technology gaps, oversupply, overinvestment while building these new supply chains regionally, that will continue.

So where will Amkor be in 5 or 10 years from now? We believe we have the ingredients to support that growth in the technology, the geographic presence, and we are 55 years in the industry with deep relations with customers. So we're well positioned. And I believe that with the industry growing along the 2 main vectors being AI on one hand and AI proliferation and edge devices like smartphone, automotive, et cetera, we will be able to cater for that, and that will bring us on an above-average growth path forward, Joe. I'm confident that, that will happen.

I appreciate you leaving the company in a strong position and good luck in your...

Thanks, Joe. It's appreciated.

So we'll wrap it up there. The conference organizer did ask me to remind people, if you aren't coming tomorrow, if you could leave your lanyard, I think there's a bin outside, behind, because they're running short. All right. Thank you so much.

Thanks so much.

Okay. I want to thank everyone for joining this next session at the UBS Tech Conference. And I'm Randy Abrams, I head up the Taiwan Research, also now covering hardware and have Sunny Lin covering semiconductors out of Taiwan. And we're pleased to have Amkor with us. Kevin Engel, we can congratulate him, he will be the incoming CEO after a long history at Amkor, moving up through the organization, so good appointment. And we also have Megan Faust, the CFO. So feel free to add your questions, and we'll try to weave it into the conversation.

So -- and I'll kick off. I think for Kevin just coming in to Amkor, give an overview, how do you see the business? What you're coming into with Amkor? And if you take an initial cut and get appointed, any changes if you think the business is already running or we could see some fine-tuning around the strategy?

Yes. Thanks, and good morning, everybody. So for me, a couple of things. First, really honored obviously, that the Board and the Kim family has the confidence in me to take Amkor on the next phase of our journey. So a really exciting opportunity there.

When I think about the strategic pillars, which hopefully some of you have heard these before, but we kind of have 3 pillars that we continue to adapt. So I'd say these are our pillars that we've been modifying over time, and we'll continue to modify moving forward but kind of step through them a little bit.

We think about our first pillar, which is our technology leadership, and that's really to work with our customers to drive the advanced packaging leadership into the market, and make sure that we're giving the customers what they need in collaboration with them.

Then we think about our second pillar, which is our geographical footprint and really the diversity that Amkor has in multiple regions, multiple countries. And you can think about that also as customers try to build in resiliency into their supply chain that enables us to really help them when we think about advanced packaging, specifically where most OSATs today in advanced packaging are in the Taiwan region, maybe a few in China, whereas Amkor has optionalities in Korea, where we're continuing to expand and obviously in the future in the U.S. So that's a good footprint for our customers.

And then our last pillar there is focusing on megatrends in markets that we want to grow in. And with close collaboration with our customers, and obviously, AI plays into that, and we have a lot of strong engagements there. So I'll try to kind of talk about some of those pillars as we go through the rest of the questions because I think that's important to think about how this transition looks for me. I think those pillars align with our future direction, especially where we are in the AI scale out.

All 3 of those components play into that market dynamic. So I wouldn't expect any significant changes there. I think potentially some fine-tuning on some things, and we'll talk more about that at our Investor Day, which will be coming up around the middle of next year.

Okay. Yes, I look forward to that. Actually, a follow-up question on AI. That's -- seeing a lot of interest in activity. Sunny has been raising the CoWoS forecast. So it feels like a good outlook. Could you talk about how Amkor is positioned, the solutions you have for high-performance computing, whether across GPU, ASIC, some of the CPUs.

Yes, sure. So I think there's a few things there also, I'll again kind of tie it back to the pillars a little bit. From the geographical footprint perspective, again, customers really want diversity in the supply chain to make sure they have resiliency built in, so that's really creating some opportunities in our Korea location where we're expanding in that footprint from a couple of different dimensions. Number one, from a capacity perspective, but also from a building perspective. and then obviously in the U.S. in the future. When we think about our platforms, so 2.5D, which is something we've been -- we've had in volume production for quite some time now, that platform, we've continued to see increased interest from multiple customers.

So we've gone from a couple of customers that have been in production in the GPU and then other space. And then what we've seen over time is that that's grown to over 5 customers, again, with new products being introduced. And I highlight that more from the perspective of we see legs in that platform. I think if we go back a year ago, a lot of people thought that -- or commented that all customers were going to migrate from 2.5D into organic interposer and they were asking us about what we would do with those assets, even though the assets are fungible back and forth, what we're seeing is we're still seeing customer interest in that 2.5D platform. So I think that's very positive.

Then we look at the HDFO platform. So now we're talking about our -- again, the organic RDL type platforms. We've talked about how we've ramped our first volume product this year. We have our second product qualified and beginning ramp. And over the next several months, we have another several products that are continuing to migrate from qualification into production.

So we're really excited about that. And that gives us a good tailwind for that to continue to grow. And then when we think about the next-generation products, more of the bridge type applications, we're still in development phase with some customers in that area. So again, broad platform, I think when you tie it back into our strategic initiatives and where we're investing, that's definitely a high level of our investment percentages.

Okay. Maybe a quick follow-up to that. How are you seeing 2026 scale up? Like when you talk about backfilling the existing 2.5D and then also ramping up high-density fan-out or some of the bridge solutions. How should we look at the AI business into '26?

Yes. So if I think about the products that are coming in the market, some of our first HDFO products were CP -- or sorry, were PC-related products. So again, kind of think of the AI in the PC market, and the next-generation products are getting more in the data center now. And so I think that's obviously an exciting trend. So going into 2026, we've invested pretty heavily this year to prepare for 2026. We've talked about how that was a little bit of a margin challenge for us this year as we invested heavily.

So depreciation increased a little bit. We invested on the people side to make sure we have the right amount of labor resources available that were trained and skilled up, so there's room to grow going into next year just with that type of space that we've already invested for. And then we're already investing for incremental capacity going into 2026 -- later in 2026. So feel very confident if you look at our compute segment, over the past 5 years, we've been growing at around a 12% CAGR. And that's almost double kind of what Amkor total has been growing. So I think that's obviously a positive direction and we continue to see that level of growth moving forward.

Yes. Well, so maybe a few more questions on the compute segment overall for both of you. And so compute at this point, roughly 20% of your total sales. Could you remind us what are the key product drivers at this point? And how is that evolving going to 2026?

Yes. So like, let's talk about our compute segment in general. So within that, we have the PC space and then we have data center, a couple of other small things. So in the PC space, as I talked about, we're still seeing momentum on some of these AI applications. And typically, maybe in the past, there were a lot of standard flip chip or multi-chip module type applications. We're starting to see some of these products getting launched in more of an HDFO platform.

And then when you think about the data center, like we said, that's continuing to grow. We see a lot of different application spaces there from ASIC players to direct engagements with foundries and others and you think about the application space, that's a mix of things like you can -- kind of across the board, we have switches, NPUs or NICs, different CPUs, lots of different application spaces there. So I think all of those are areas where we're going to continue to see that growth.

Right. So we're seeing the 20% of sales from computing overall, would you be able to quantify how much is driven by advanced packaging and testing?

I don't have that number off the top of my head. I'd say if we look at the compute segment in general, it's a significant portion, and it's -- again, that's what's driving the growth. That CAGR is driven by the advanced packaging space.

Got it. And then with the stronger demand opportunities across maybe also PC and also server. How should we think about the CapEx going into 2026?

The what?

The CapEx, capital expenditure.

So we'll talk about CapEx for '26 in our earnings call coming up in a few months. So I think that will be the key. But as I mentioned, if you go back to this year, we invested heavily to be prepared for early 2026, and we'll continue to invest in that area going through the year.

If I could follow up about the profitability. You talked about this year you put in place investments that there was a bit of OpEx. How do you see the fall-through? So if you grow this high-performance compute. I think you've talked about a 30% fall through of margin, for advanced packaging, is the margin structure different? And is it reaching that potential, where do you still have teething issues to ramp up and it will take that time to get that leverage?

Sure, sure. So generally, our financial model would suggest a 30% fall- through, as you mentioned, Randy. What we're seeing with a very advanced high-performance computing is, this does demand a premium. And there is a higher margin profile for that high-performance computing. And we see that today in our Korea facility as we are bringing on incremental headcount and incremental CapEx, there is some, what I would call, short-term operational efficiency that we need to gain.

But as Kevin mentioned, we see that those products are coming online. We have line of sight and that growth and that scale is going to come in '26, which will definitely help that short-term margin perspective. And that's really what we're planning to do here in Arizona. And so the margin profile for that very high-performance computing space is at an accretive -- will be accretive to our overall gross margin.

So it sounds like, to clarify, next year by '26, you're kind of through that learning curve? So you could be accretive to the 30% fall-through as we see advanced packaging growth.

Yes.

Okay, good. Actually, I think when you were talking about the different expansion, Korea test, that's been an area that you've added capacity. When I look long term at Amkor, I feel like there's been a strategy to grow test, but then you look at the revenue mix, and it's 10% to 15% of revenue, do you see with the test investment inflection where it could be growing at a premium to advanced packaging? Or does it scale up with advanced packaging. Maybe talk about the test opportunity if you see.

Yes. So if I think back to, again, those strategic pillars and how the resilience in the supply chain is bringing opportunities to the Korea location, customers, ultimately, they want test and packaging to be done in the same location. They don't want it to ship back and forth between different regions. So as we grow our advanced packaging within the Korea site, customers also want to tie on the test. So what we -- and then I'd say there's another opportunity there, so we're not passed up on that opportunity.

As we think about some of these custom ASIC type players, they don't really have a significant test infrastructure. So those types of customers are also looking for what is their test strategy, how do they build out that infrastructure. And I think that's a good opportunity. So in Korea, as you mentioned, we've been working on expanding the footprint within the existing building and that will be -- that space is becoming available this year. And then we look at another building, which we just broke ground a couple of weeks ago on that facility, that will be more focused on test at scale, and that will be ready going into 2027.

Is there a way to think about the capacity addition because you have 2 buildings, quite a bit of test capacity will be a pretty significant scale up in your test field.

It will be significant. I think the other thing you got to think about is we have a significant amount of test in the K5 building today. So that would migrate into this new test building so that we can expand the assembly footprint in the existing building. But in general, that -- the new building has the ability to also continue to scale and go even bigger. So as the test area grows, that will definitely be an area that we have a lot of room to expand.

Also on your expansion here in Arizona. What drove the expansion to second phase before you complete the first phase, and how should we think about the time line for your $7 billion CapEx? While, I think for us a CapEx, it's only approaching USD 1 billion?

Sure, sure. So obviously, there's been a lot of announcements, a lot of expanded investment, especially here in Arizona with respect to the semiconductor supply chain. And so really, our announcement of expanding our investment is following the demand of our customers and our partners. And so to think about that $7 billion investment, that is going to be a multi facility, multi-phased approach. We've broken ground on our first phase. We expect that to be completed mid-27 with production beginning in '28.

The timing for Phase 2 is really going to be a function of demand. And so we can accelerate that. We can time that as far as when that demand is ready to come online to -- and make sure that we're managing that CapEx.

Well, so if you look at TSMC, they had started to build a fab show for the third phase, while they are only moving tools for the second phase going to 2026. So I wonder for Amkor, would you also consider maybe setting up the fab show before the demand start to emerge. So that would shrink the lead time for your expansion?

We're evaluating all scenarios. We're looking at parallel passing, we're looking at serial, and those are all in discussion with our customers today.

Got it. And TSMC has also announced 2 other packaging sites in Arizona, so how should we think about the dynamics and your collaboration with TSMC? Should we assume a full part of your capacity will be related to the collaboration with TSMC maybe on substrate or fan-out.

Yes. So the partnership with TSMC is very strong. We're talking to them a lot about, again, how we both support the mutual end customers. So I think that's the overall goal. And when we think about their packaging facilities coming online, I think that creates more opportunities for Amkor, especially when you think about, again, like you mentioned, on substrate opportunities, things like that. I do want to make sure that it's clear that the Arizona facility is not dedicated to TSMC. We'll have several different business models. In some cases, TSMC would be the direct customer for Amkor.

In other cases, the end customer the end-end customer would be the direct customer, directly to Amkor. And so I think there'll be lots of different dimensions and dynamics related to what kind of customer agreements, what kind of capacity planning we're working through but ultimately, them continuing to scale in the U.S., it has additional value for Amkor.

Got it.

Okay. If we look at timing for Arizona, it comes up, I think you talked about middle of '27, you'll have tools moved in, [ '28 ] that starts up. How should we think about the ramp-up of profitability with the higher cost in the U.S. and it takes time to get scale, could '28, we see the type of pricing where that could be at corporate average, accretive? Or is there a period we have to ramp it up to scale to get to a profitable model?

Sure. So I would say, from an order of magnitude, we're anticipating our first phase will be around 10% of our portfolio on a revenue basis. As we move in tools and we ramp up in '28, we would expect that to probably take 2 years would be where we would get to comfortable scale where we would see profitability that would be accretive to margins. And when we think about the broader aspect of high-performance computing, as I mentioned before, with that being on the very advanced side, that general portfolio there is also what's going to enable that profitability.

We've also -- are in discussions about how to manage the higher labor costs. This factory is going to be more of a level loading. We're going to ensure that we have level loading agreements given that there's a portion of capacity happening in the U.S. We want to fill that capacity first. We also see this factory being more low mix, high volume in order to manage utilization. Turnkey, as Kevin mentioned, we're going to offer that broad portfolio of services, which also supports profitability. And it will be our highest automated factory worldwide. So all of those are going to contribute to the profitability and some of those labor challenges.

Okay. And when you talked about 10% of the portfolio, how quick do you see the demand to scale it up, I think you took 2 years to break even or be accretive. But could we see the revenue scale up to that 10% of the footprint pretty quickly?

Yes. The exciting thing about Arizona is the demand -- the U.S., the demand is here. So it's really a function of how fast can we scale up. So it's a bit of a different environment than some of our other the Vietnam greenfield, that's progressing and even better than expected. But as far as the demand, that isn't the issue. It's how fast can we bring that scale up.

Okay. You up Vietnam, one part of the business, you have quite a bit of system and package Vietnam has been a good site for that business. How do we see SiP, one, as a growth area, if you can build that business further? And then the other part of it's more material content, so a bit of a drag on margin. Is that just the structural margin for the business? Or are there ways to improve the profitability of the SiP business?

So I think there's a few things there. So if you think about Vietnam specifically, that region we went to because it has some benefits from a cost structure perspective. So that ramp that we've been going through, there's a couple of product -- a couple of different portfolios. We have our memory products that are ramping. And I think that's been very successful with our end customer. We're in the mode now with them of talking about as the memory market recovers, how do we split between the 2 different manufacturing sites we have for memory. Then on the SiP side, specifically, again, we're ramping -- we've been ramping this year.

Those ramps have gone very good. We've now kind of proven to the customers that we have, the quality the reliability of the yields that you would expect from an advanced facility. So that's creating more momentum for that customer to start introducing additional products going into 2026. And then in addition to that, we have another customer qualified already ramping in production and then a couple more customers in the qualification phase just for SiP. So that is an interesting dynamic in that if we go back to this year, we -- again, we have a very large factory, not as much scale to really get the profitability we would have liked but we should project that forward.

Now we have the labor force beginning to be more trained and more skilled, we'll get more operational efficiency from that. We have much higher volumes from customer dynamics. So overall, on a profitability perspective, we think we'll see some benefits as we continue to scale in a lower-cost region over time. And then as these products migrate from some products migrating from our Korea facility into Vietnam, that frees up additional space in Korea to put in more of our advanced package portfolio.

It sounds like we're back to growth. I mean, you recovered that, I think, a key socket with a key customer this year but you see continued opportunity to grow SiP with additional products, additional customers.

Yes. I don't know that I would kind of envision that as really accelerated growth. Again, if we think about where are we really focused and what are our fastest-growing markets, the computing segment is definitely where we see the most growth, and that's where we're very highly focused.

So maybe a question for short term. So you have guided down quarter for Q4. So any upside downside that you're seeing across smartphone, PC, industrial and auto, and with a down quarter in Q4, should we expect a better start going to Q1?

Okay. So let's talk about Q4 first. So Q4, we're guiding about 8% down from Q3. That's going back to more kind of average levels of seasonality. We saw similar levels in 2022 which was kind of before we started seeing the downturn in the market. If we look at last year as an example, that reduction from Q3 to Q4 is around 12%, so definitely a better seasonality for Q4 this year.

If you look at Q1, obviously, we're not ready to guide there. But I would say from a forecast perspective, we feel optimistic about how Q1 is performing. So obviously, we'll provide the details in our earnings call coming up.

Sure. Also any view on the strength or weakness across applications?

Yes. So again, if I kind of think about Q4 for communications, we've -- from a very strong Q3, we saw a little bit deeper declines in the Q4 than normal but again, really off of a high, for automotive and industrial, I'd say pretty much as expected. We continue to see a little more strength in the mainstream automotive products, again, very slow, but at least in a recovery mode, and then advanced is, again, doing pretty well on the automotive side.

When we think about computing, we did see a little bit of a decline in Q4 as we went through some product mix changes, but I think the demand is there going into next year. So we feel very positive about that. And then the consumer space, kind of similar from some of the product launches a little bit of declines as expected and then kind of in the standard communication -- consumer market, we're seeing a little more strength than typical.

Right. Also now looking at 2026, maybe full year, how should we think about some of the tailwinds, headwinds for the sector and whether we should think about maybe Amkor outperforming or growing in line with the sector?

Yes. So -- how do I think about '26. Obviously, we're not going to give a lot of color on that yet. But I'd say in general, what we see on the communications side, I think market projections are to grow low single digits from a unit perspective. We feel our position within Android as well as iOS is pretty solid. So we feel comfortable with those market dynamics. When we look in automotive and industrial -- focus on automotive first, in automotive, on the mainstream side, again, seeing that different customer dynamics, but overall, kind of a slow, slow growth out of that trough, something positive there.

And then on the advanced side, so think ADAS, in-car infotainment, things like that, definitely seeing continued momentum there. And some of that is in IDM space, but also in fabless companies. So positive momentum in that space.

When we think about compute, obviously, we talked about that a lot already. So we expect strong compute market, mostly driven by the AI data center space but also some opportunities in PCs related to transitions to ARM, things like that. And then in consumer, that will be strongly tied to product launches. So in general, we -- 2026 is feeling positive.

Also, maybe if I could squeeze in 1 more question. So have you started to sense any concerns from -- especially consumer clients and the rising bond cost because of DRAM and NAND and therefore, potential impact on end-demand if they have to raise the pricing?

I would say from our customers, we're not hearing too much about that yet. So maybe just a little bit too early for that question.

Okay. I want to ask how it translates to profitability. Margins, when I look back in the late -- like before 2020, you could get closer to 20% gross margin with the rise of SiP, it's been mid-teens. How do you think about that margin outlook? It sounds like compute will be the strongest growth driver and you've gotten through some of the learning curve. Do you see margins starting to creep back up how do you see the leverage in the model?

Sure. So our margins did come down, I would say, starting in '23, which was at the beginning of the semiconductor cycle. And I would say Amkor has demonstrated tremendous resilience during that cycle. In fact, a lot of our investment decisions were strategic investment decisions, that do have some short-term impact on profitability but our intention in order to set ourselves up for future growth, which is what we're experiencing now.

So it's really going to be 3 factors that we see that are going to drive that profitability back up and beyond where we've been. We've talked a lot about Vietnam. So as we now build scale, we have what I would call operational excellence has been demonstrated, so we can pivot to operational efficiency. We've got our top 10 customers, all engaged in looking at what products that we're going to bring up in Vietnam. So we see that, that margin drag that has been throughout 2025, is really going to lift as we move forward.

The second area is the very advanced high-performance computing. We've had made some very significant investments, not only in R&D, CapEx, but our people in order to ensure that we have successful ramps and as that scales going forward at a higher growth rate. And then the last is the recovery of mainstream. So while SiP has become a higher proportion of our revenue, that's really a function of how deep this cycle has been for our more mainstream business. And as we see that start to gradually recover, we'll definitely see an impact on our profitability moving forward. So all those, the timing of how all those kind of comes into play and then adding that Arizona facility on top, we definitely see expansion in margins.

Okay. How should we think about CapEx? Does it start to move to a much higher level where you're bringing on Arizona. And if you could talk about the implication, free cash flow and ability to increase payout while you go through this expansion phase?

Sure. So we're not -- we haven't yet guided '26 CapEx, we'll do that in February. We need a little more line of sight in how this Arizona build is going to progress. But you may expect to see some temporary increase in CapEx as we put in this very strategic investment here in Arizona. So there may be fluctuations in free cash flow. Amkor has exhibited very disciplined and prudent capital allocation, and we'll continue to do so. And we would expect to continue to grow our dividend modestly as well.

Okay. Great. I think with that, we have to wrap up. I want to thank everyone for coming out. Also thanks to Kevin. Congrats on the new role and also to Megan. Yes, thank you.

All right. Thank you, everybody.

Thank you.

Good day, ladies and gentlemen, and welcome to the Amkor Technology Third Quarter 2025 Earnings Call. My name is Diego, and I will be your conference facilitator today. [Operator Instructions] 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.

Good afternoon, and welcome to Amkor's Third 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 slides.

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

With that, I will now turn the call over to Giel.

Thank you, Jennifer. Good afternoon, everyone, and thank you for joining the call today. I'd like to begin today on a personal note and to share that I have decided to retire from Amkor at the end of 2025. It has been an honor and privilege to be President and CEO of Amkor for over five years, and I'm excited to see what the future holds. I will remain on the Board of Directors to provide continuity and to support our long-term strategy.

I would like to congratulate Kevin Engel as my successor and will support this transition over the next couple of months. Kevin has been with Amkor for over 20 years and brings deep experience that will benefit the company during this next growth phase. You'll hear more from Kevin at upcoming investor events and on the next earnings call. With that, I will now provide updates on the quarter.

Amkor delivered a strong third quarter with revenue of $1.99 billion and EPS of $0.51, both exceeding the high end of our guidance. Revenue increased 31% sequentially driven by a robust demand for advanced packaging. We executed steep production ramps and achieved record revenue in both the communications and computing end markets, demonstrating our ability to scale quickly and support our customers' product launch cycles.

Communications revenue increased 67% sequentially and 5% year-on-year, driven by the latest iOS product ramp and a 17% year-on-year growth in Android. We expect Q4 to decline sequentially with some slowdown in iOS, partially offset by continued strength in Android. On a year-on-year basis, communication is expected to be up more than 20% in the fourth quarter. Edge AI expands into edge devices, we are collaborating closely with customers on next-generation products and we are confident this will drive future demand for advanced packaging.

Computing revenue increased 12% sequentially and 23% year-on-year. We anticipate modest sequential decline in Q4 on product mix changes but expect continued year-on-year growth. Our high-density fan-out technology is ramping as expected with another product moving into production in Q4. Our long-term computing outlook remains robust as innovation in AI and high-performance computing fuels investments across data centers, infrastructure and personal computing areas where Amkor has a strong customer pipeline.

Automotive and Industrial revenue increased 5% sequentially and 9% year-on-year driven by growth in advanced products for ADAS applications together with improvements in our mainstream portfolio. Fourth quarter revenue is expected to be stable sequentially and grow around 20% year-on-year, supported by broad-based customer demands.

Consumer revenue increased 5% sequentially, but was down 5% year-on-year reflecting the product life cycle of a wearable product introduced in the second half of last year. We expect a further decrease of this product in Q4 and anticipate a slight decline in traditional consumer applications. Year-on-year, Consumer is expected to be down mid-teens percent. Overall, our fourth quarter guidance reflects positive trends of returning to a more normal seasonal pattern and for continued year-on-year growth in both our advanced and mainstream portfolio.

Now let me share an update on our strategic initiatives. The semiconductor industry is rapidly evolving as accelerated AI proliferation drives market expansion technology transitions and increased requirements for a resilient manufacturing base. Within this dynamic landscape, Amkor remains focused on its three strategic pillars. Investing in our technology leadership, building supply chain resilience in our manufacturing footprint and deepening partnerships with lead customers.

Earlier this month, we marked a major milestone with the groundbreaking of our new advanced packaging and test campus in Arizona. Working closely with our foundry partner. This campus will be a cornerstone of U.S. semiconductor manufacturing, delivering a full turnkey supply chain with advanced packaging and test capabilities to leading customers in the industry. The Arizona investment represents a bold step forward in our strategic journey.

We've increased the total projected investment to $7 billion, reflecting additional clean room space and a second facility. Once complete, the campus will include 750,000 square feet of clean room, space and create up to 3,000 high-quality jobs. Construction of Phase 1 is expected to be completed in mid-2027 with production beginning in early 2028.

The Arizona campus will feature smart factory technologies and scalable production lines to meet evolving market demands for AI, high-performance computing, mobile communication and advanced automotive applications. It will focus on advanced packaging and testing technologies and will complement domestic foundry manufacturing, enable a full end-to-end semiconductor supply chain in the U.S.

Our expanding geographic footprint with facilities in Asia, Europe and now the U.S. distinguishes Amkor in the OSAT industry. It allows us to partner more closely with customers and deliver innovative packaging and test solutions aligned with their technology road map needs.

In summary, Amkor delivered a strong quarter advance our strategic initiatives and remains well positioned for long-term growth. With that, I will now turn the call over to Megan to provide more details on our third quarter performance and near-term outlook.

Thank you, Giel, and good afternoon, everyone. Third quarter results were better than expected with revenue of $1.99 billion. This represents 31% sequential growth and 7% year-on-year growth. All end markets grew sequentially, and we achieved record revenue in the communications and computing end markets, driven by robust demand for advanced packaging. Given the leverage in our financial, profitability metrics expanded more than revenue sequentially. Gross profit was $284 million and gross margin was 14.3%, up 230 basis points as the flow-through benefit from higher volume was partially offset by an increase in material content due to a higher proportion of advanced SiP. Operating expenses came in as expected, higher sequentially, primarily due to a nonroutine benefit in Q2. Operating income was $159 million, and operating income margin was 8% compared with 6.1% in Q2. As a result of higher operating income and favorable foreign currency, net income more than doubled at $127 million, driving EPS to $0.51 for the quarter. And finally, EBITDA was $340 million and EBITDA margin was 17.1%.

Turning now to operational efficiency. We are taking steps to optimize our manufacturing footprint in Japan. We are actively working with our customers to align factory capacity to market demand to assure supply is guaranteed for this broad portfolio of automotive products. Near-term focus is on reducing manufacturing costs, as well as working with customers to adjust terms to cover costs for underutilized production lines. We expect to begin to see results from these actions in Q4 2025 while additional adjustments will take effect in the first half of 2026. With the full effect of these actions, we see a path to improving corporate gross margins by around 100 basis points exiting 2027.

Japan continues to be a key region for Amkor, supporting the automotive end market and offering geographic flexibility to a global customer portfolio. Over the same time period, we also expect margin improvement from Vietnam ramp-up efficiencies and mainstream recovery and scaling of leading-edge advanced packaging. We are currently refining our long-term financial targets, and I'm pleased to announce that we plan to host an Investor Day in mid-2026, where we will share these targets and deeper insights into our long-term strategy.

Now moving on to the balance sheet. This year, we took proactive steps to position our balance sheet and enhance liquidity for the upcoming investment cycle, particularly for our Arizona campus. We replaced our $600 million Singapore-based revolver with a new $1 billion U.S.-based revolver. We executed a $500 million term loan. We issued $500 million of senior notes due in 2033, and redeemed $525 million of senior notes due in 2027, significantly extending our maturity profile. As of September 30, we held $2.1 billion in cash and short-term investments, and total liquidity was $3.2 billion. Total debt as of Q3 was $1.8 billion, and our debt-to-EBITDA ratio was 1.7x.

Now turning to our fourth quarter guidance. Revenue is expected to be between $1.775 billion and $1.875 billion, representing an 8% sequential decline at the midpoint and a 12% year-on-year increase. We are pleased to see forecasts for both advanced and mainstream are up double-digit percent year-on-year.

Gross margin is projected to be between 14% and 15% which includes an anticipated benefit from asset sales of around $30 million. Year-on-year, gross margins are constrained due to product mix concentrated in higher material content products and higher manufacturing costs as we scale and invest in leading-edge advanced packaging.

Operating expenses are expected to be around $120 million, and our full year effective tax rate is expected to be around 20%, excluding discrete items.

Net income is forecasted to be between $95 million and $120 million, resulting in EPS between $0.38 and $0.48, which includes the anticipated asset sale benefit.

Our 2025 CapEx forecast has increased to $950 million, up from $850 million to support expanded investment in our Arizona campus. In addition to investment in our geographic footprint, our focus remains on scaling capacity and capability for leading-edge technologies, including high-density fan-out, advanced SiP and test solutions. We will provide more details on our CapEx spend levels and timing for our new Arizona facility when we give 2026 CapEx guidance at our next earnings call.

In closing, our third quarter results reflect the effectiveness of our strategy, strengthening our technology leadership, building supply chain resilience by expanding our broad geographic footprint and deepening partnerships with lead customers in growth markets. With the upcoming CEO transition, we remain committed to investing in our long-term growth and our capital allocation strategy, positioning Amkor to deliver sustainable value for our shareholders.

This concludes our prepared remarks, and I'll now turn the call over to the operator for Q&A.

[Operator Instructions] Our first question comes from Ben Reitzes with Melius Research.

Yes. I appreciate it, and Giel wish you the best of luck. Look forward to talking to you later, but enjoyed you on these calls. I got two questions. First of all, with regard to the gross margin guidance in the fourth quarter, if you take out the asset sale, I believe it's 160 basis points lower which puts you below what we were expecting a bit. You mentioned some higher manufacturing costs. Could you just elaborate on that? And what the pressures are that kind of puts you without the sale below 14%?

Ben, this is Megan. I'll take that one. So normalizing for that asset sale, you've got the math right. So that sequential incremental flow-through is actually in line with our financial model. You'll see it's probably about 30% incremental. What's happening there probably compared to last Q4 is we do have a higher material content in Q4. If you look at last year, we actually had over 350 basis points drop in the material content between Q3 and Q4. That was related to a deeper communications drop last year. So that's effectively what's impacting margin in our Q4 guidance.

And then you had a follow-up?

Yes. Just wondering if you could talk a little bit more about the communications segment. I'm sorry if you said this, but we're picking up indications that there's upside into 4Q with one of -- with your biggest customer at least. And I was wondering about the dynamics there on the consumer guide, if you can elaborate, are you seeing it? Or is there an offset in Android? Or is there a conservatism in your guidance for communications in particular?

Thanks, Ben. Let me try to answer that question. Overall, I think the Communications segment, we're guiding down slightly into Q4, we see continued strength in Android, and that's also reflected in our guide. We see a slight tapering off in the iOS ecosystem, how that exactly reflects into end product outlook is difficult to say. I think we're a little bit deeper into the supply chain where we supply our services. I think for now, this is the exposure that we have, and we take that forecast in our guidance.

Your next question comes from Randy Abrams with UBS.

Yes. I wanted to also congratulate you, Giel, just on the next chapter. It has been good working with you. I wanted to ask the first question on the compute opportunities, where you mentioned the start of shipping the high-density fan-out. If you could go how you see the pipeline for AI and networking and also for the first tranche of CoWoS-S capacity, if you see opportunity to utilize that with some of the new products coming out.

Let me take that, Randy. Well, first of all, thanks, with your congrats. With respect to the high-density fan-out opportunities, I mean we start shipping the first product in the quarter. We have two more products lined up, one with the same customer and the other with an external party. So we believe that, that high-density fan-out technologies, and I reiterate the question the, let's say, the outlook that we shared last time, is a solid foundation of future growth for Amkor. And it was good to see the ramp going into this quarter and also winter next quarter. So we expect that to continue. I think we see a strong outlook there.

With respect to the 2.5D, I mean short term, we see a slight moderation there. Longer term, we see, let's say, a stronger potential pipeline coming up. And I think we had a review last couple of weeks with our customers on that specific technology, and that's signaled positive trends going forward. It may take a few more quarters before these products are going to be released but it's encouraging to see that, that technology will continue to be a solid foundation also going forward.

Okay. Good. And then my follow-up question on the system and package pipeline. This year, you gained back a key socket. It looks like two different things going on that improving, but the consumer pulled back. If you could talk broadly about SiP, how you see the pipeline into next year, continuing on the communication gain and then maybe what's happening on the consumer side.

Yes. I think the sockets on the communication side that is performing as expected. We're executing the ramp going into Q3 and Q4. And also there, I think the outlook for the full year is in line with what we shared in February, including the socket ramp. So we're pretty positive on the communication side.

With respect to the consumer side, I mean the end product goes through a predicted and forecasted sequential decline. It's a cyclicality of that product portfolio. We're encouraged with next products that are being launched going forward in that same portfolio but we expect that Q4, as guided, will be a correction and a further slowdown of that existing product.

Your next question comes from Steven Fox with Fox Advisors.

I had a couple of questions as well. First, Megan, can you just round out some of the margin to, you mentioned in the prepared remarks also that manufacturing costs were weighing year-over-year. So I was curious how much that is and where you are relative to sort of peak pressures on that? And the same thing for the material content mix, how do we think about that sort of ongoing pressures into next year? If there's any way to give clues on that. And I need a follow up.

Sure, Steve. So with respect to the Q4 gross margin, year-over-year, there's really two things constraining flow through. One is the higher manufacturing costs, and that's really attributable to our leading-edge advanced technology, most of which Giel just mentioned, but having higher overhead and CapEx to support that ahead of scale. So as we build scale with those leading-edge advanced technologies, which we see that scaling well into 2026, that will not be a headwind.

The other half is related to, what I would say, year-over-year unfavorable product mix. So the decline in our peak material content we had in Q3 to Q4 will probably be around 100 basis points compared to last year, which was over 300 basis points. And that's really attributable to a more stable SiP and a more normal seasonal pattern with regards to that sequential behavior.

Great. That's helpful. And then just bigger picture on the $7 billion investment for Arizona now. I guess if you can comment a little bit further than what has been described so far and like public comments about why the increase in investment, what does it signal about Amkor's opportunities longer term?

And then I was curious, does it create any near-term opportunities like stamp of approval for winning near-term business in other parts of the world?

Steve, let me comment to that. I mean, over the last, let's say, 12 months, we see an increased interest in U.S. manufacturing and that comes from multiple customers that is driving up local investments, not only in scale for silicon to be manufactured in the U.S., but also an increased demand for advanced packaging. So we're working very closely with these lead customers, but also with our foundry partner to scale the capacity that we put in place in line with demand of our lead customers. And that's the basis of the increased investment to $7 billion. You have to keep in mind that this investment is coming in different phases, and we stepped that up through two important phases with the two additional -- or a second additional building. And also, of course, we only put equipment then based on real market demand. But overall, we expect that the $7 billion is justified given the increased interest in the U.S. But also given the alignment that we have with lead customers here on to require capacity for U.S. manufacturing.

Your next question comes from Craig Ellis with B. Riley Securities.

Yes. and I'll start just by thanking you and wishing you well, Giel, for all the help. And then Kevin, look forward to working with you more intensely next year. On to the question, I think there was an indication that within the automotive and industrial end market, we saw broad strength that sounds like ADAS is starting to improve, as I think you expected three months ago against what's been a pretty tepid automotive market. Could you give us a sense for the potential for ADAS and some of your other programs to continue to benefit that segment as we look beyond 4Q into 2026?

Thanks, Craig. Yes, let me try to answer that. I mean we expect, going forward, that advanced packaging in the automotive domain will continue to increase and will continue to drive growth. ADAS, it's a broad range of technology going into automotive, and we expect that, that will continue to grow certainly because of the proliferation of that functionality deeper into the car range but also further electrification of the automotive market. So we expect that to continue over the next, let's say, a couple of years, and that will step-by-step move to a more self-driving functionality into the car, more connectivity into the automotive domain. We're well positioned there. I mean, we're working with the leaders in the semiconductor area that deliver products in this functionality, and we're very pleased with our opportunities and pipeline there.

The other positive elements in the automotive domain is the recovery of our mainstream portfolio. We saw the second quarter of this year reaching a trough and going into the third quarter, we see improvement, and we expect that to continue into the fourth quarter. And our customers signaling a strong, let's say, improvement of the overall inventory in the supply chain with a more balance there and that ultimately will drive a more balanced revenue base in the automotive domain for Amkor.

That's really helpful, Giel. And then I wanted to follow up with a clarification for Megan. Megan, Nice to see the significant gross margin improvement coming from the facility rationalization in Japan. The question is, per the 100 basis point gross margin improvement by end next year, what's our baseline? Is it the adjusted fourth quarter level after taking out that $30 million benefit or were you pointing back to the third quarter as the baseline?

Thanks, Craig. Yes. So I would use our Q3 as our baseline, given we are going to begin seeing benefits moving into Q4. I did want to clarify the 100 basis point benefit. We had stated the full impact of that would be seen by the end of 2027 and that marks a 2-year activity, which is, for us, very standard as we're managing through rationalizations of this sort in Japan supporting mainly an automotive customer base.

Your next question comes from Joe Moore with Morgan Stanley.

I wonder if you could just address the overall cyclical environment for the OSAT business. Are you seeing customers starting to get concerned about potential tightness and any impact that you could see -- Haven't seen on like-for-like pricing and may see in the future on like-for-like pricing?

Well, good question, Joe. Thanks for that. Across our portfolio of mainstream and advanced packaging, we see on the advanced packaging side in some pockets, tightness of supply that [ over lines ] are filling up quite significantly that holds, for example, a flip-chip portfolio or some wafer-level packaging. So I don't see tightness still occurring in the next quarter, but we see that in some pockets that has tightness of supply not only with respect to overcapacity, but there's also some limitations in certain areas, for example, substrates where we're working closely with suppliers to make sure that we have a continued supply base there.

Okay. Great. And then in terms of the strength that you've seen in the smartphone business, any indication that any of that could be pull forward, tariff related, anything like that, I mean it seems like there's a pretty solid demand, but I just wanted you to address that because we get the question a lot.

I mean, it's difficult to say what next year will bring on the smartphone base. I mean, for Amkor, it's important to reconfirm our position in this domain, both on the Android side as well as on the iOS side where we can confirm that we are convinced that we have a very strong footprint on both sides of certainly the premium tier smartphones. We also see an increased evaluation of next-generation products in that supply chain enabling future phones for more AI functionality as edge devices when that will materialize and then change or increase semiconductor content, it's difficult to share with you at this moment, Joe. But overall, we're confident that we have a solid position in the market, difficult to predict how the individual phone segments will develop into next year.

Your next question comes from Peter Peng with JPMorgan Chase & Company.

I want to echo my peers' comments as well and best of luck in your next chapter. Just on your CoWoS-L, there's increasingly more and more of your hyperscale customers and merchant transitioning to CoWoS-L in their technology road maps. I know you guys have something equivalent to your S-Connect. Maybe you can share some update on the progress there with your S-Connect and how do you believe you're positioned in this area?

Well, it's difficult to comment on CoWoS-L. What -- we're working very closely with our foundry partner to make sure that we have a complementary supply chain in place. Current focus is very much on what we share, what we label high-density fan-out, an equivalent of CoWoS-R and we see significant opportunities there.

With respect to the other CoWoS-L, I think we're currently evaluating the on substrate part of that technology in Asia as well as to make sure that we have a complementary supply chain put in place in the U.S. So overall, that's our approach there, Peter. But overall, I think the computing market has multiple opportunities for Amkor. I think we're working closely, both with customers as well as with a foundry partner going forward on the different technology domains.

Got it. Okay. And then maybe just -- you talked about some new ramps in your -- the CoWoS-R equivalent, high density fan out. How is that going to impact seasonality as we think about the first half of next year? Is that anything significant that would alter seasonal? Or do you think those are like less beneficial until later on. Maybe just talk about seasonality and how you think about those products ramping?

Well, seasonality for Amkor in the past and also now is, to a large extent, driven by our exposure to the communication market. I think there was a strong and there is a strong seasonality in the communication market. If you look to our other markets, be it automotive, computing and also consumer, there is less pronounced seasonality. So the product launches that we are referring to, we expect them to show significantly less seasonality and with more growth in the computer domain that was ultimately level out the significant seasonality that we have, although we foresee, of course, that for the time to come the communications segment will be our biggest segment.

Your next question comes from Tom Diffely with D.A. Davidson.

Congratulations, Giel, on your next chapter. So maybe just one more question on the new facility in Arizona. When you think about the $7 billion -- the increase to $7 billion, how much of that is because of the extra capacity you're adding versus the increase in costs that we've seen kind of across the board these days in construction?

Well, Tom, I think I can be short on that. This is exclusively related to the increased capacity that we are planning for. you may have been informed that we also moved the location of the factory to a different location, a location closer to the TSMC location that gives us twice the land area with an additional option to further expand 50 acres for, potentially, a third facility. So that offers opportunity to grow. We're in close cooperation and close alignment between the different partners and customers to make sure that we scale the facility correctly when it comes to scale, but also make sure that we ramp that facility with the right technologies in line with what customers need in the U.S. So it is not related to the increased investment, it is not related to the higher cost. It is strictly related to the share capacity expansion.

Okay. Great. That's very encouraging. And then as a follow-up, when you think about the CapEx of $950 million for next year, how much of that is specifically for Arizona?

So Tom, I can take that. So we had increased our CapEx guide for 2025 to $950 million and that was really driven by having more visibility in what we would need to spend in 2025. We have not yet given guide for CapEx for 2026. So we will give that at our next earnings call along with more visibility on the timing and expense for the Arizona facility.

Okay. But the increase in '25 was all driven by Arizona, the incremental?

Correct.

Your next question comes from Steve Barger with KeyBanc Capital Markets.

Thanks I had another compute question. Giel, I think RDL formats are replacing silicon interposer to some degree, which should be good for OSAT. How much of your CapEx has been to support RDL? And does that shift drive higher value add that translates to unit margins? Or would the primary benefit the volume?

Steve, with respect to the relative CapEx that goes into the expansion of high-density fan-out, the RDL based technology, it's a significant, I would say, the majority of our CapEx. I want to reiterate there that a large part of our capital investments when it comes to individual equipment is highly fungible. Fungible between standard wafer-level packaging, even bumping to into the high-density fan-out. But if we look to the ramp that we're preparing for, and I have to correct myself, I think we're ramping up the -- with our lead customers, three individual products and with the second customer another product in the early part of the year. So there is a significant ramp expected and we made a significant commitment to our customers to support that ramp where we are working in close cooperation with our lead customers there. So that's how we see the investment in high-density fan-out.

And I know it's being driven by compute right now, but what are the gating factors to the higher volume applications like PC or mobile? Are there technology challenges for those applications? Or is it just really a function of customers making the decision to go that direction?

Yes. Good question, Steve. From our perspective, this technology will be applied in multiple domains. One is the data center domain as we just discussed, but it definitely will go into the more higher volume PCs and ultimately, also in the mobile communication domain.

The technology is basically the same. I think we use the same production lines for that technology. Of course, the individual specification of the technology is slightly different for each application, but the basic capacity that we won in place -- will put in place is supporting products into -- in the PC domain as well as in the data center and communication domain.

And your next question comes from Denis Pyatchanin with Needham & Company.

Great. Well, we'd like to [indiscernible] everyone's congratulations as well. And for a quick question about computing. So computing looks like it was over 20% year-over-year. Can you discuss the key drivers of this growth? And if you will see these persisting into Q4, even with revenue guided down somewhat quarter-over-quarter?

Yes, Denis. I mean computing in the last quarter showed broad-based strength. I think all applications in the computing domain from PCs as well as networking as well as data center products were up in the quarter. And we expect that, that will continue. May we see on the more consumer products on the PC product, we still see strength, and that's also what the market predicts but definitely also on the networking and data center product side, we see continued strength. So overall, we're optimistic. We had a good quarter and a good year in computing. We had a record in the third quarter. I have to remind you that the AI and the AI proliferation is just started. So there will be more products being developed going into the edge and edge devices as well as into networking and data centers. So we stay -- and we remain very optimistic there, and we're confident that we are applying there.

Great. And then for my follow-up for communications, I think you mentioned strength in Android persisting into next quarter. Can you provide some more color on that, maybe perhaps by geography?

That is difficult to say. I mean, we believe that there is a trend in the Android market. And I also mentioned that last quarter is there -- is a trend to higher-end devices for the premium tier smartphones, and that's a global trend. And I cannot go to individual customers there, Denis, we saw that there was inventory in that supply chain. But overall, we believe that currently that inventory is digested. So overall, we are very positive on the Android players.

And ladies and gentlemen, at this time, I'm showing no further questions. I would like to turn the call back over to Giel for closing remarks. Thank you.

Thank you. Now let me recap our key messages. Amkor delivered a strong third quarter with record revenue in both the communications and computing end markets. Fourth quarter revenue is expected to increase 12% year-on-year at the midpoint. We are focused on enhancing operational efficiencies and optimizing our manufacturing footprint in Japan. And we look forward to hosting an Investor Day in mid-2026 where we will share financial targets and deeper insight in our long-term strategy. Thank you for joining the call today.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.