Amkor Technology, Inc. (AMKR)
UBS Global Technology and Services Conference Call
November 14, 2012 2:30 pm ET
Kenneth T. Joyce. – President and Chief Executive Officer
Joanne Solomon – Executive Vice President and Chief Financial Officer
[Call Started Abruptly]
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The industry was found it by us and through a predecessor company and we continue to be one of the drivers from a technology perspective. Here we are as an outsourced service provider has lot to do with who our customers are and we are well-positioned with the leading semiconductor company globally both U.S. and Europe as well as in Asia. When you look at how well we compete with the Tier-1 and Tier-2 players our niche is mostly in this flip chip advanced semiconductor assembly and tests.
We are competitive in the wirebond side, but we definitely do better on the flip chip side and with respect to the industry of outsourced assembly and tests it is a growing industry so we are benefitting from those growth trends. On page four, just to review some of the financial highlights through the last 12 months ending our third quarter here, our sales are at $2.7 billion our EBITDA is right around $500 million and net income of around 80.
With respect to our financial policy, we do balance both free cash flow generation as well as profitable growth, so there are periods where you are investing for the markets that are growing and that put some pressure under free cash flow similar to this year. We do operate in both a cyclical and seasonal industry, so it does become critical of that as there is periods of cyclical correction that we do manage our cost in line with demand as well as to manage our investment in line with demand. We have a strong balance sheet and our debt-to-EBITDA is at 2.8 times.
When we talk about what drives our growth, I would characterize it into three categories, it’s the end markets that we compete in, it’s how we use our technology to drive growth and then just our overall what are the trends in the OSAT industry.
From an end market perspective, we are well-positioned to be capturing a lot of the growth that we’re seeing on the smartphones and tablets space. On a technology side, we are at the forefront of the next generation technology as it supports smartphones and tablets, as it supports some of the field programmable devices heading into networking in the like and then we’re also as more and more companies are starting to outsource more, we are well-positioned to capture that as well.
Looking at the major markets that we compete in smartphones and tablets being the single biggest end market, communications has got 45% of what we do and most of that heading into smartphones and tablets, to the right are some of the major customers that we support in that space. Consumer electronics is also an important area for us and broadly includes game boxes as well as set-top boxes in the like. And then finally networking is an area of strength as well because of its dependence on advanced technologies.
This is on slide seven is the more granular breakout for the end market summary, communications is 46%, consumer electronics 2%, computing at 12% that’s largely on the peripheral side to hard disk drives and a like networking 11% and then other principally auto and industrial the balance.
With respect to communication these numbers are as of the last 12 months, as of the third quarter, with the delay in ramp of 28-nanometer, I would actually expect this to be higher as you move forward and as the supply chain in the demand and supplier more in line in smartphones and tablet’s, the 28 nanometer.
So I do expect the communication side to be increasing importance, sometimes we get off to what are the chips that we have in each of the major devices, so whether it’s smartphones and tablets, gaming consoles, digital home and networking and we have broad penetration in the devices, it’s more than just one chip that data that makes up our exposure, so it’s very broad within each of the devices.
On page nine, you start to see who are our top 10 customers were as of the full year 2011 our top 10 customers represents 61% of our business, top 25 represents 83%, for 2011 we had two customers about 10% and that was Qualcomm and Texas Instruments.
Taking a little deeper look at flip chip and advanced packaging, we are the leader in the space, we have a market share lead from ASE, ASE is the largest OSAT in general, but with respect to flip chip and advanced packaging, we are the leader at about a $1 billion, you can see that ASE on the last 12 months it’s about 800,000, what is driving our market share and the demand for these products is the smartphones and tablets side, gaming as well as networking infrastructure and more of these devices are going into flip chip because of performance reasons, as well as power consumption and just a form factor. The fact that we all want more in less space