Greg Johnson – Senior Director, Finance and Investor Relations Stephen Kelley – President and Chief Executive Officer Joanne Solomon – Executive Vice President and Chief Financial Officer.

Suji De Silva – Topeka Jairam Nathan – Sidoti Randy Abrams – Credit Suisse Atif Malik – Citigroup Sidney Ho – Deutsche Bank Sam Goodyear – MidOcean Partners.

Good day, ladies and gentlemen, and welcome to the Amkor Technology First Quarter 2015 Earnings Conference Call. My name is Danielle, and I will be your conference facilitator today. At this time, all participants are in a listen-only mode. After the speakers’ remarks, we will conduct a question-and-answer session.

As a reminder, this call is being recorded. I would now like to turn the call over to Greg Johnson, Senior Director of Finance and Investor Relations. Mr. Johnson, please go ahead..

Thank you, Danielle, and good afternoon, everyone. Joining me today are Steve Kelley, our President and Chief Executive Officer; and Joanne Solomon, our Chief Financial Officer. Our earnings press release was filed with the SEC this afternoon and is available on our website.

During this conference call, we will use non-GAAP financial measures and you can find the reconciliation to the U.S. GAAP equivalent at our website. We will also make forward-looking statements about our expectations for Amkor’s future performance based on the environment as we currently see it. Of course, actual results could be different.

Please refer to our press release and other SEC filings for information on risk factors, uncertainties, and exceptions that could cause actual results to differ materially from these expectations. Please note, that the financial results discussed today are preliminary and final data will be included in our Form 10-Q.

And now, I would like to turn the call over to Steve..

Good afternoon, and thanks for joining the call. Today, I’ll discuss our first quarter results, our second quarter outlook, and the progress of our key growth initiatives. First quarter results met our expectations. Sales grew 7% year-on-year to $743 million, driven by increased demand for advanced packaging and test technologies.

We experienced strong year-on-year growth in our Wafer Level, SiP, and MEMS product lines. We also saw a very strong year-on-year growth in greater China. Earnings per share increased $0.03 year-on-year and we generated $60 million in free cash flow. We anticipate that second quarter 2015 revenues will be relatively flat to Q1.

Demand will be constrained in the second quarter, primarily due to inventory adjustments and other issues at one of our major customers in the mobile device segment. We expect growth to resume in the second half driven by the launch of new flagship mobile devices.

Many of the capacity and technology investments we made in 2013 and 2014 are paying off this year. Recently installed wafer-level, MEMS, and SiP capacity is well utilized. First quarter revenues more than doubled year-on-year at our greater China fabless customers.

Growing in China and Taiwan is very important for the company since it broadens our exposure to the mid-range and entry-level segments of the mobile device market. We can typically address the needs of these important second-wave customers using existing assets, which improves our capital efficiency.

A key part of our value proposition in greater China is our regional manufacturing footprint, particularly our world-class factory in Shanghai. In terms of revenue generation, our Shanghai operation is the second-largest factory at Amkor. It is arguably the most advanced OSAT facility in China.

We manufacture products for both international and local customers with heavy emphasis on wafer-level technology and sophisticated multi-die packaging. We intent to significantly expand this factory in the coming year to accommodate steadily increasing demand.

We have a larger strategy to broaden Amkor’s base of customers, not just in greater China, but also in Europe and the U.S. The number of customers generating at least $30 million in annual revenue increased by 30% over the past two years. Over time, this broadening of the customer base will enhance the overall health of our business.

The long-term trends look very positive for Amkor. More integration is occurring at the package and module level as the economics of advanced silicon nodes become more and more challenging. Also working in our favor is the relatively high cost of adding new advanced packaging capacity.

It narrows the playing field, since only the largest OSATs along with a select few foundries and IDMs are willing to make the necessary capital investments. Our R&D team’s top priority is to develop cost-effective packaging solutions, which maximize yield and minimize building material and process costs.

Our efforts in investment in leading-edge technology paid off for us last year 20-nanometer and will pay off again later this year when 16-nanometer and 40-nanometer products hit the market. These latest process nodes largely reuse already purchased equipment, which is helping to drive reduced capital intensity in 2015.

Our SiP or System in Package business is another advanced technology area that is getting significant traction, particularly for RF applications. Our center of excellence for this business is our K4 manufacturing plant in Kwangju, South Korea.

To assure our leadership position in advanced packaging and test technologies, we are building K5, a new R&D and advanced manufacturing center located about 30 minutes from Incheon Airport in South Korea. Construction is progressing on schedule.

We expect to begin product calls in the second quarter of 2016, followed by first production in the second half of 2016. We believe that K5’s engineering talent, advanced capabilities, and competitive cost base will be a powerful draw for advanced packaging and module customers.

Growing our automotive business is also a key part of our long-term strategy. Amkor and J-Devices, our joint venture in Japan, together generated more than $0.75 billion in 2014 automotive revenues; making is the number one OSAT provider in the automotive space.

Automotive is a natural fit for Amkor, given our emphasis on quality, execution, and manufacturing stability. We are working closely with our joint venture partner J-Devices on a number of fronts. J-Devices is the largest OSAT in Japan and the seventh largest globally with revenues of over $900 million per year.

We currently own 66% of J-Devices and expect to consolidate their results starting in the first quarter 2016, after we increase our ownership stake to 80%. Consolidating J-Devices will cement our position as the second-largest OSAT in the world well ahead of the new two players.

Our 2015 capital expenditure plan remains unchanged around $600 million, including $150 million for K5 construction. In closing, I would like to note that Amkor recently received Intel’s Preferred Quality Supplier Award for the second consecutive year.

We are proud to be one of a select group of suppliers Intel recognized for outstanding performance in 2014. Joanne will now provide more detailed financial information..

Thank you, Steve, and good afternoon, everyone. First quarter revenues grew 7% year-on-year. Units were flat with the prior year quarter. Advanced product units were up $540 million, driven by growth in wafer-level packaging and SiP.

Mainstream product units declined by $550 million, as our discrete operations in Malaysia saw the planned transition of small signal products back to a Toshiba owned factory. Operating expenses in the quarter were $80 million essentially flat from the fourth quarter.

For the remainder of the year, we expect our operating expenses to remain around this level. Our effective tax rate for the quarter was 20% as we benefited from a discrete tax item in a foreign jurisdiction. We expect the quarterly effective tax rate to be around 26% for the rest of the year.

In January, we increased our ownership in J-Devices from 60% to 66%. Our equity pickup from J-Devices contributed $0.03 to our first quarter EPS. We generated EBITDA of $840 million over the past 12 months, adjusted to exclude a litigation charge. J-Devices produced $145 million of EBITDA over the same period.

So together, Amkor and J-Devices generated nearly $1 billion of EBITDA over the past 12 months. At March 31, we had total debt of $1.5 million and J-Devices’ debt was only $50 million. On a standalone basis, Amkor’s debt to non-GAAP EBITDA was 1.8 times. And on a combined basis, debt to non-GAAP EBITDA was 1.6 times.

And finally, we generated $60 million of free cash flow in the first quarter. Our liquidity is solid with about $500 millions in cash and $450 million in available undrawn loans. With that, we will now open up the call for your questions.

Operator?.

Thank you. [Operator Instructions] And your first question comes from Suji De Silva from Topeka. Your line is now open. Please go ahead..

Hi, Steve, hi, Joanne, congratulations on the cash flow generation there.

The way the phone customers playing out here, Steve, how is the second half versus first half going to look this year versus typical years in terms of split?.

I think the second half is definitely going to be stronger. Obviously, the second quarter forecast was a bit of a surprise for us. So we have some work to do as we move into the second half.

But one of the positive things about the second half is that there are number of new platforms from Apple that they are launching into the market, and we have a very good content in many of those platforms. So that gives me a lot of hope. The second major driver is our seasonal uptick in the mainstream business.

Typically, we’ll see a nice pop in the second half from our wire-bond businesses, typically in the order of 48 to 52 from a first-half second-half standpoint, sometimes a little bit better, like last year. So, yeah, I’m very positive about the second half. I think the second quarter is a bit of a hiccup for us..

Okay, great. And then you talked about the growth of the number of large customers $30 million plus.

Can you talk about whether those are all smartphone, tablet, mobile customers or whether you are seeing the most large customers coming in other categories?.

So we are talking about customers that generate $30 million or more annually for Amkor, so that would put you in the top 25 basically. And so, what we’re seeing is a number of the customers that are entering that zone are actually non-mobile comm customers.

They are large IDMs, as well as fabless companies, who we have broad exposure to the chip markets. So that’s encouraging for us..

Absolutely. Last question, you talked about the reuse of equipment in 16-nanometer coming up this year versus 20-nanometer. How much of reuse is that? And how often does that cadence happen? It sounds like 20-nanometer was a big investment that will repeat every X generation. So, just curious on the dynamic there..

Yeah, so it’s fortunate that we are able to reuse the equipment. So, basically, from a packaging standpoint, the 14-nanometer and 16-nanometer products look the same. So by the time you get to that top layer, it’s basically the same geometry. So that helps us. At 10-nanometer, I’m not sure at this point.

We will have to wait and see, and see how things develop at the foundries as to whether we’re going to invest a lot more in the equipment..

Okay, great. Thanks, guys..

Thank you. And your next question comes from Jairam Nathan from Sidoti. Your line is now open. Please go ahead.

Hi, thanks for taking my question. With regard to your – the customer you talked about for the guidance decline – for the flat guidance for 2Q. What kind of visibility do you have with respect to that customer? And I had a follow-up..

Well, I think, we have reasonable visibility with respect to that customer. Obviously, all of us depend on the end customer to make the call. Many times that call is made at the last minute. So, that’s why the magnitude of the decline in Q2 was a surprise for us.

There were some inventory issues that occurred as well as some resetting because of some of the share loss. But this is the business we are in. Smartphone business is an all-or-nothing business; you win some, you lose some, but you move on.

So we will continue to work closely with that major customer; we’re going to partner with them on the package and test side and try to make them even more successful with their end customers over the coming 12 months..

Okay. And my other question was regarding CapEx. You maintained your CapEx.

What kind of flexibility do you think you can have if things don’t work out in the second half?.

So, with regards to CapEx, if you take a look at our year-on-year CapEx, we are – if you exclude K5, which is the new facility in South Korea, we are down about $200 million from 2014 and 2015. So we are already economizing on CapEx. We still have flexibility.

If the second half turns out worse than we expect, we have the flexibility to turn the facet off, if we want to. So, I think, right now, we do intend to invest the full amount because we see a lot of good growth opportunities in the market today and they are in areas where we’re already full – the wafer-level area, the SiP area, the MEMS area.

We are doing quite well and we don’t want to constrain our growth in those areas..

Okay, thank you. That’s all I had..

Thank you. And your next question comes from Randy Abrams from Credit Suisse. Your line is now open. Please go ahead..

Okay, thank you. My first question, I wanted to ask a little more on the guidance.

If you could talk about the – pretty much the full impact from the key customer and their project in the inventory or just have you saw any impact across the broader customer base whether mainstream or advanced packaging or from the different end markets, if you could talk about the behavior on the rest of the customer base?.

Yeah, I would be happy to Randy. We took a very close look at this, obviously, and I have to say that 75% of the miss was the single customer issue. We had one other customer that had a market share issue.

But looking across the broad market, we just saw the normal puts and takes of a normal quarter; some customers are up a little bit, some are down a little bit. So, at this point in time, we don’t see signs of a broad market correction..

Okay, great. If I could ask the other question on the – you mentioned a few times about the SiP opportunity.

Could you talk about how you are addressing and how broad – I think you mentioned RF, but the applications you are targeting? And related to that, how you are seeing the fan out market developing? And how Amkor would be positioned if you are seeing it like what applications you are seeing fan out and if it’s something that looks like it’s coming into sort of high-end or starting to broaden out?.

Yeah. So let me talk a little bit about SiP. Right now, as you said, the RF and front-end modules are driving our business.

But we also have opportunities in fingerprint sensors, we have opportunities in other parts of the phone, as you see the phone start to – there are various vendors who are trying to create modules, right, that encompass more than one piece of active silicon. So we are very engaged in those efforts.

We also see opportunities in automotive and we see opportunities in the Internet of things. If I try to categorize the direction we are going in, we are going into the areas that are more IC and packaging intensive and less of the board-level type SiPs. So we are trying to add as much value as we can at Amkor..

Okay.

And I guess on the InFO, if you are seeing much adoption for fan out and any impact, I guess, positive or negative on fan out I guess with TSMC working on InFO for high-end project?.

Yeah, yeah, certainly, InFO was out there. We have our own technologies. And what we’re seeing today is that the end customers are evaluating InFO, they are evaluating the technologies from Amkor and other suppliers.

And as in the past, success or failure of any particular approach is usually driven by the economics, particularly [ph] the materials cost, the equipment cost to setup a line and the yield of the process. The yield is particularly important. So, the other dynamic is that all these customers require multiple suppliers.

You just can be a single supplier to the major mobile device manufacturers today. So what ends up happening is one technology becomes mainstream and then the rest of the suppliers obtain licenses to that technology. So I think a similar scenario was going to play out here over the next 12 months. Our customers will determine the winning approaches.

And then, we will license our technology to others, including TSMC or we will license technologies from TSMC or a combination of both. But I think that’s what will play out. And usually this is very valuable process for us because the customers will help all of us to improve our approaches..

Great. Thanks a lot..

Thank you. And your next question comes from Atif Malik from Citigroup. Your line is now open. Please go ahead..

Hi, thanks for taking my question.

Steve, with respect to your expectation for second half growth, I just want to understand if you are assuming that customer coming back in those expectations or you expect that customer to take its packaging and testing to its customer?.

Well, I think in the second half, it must be a combination of factors. I think the customer that’s going through a reset this quarter will come back to a certain extent and we will share on that upturn with that customer.

But I’m speaking more broadly where we have exposure through a number of different customers to these new mobile device launches in the second half, so I think we’re going to benefit from that surge and that will be compounded by the recovery in mainstream and also some share gains we are making in China and Taiwan..

Okay.

And then did you see any handset weakness in China, I know you are still growing from small base in China, and also if you can quantify for us the flagship exposure of your mobile sales, basically the two big smartphone makers, what percentage of your mobile sales are those two big smartphone makers?.

Yeah, so I will talk to the greater China issue. Traditionally, we have not had a lot of exposure to the ups and downs of the China market. However, in the past 18 months, we have become more involved in that market and engaged one particular customer who is doing quite well in that market today. So, so far what we’ve seen has been positive.

Again, our exposure is a lot different than some of our competitors, who are more broadly exposed to many different customers in the China, Taiwan region..

And what percentage of your sales are the two big smartphone makers?.

Could you just tell me which companies you are referring to?.

I’m referring to Apple and Samsung..

Okay.

Do you have that number?.

No. We’ve never guided a specific number. I would just characterize it as majority of our revenues would be tied to those two platforms..

Got it. And then last question on the reuse of equipment.

The comments that you made, are those limited to packaging or also testing where you are seeing more reuse of equipment? And if the reused being driven by demand shortfall at 20-nanometer and then you have capacity that you can use it for 16-nanometer or are the technical requirements of 20-nanometer and 16-nanometer are very similar that you can use the equipment on the test side?.

So my comment on reuse applies to both assembly and test equipment, which is good, because the test equipment these days is very expensive. With regards to the capacity, we put in place a fair amount of capacity last year. And as you know, this market tends to be pretty dynamic; goes up, goes down.

And so, the next generation of 16-nanometer and 14-nanometer comes into play as the 20-nanometer demand is fading. So the two product cycles complement each other..

Okay. And then one last one on the CapEx discipline. I mean it seems like all those [indiscernible] showing pretty good CapEx discipline.

And just curious in terms of what do you think the reasons or the drivers where this time around the CapEx seems a lot more disciplined from everyone?.

So, I think your question is why is the CapEx down this year as opposed to last year?.

Right..

I think it’s probably a similar story to what we are telling. I think there were some major programs last year that required a lot of spending on the part of OSAT until we put in place a lot of capacity, which we are reusing this year..

Okay, thanks..

Thank you. And your next question comes from Sidney Ho from Deutsche Bank. Your line is now open. Please go ahead..

Hi, thanks for taking my questions. Just a quick clarification. I’m hoping to quantify the revenue miss from this one handset customer. So, typically, your second quarter, you see high single-digit growth on the sequential basis. And you said, 75% of that miss is coming from this one customer.

So if [indiscernible] that’s somewhere around $50 million? And a follow-up to an earlier question, how comfortable are you, you are not losing share in that particular customer?.

I think your estimate is roughly right. I think we see somewhere in the $40 million to $50 million is the direct impact in Q2 from that particular customer. I think on the share questing moving forward, we compete every quarter for share at every customer. So, we have to stay competitive from a price standpoint, from a technology standpoint.

So, it’s very difficult to predict share. All I can say is in the past we have been the number one OSAT supplier and we would like to keep that position moving forward with that particular customer..

Okay. My follow-up question is, can you talk about what kind of impacts have you seen from currency depreciation on end market demand or competitive landscape? It looks like currency should give your competitors some cost advantage.

But has that impacted your business yet?.

Well, from Amkor’s perspective, currency has been a tailwind. The vast majority of our revenues are U.S. dollar based. We do have some costs that are denominated in local currencies – labor and utilities. So, as the dollar strengthened, we got a benefit.

With respect to end market, the impact of currencies, I think the trends that are driving the demand are strong from a mobile communication standpoint and that just brought demand for mobile communication. So it seems unaffected by currency..

Yeah. If I can squeeze in one more question, your mainstream wire bond ASP is up for the last two quarters, but your volume on a year-over-year basis was down and revenue is also down.

Can you help us -- I think, Joanne, you mentioned on your prepared remarks, but can you help us out in terms of the dynamics behind that and how should we think about ASP and volume going forward for the wire bond side?.

Yeah, with the addition of the discrete business into the portfolio of mainstream, it had increased units exponentially. And there is this one piece of business that at the time of acquisition, it had always been planned to go to a Toshiba based factory. So we migrated that over this past quarter.

So that’s a lot of the variability that you are seeing in mainstream and it’s not – while it’s technically the calculation of an ASP, it’s very much driven off of mix in the discrete..

Okay, thank you..

Thank you. [Operator Instructions] And our next question comes from Sam Goodyear from MidOcean Partners. Your line is now open. Please go ahead..

Hi, thanks for taking the call. I was just hoping you could remind us what the impact of the consolidation of J-Devices would be on your leverage. And also just wondered if you had any comments on your 7.375% notes of 2018, they’ve just stepped down with a call premium.

I was just wondering if there was any comments you could make on that?.

Okay, certainly. So, Amkor’s debt is $1.5 billion, J-Devices debt is only $50 million. They have cash of about $85 million on their balance sheet. From a debt-to-EBITDA standpoint, standalone were at 1.8 times. On combined basis, we are on a 1.6 times.

So with the addition of J-Devices, it substantially improves the capital structure and improves it further.

On the step down of the 2018 notes the 7.375%, we continually looked at our alternatives to further improve our capital structure and lower cost of debt, and so it’s starting to get very interesting when you look at that step down of that call price coming here in May 1..

Thank you very much..

Thank you..

Okay. Thanks very much, Sam. Our Q&A now is over. And I would like to hand the call back to Steve for his closing remarks..

I would like to recap our key messages. First, Q2 demand will be constrained primarily due to inventory and other issues at a single large mobile device customer. We believe that growth will resume in Q3 driven by the launch of new flagship mobile devices. Our outlook for the medium- and long-term remains very positive.

We plan to continue making strategic investments in both capacity and technology. We are exercising financial discipline. Operating expenses are flat year-on-year. Free cash flow was up. We continue to focus on revenue growth as the overriding priority for the company.

We will continue to broaden our customer base and go deeper with the customers we already have. Thank you for joining us today..

Well, ladies and gentlemen, thank you for participating in today's conference. This does conclude today’s program. You may all disconnect. Everyone have a great day..