Steve Kelley - President and CEO Joanne Solomon - CFO Greg Johnson - Senior Director of Finance and IR.

Randy Abrams - Credit Suisse Suji De Silva - Topeka Sidney Ho - Deutsche Bank Atif Malik - Citigroup Ana Goshko - Bank of America Merrill Lynch Umesh Bhandary - Jefferies David Duley - Steelhead Security Sean Dixon - Bradford & Marzec.

Good day ladies and gentlemen and welcome to the Amkor Technology First Quart 2016 Earnings Conference Call. My name is Michelle 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 conference is being recorded. I would now like to turn the call over to Greg Johnson Senior Director of Finance and Investor Relation. Mr. Johnson please go ahead..

Thank you, Michelle, 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. These non-GAAP measures include combining J-Devices financial results for certain periods prior to their consolidations.

We will also make forward-looking statements about our expectations for Amkor's future performance based on the environment as we currently see it. And statements about the impact of the earth quakes in Japan at our ongoing recovery efforts. 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 status of our key growth initiatives. First quarter revenue of nearly $870 million was well about the high end of our guidance.

We benefited from better than expected demand in Japan and strengthen high end android smart phone market. On the combined basis with J-Devices revenues were flat sequentially. Year-on-year combined revenues were down 9% due to a weaker demand environment particularly in the communication space. This lower revenue were the break even financial results.

Looking ahead we see improved demand across most end markets. Unfortunately we do not expect to realize meaningful revenue growth in Q2 due to temporary disruption stepping from the recent earth quakes in Japan. Our Kumamoto factory was damaged in the earthquakes and is currently operating on a limited basis.

Repair work is being expedited and we expect to ramp to full operational capacity over the next 11 weeks. We are working closely with our customer base to minimize disruption during the recovery period. I have been impressed with the speed and professionalism of our team in Japan.

The constructive approach taken by our customers and the support provided by the world wide Amkor Manufacturing team. The entire supply chain is working together to ensure a speedy recovery. We were relieved that only few of our employees suffered minor injuries during the earth quakes.

Others are on Kyushu island were unfortunate and we extend our condolences to those who were seriously impacted by this natural disaster. We expect Q2 revenue of around $875 million which reflects the impact of roughly $35 million lower sales due to the temporary disruption in Japan.

Taking into account insurance payments we expect the disruption in Japan to have only a modest impact on our 2016 results. Now discuss four of our key growth initiatives J-Devices, Automotive, Greater China and Advanced Packaging Leadership. The J-Devices acquisition was completed in December 2015.

It is expected to add roughly $800 million of annual revenue to Amkor’s top line. The acquisition also cements Amkor’s leadership position in the automotive IC market. The addition of J-Devices creates more balanced business for Amkor.

We are now less dependent on the communications market which accounted 42% of our Q1 '16 revenue, down from 57% in Q1 '15. Also as a result of the acquisition our participation in the relatively stable automotive market has increased. Automotive accounted for 25% of our Q1 '16 revenue, up from 11% in Q1 '15.

On a combined basis first quarter automotive revenue of $220 million was up 6% year-on-year and up 7% sequentially. Now I would like to shift the discussion to Greater China, where Amkor revenue grew 21% sequentially in the first quarter. We expect to see significant year-on-year revenue growth as we gain share on the region.

This growth will come primarily from new customers. We are taking steps to elevate Amkor's profile in the region. Last month, I was a key note speaker at SEMICON China, one of Chinese premier industry events. In addition, we recently held our first press event in Shanghai and received excellent coverage in China's trade press.

Our Shanghai factory is now Amkor's second largest factory by revenue. And offers a wide variety of advanced packaging and test services. Including wafer probe, 8 and 12-inch wafer bumping, wafer packaging and advanced SiP capability.

We are able to offer quick turned engineering assistance to our customers and leverage our location and a free trade zone to simplify logistics. The expansion of our Shanghai factory is on track. The structure will be completed this quarter, and equipment installation will be begin in July.

This expansion will boost our Shanghai cleanroom space by nearly 45% to roughly 625,000 square feet. Now, I would like to briefly review Amkor's technology leadership strategy. This strategy is critical to our long-term success. Since advanced packages will drive a substantial part of our future growth. For Amkor it starts with the smartphone.

Since smartphone applications drive capacity investments and technology roadmaps for much of the IC industry. Smartphone IC and module makers want thin, low cost, high performance and high reliability products.

Package technologies develop a high end smartphones often migrate quickly to lower tiers of the phone market as well as to the tablet, networking and wearable markets. In our view there are five technologies which will dominate the advanced packaging landscape over the next 5 years.

These big 5 technologies are wafer level CSP packages, low cost Flip Chip, laminate-based advanced SiP, wafer-based advanced SiP and MEMS. Amkor has a leadership position in all of these technologies. Today we are nearly 100 wafer level CSP customers. Wafer level CSP's eliminate the need for a substrate, for most IC's less than a 100 square miles.

Wafer level CSP capacity is expensive, since we build the package in very clean environment. Well, the die are still in wafer form. Amkor has large scale wafer level CSP lines in Korea, China and Taiwan. Low cost Flip Chip is a thin substrate-based technology is a good choice for larger IC's, where wafer level CSP is not a reliable option.

It is also an enabling technology for advanced SiP products. Low cost Flip Chip leverages Amkor's exisiting capacity and expertise, built up over many years in the standard Flip Chip business. For multiple die products Amkor offers a variety of technologies. Three of the most popular laminate-based advanced SiP's, wafer-based advanced SiP's and MEMS.

Laminate-based advanced SiP's are the mainstream choice today for cost sensitive SiP application. You'll find these modules in smartphones, wearable and other applications where space savings and performance are important. Our K4 manufacturing plant in Gwangju, Korea, is Amkor's center of excellence for this technology.

Wafer-based advanced SiPs, utilizing a die last technology we call SWIFT, offer the very best performance and thinnest form factor. We plan to ramp this technology to production in 2017 at our state of our K5 facility in Incheon, Korea. Our MEMS technology is typically used for very small center modules.

Our MEM center of excellence is in the Philippines and we are bringing up a second manufacturing line in Shanghai. So the long-term technology trends look very positive for Amkor. More integration is occurring the package and module level as the economics of advanced silicon notes become more and more challenging.

Also working in our favor or the relative high cost of adding new advanced packaging capacity and the need for skilled engineers to build and maintain these high-tech production lines. Only large OSAT such as Amkor have the financial and engineering resources required to compete effectively in the advanced packaging space.

I would like to close with a few comments about the consolidation occurring and our customer base and in the OSAT's base. We do consolidation of our customer base as a good thing for Amkor. Since in general larger customers wants to deal with large OSAT's.

Amkor's technology, large geographic footprint, large installed base and strong financial putting are meaningful attributes for these customers. The OSAT industry landscape is also changing which that's two pack being integrated into JSAT and ASE aiming to acquire skill.

In the midst of this activity Amkor is positioned as a stable and reliable choice. We are focused on the basics, execution, quality and technology, satisfying customers and growing market are what drive us day to day. In closing, I would like to note that Amkor recently received Intel's preferred quality supplier work for the third consecutive year.

We were proud to be included in the select group of companies recognized by Intel. Joanne will now provide more detailed financial information..

Thank you, Steve. And good afternoon everyone. Our first quarter revenues were up 30% sequentially with the consolidation of $217 million of sales from J-Devices. J-Devices also contributed $0.04 to our earnings per share in the quarter.

Although advanced product revenues increased 7% sequentially, we had 250 million pure units driven by a shift in wafer level, chip scale package mix to wafers with larger die sizes. Revenue for mainstream products was up 50% and units were up $560 million with the addition of J-Devices to the mix.

Our gross margin of 14% was above the high end of the guidance due to our better than expected revenue for the quarter. A substantial portion of the cost that our factored is fixed. So there tends to be a direct relationship between the revenue levels and gross margin.

Generally we would expect margins to reach 20% area at around $1 billion of quarterly revenues and around 25% of $1.1 billion. Operating expenses in the first quarter were $100 million. The year-on-year increase is due mostly to the addition of J-Devices operating expenses to our total.

For the second quarter, we expect operating expenses to remain around this level. Interest expense in the first quarter was $17 million with the completion of K5 in the second quarter we will no longer capitalize interest on the project. So for the rest of 2016 we expect interest expense to be around $22 million per quarter.

For Q2, we expect an income tax benefit of approximately $4 million. We expect our effective tax rate for the full year will be around 35%. On a combined basis Amkor and J-Devices generated $730 million of adjusted EBITDA over the past 12 months. On March 31, we had total debt of $1.5 billion and debt to combine adjusted EBITDA with 2.1 times.

Looking at the second quarter financial impact that the earthquake in Japan. We expect the decline in revenue of about $35 million. We also expect to incur incremental cost of around $20 million for damaged inventory and repairs to buildings and equipment. In total, the earthquakes impact reduced our second quarter EPS guidance by $0.11.

We expect our insurance recovery to be about $25 million. We anticipate receiving the insurance proceeds in the second half of 2016 and we will record the offsetting gain on insurance recoveries at that time. Taking into account these insurance payments we expect the net impact on our full year 2016 results to be modest.

Our liquidity is solid, but over $410 million in cash and $300 million in available undrawn loans. Our full year 2016 capital expenditures forecast of around $650 million remains unchanged. And any capital expenditures associated with the earthquakes in Japan are reflected in this estimate. With that, we'll now open the call up for your questions.

Operator?.

[Operator Instructions]. Our first question come from the line of Randy Abrams with Credit Suisse. Please go ahead..

Thank you. My first question, just wanted to ask on the business and first on the upside in first quarter relative to the initial guidance.

How much that came from the high end smart phone builds versus other areas and then as you look forward the Kumamoto impact, if you expect to recover some of the loss revenue or due to the disruption may go to say other suppliers.

But how much you maybe want to recover later in the year as you restore production?.

Randy, as far as you first question goes the high end smart phone boost we think was roughly $15 million in Q1. So that was the impact. In addition to that we saw strength in Japan. We didn’t see the typical seasonal patterns in Japan as well as strengthening of the Yen. So those three factors together accounted for substantial part of the Q1 upside.

In addition we have number of customers that beat their forecast by varying degrees. You second question on the Kumamoto recovery loss revenue. I will give you little color on that, we've had discussions with the customers and the real emphasis from these customers is getting that factory back up and running as soon as possible.

So we do see the potential for recovery of some of revenue in the second half. The customers do not want to spend a lot of time and effort transferring the product to other factories. They'll do some waiver [ph] type production. But they want to bring it back in to the Amkor factory in Kumamoto as soon as they possibly can. So that’s where the focus is.

So, I think positive for the second half potentially we have not built that into our forecast. But we think that, we will see some rebuilding of the pipeline in second half and some building our stock as well. So I think Q2 is full of challenges getting that plant up and running again. I think second half we could see upsize..

Okay, great. On the China, it looks like it’s re-accelerating again on revenue.

Could you talk about where you are seeing the strength that this is coming from the smartphone and mobile where some of the other consumer mature products and maybe a perspective where we are at now contribution from Greater China and some rough expectation for how that may grow and if you are seeing any benefit now from you mentioned a bit on the consolidation activities.

But if that's also starting to benefit your market share potential?.

So it's a lot of questions, let me try to answer them all. If I miss anything Just remind me. You first questioned, where is it coming from, it’s almost all coming from Advance Packaging it’s been driven smartphone and tablet applications. Why is it coming now, first of all we have been working this for the last 2.5 years.

So I would have to say that the consolidation activity within the OSAT space is certainly giving us a push, it’s helping us in addition to the people we put in place the calling these accounts and provide technical assistance.

And the requirements from these customers they are really driving a lot of these activity in Shanghai to extend our factory because we see a quite an upside from our customers in China and Taiwan over the coming years. We start from relatively low base in Greater China just talking Phablet revenues.

What I can tell you is I believe over the next 12 to 24 months, they will become a much more different part of our overall revenue and more importantly the demand from these customers tends to come off cycle from the iOS and Android demand peak. So it keeps our factories full. There is a double impact.

One is the revenue and profit impact, but also there is the factory impact as well..

Okay.

And then the final question if I could ask on the SiP, maybe system-in-package if you can give an update on the scale of that business and where you are seeing interest in the SWIFT if we may get some meaningful volume projects say from mobile or other application when you launch that next year if it's just too early at the stage?.

Yeah, the advanced SiP business as I mentioned last quarter is growing quite rapidly. We saw a bit of a decline in Q1, basically because of the decline in the communications team in Q1, driven by some crashes in the iOS ecosystem.

I expect our advanced SiP business to really take off in the second half as we see a number of product launches from China, from the iOS ecosystem and some additional launches from Samsung. So I anticipate that we will see a surge and we will be pretty close to being fallen Advanced SiP in the second half of this year.

As far as SWIFT goes, our objective right now is trying to take as much cost as possible out of the Swift process. So that is accessible to the masses. Right now, it’s a fairly high-end type of package. But we are working very diligently to get the cost down.

So it’s attractive to all the market participants in the high-end smartphone space and the mid tier smartphone space. We anticipate that we will start ramping that next year in K5 and the good news is on that particular line we also be able to build smaller wafer fan-out devices in the same line that we build our SWIFT devices..

Okay, great. Thanks a lot Steve..

Thank you. And our next question comes from the line of Suji De Silva with Topeka. Your line is open. Please go ahead..

Hi, Steve. Hi, Joanne.

On the Japan earthquake damage, can you talk about what end markets Kumamoto lab serviced and what percent of capacity Kumamoto is roughly?.

I will give you general answer because I don’t have all the specifics. But I could tell you that it served of variety of markets including automotive. Again this is one factory out of 10 factories we have in Japan right now. But it’s a significant factory.

And right now we are receiving systems not just our customers but also customers customer and they are helping us prioritize and get priority from our repair firms. So the construction firms we have engaged are spending quite bit of time and effort trying to better the schedule we have been given from Kumamoto factory.

I am giving you little more color on Kumamoto, there are three main buildings there, there is a central utility building and two factory buildings. The central utilities building is basically undamaged.

What that means is we have electricity, we have water, we have chemicals, we have gases uninterrupted and that’s usually the biggest issue in these earthquake situation. The first factory is partially running today and we are fully up and operational next week.

The second factory building will take little bit longer, but we will take that in stages and take 11 weeks as a conservative estimate. We are aiming to bring it up faster than that..

Okay great, that’s helpful color. And then on the - you answered some of the question about the China being dominantly a smartphone growth driver.

How well diversified you feel you are with the smartphone customers, did you feel like you're concentrated really on a few customers across the premium vendors and the China [indiscernible]?.

Yeah, historically it's been an issue for us. We were too focused on the high end. I think over the last couple of years we have diversified, you could find this in a lot more than mid tier phones and even some of the entry level phones. So we are lot more focused on the second wave customers that we were three years ago.

I think you will see the benefit of that the second half of this year when several of our designs in China and Taiwan come to fruition..

Okay. And the last question, you did great job outlining the five tech areas that are focused for view.

Where do you feel like your competition is in those five areas, are you ahead of them, what’s the share relatively are they playing catch up or they are levelled setting with you?.

Yeah. Let me just give you general answer. I think in general Amkor is the technology leader in the packaging space which means we are little bit faster than our competitors.

What our competitors tend to catch up quickly, we have strong competition particularly in Taiwan and so while we are proud to be the first guy out there we also know it's very important to reduce cost quickly.

And so one of the things we have down is to really split our R&D team into two parts the first part brings out the new technologies, the second part of the team gets the concept of those technologies because we need to do that very quickly, so that we can maintain good share once the other competitors get into the market..

Great, thanks, Steve..

Yeah..

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

Hi, guys thanks for taking my question. Maybe first one for just a clarification for earlier question. So for the $35 million revenue that you guys were missing in Q2, you are not expecting the 435 to come back in the second-half of the year. It should model maybe some longer-time..

Yeah, I don’t think we will see the $435 million come back in second-half. I think we will see some percentage of it back to us as they restock and they build some inventory. But at this point we haven’t really come up with a number but we are hoping for something that's probably mid way between 0 and 35..

Okay, that’s helpful. Maybe another question for Joanne, for the guide, just trying to understand the gross margin guidance, I was hoping you can give like a bridge between Q1 and Q2, Q1 is 14% and Q2 10% to 13%, it may simply be the earthquake related cost you mentioned.

For all else equal I would expect gross margin would improve given Amkor's revenue goes up and J-Devices revenue goes down or is there some other factors I should be thinking about..

The first thing you said is the correct answer it's the 20 million of incremental cost all hit and the cost of good sold lines. So that's what compressing the gross margins for Q2..

Okay, thanks for that clarification. And maybe one other question on your comps business. There are clearly some concerns that this smartphone market is saturating especially in the high end and there are also the typical seasonality that we all expect.

From a longer-term perspective if the smartphone market levels off in terms of unit and ASPs our phone starting come down, do you expect that comps business would still be a growth business for you. I guess I am specifically looking for your comments on a content increase and share gain opportunities..

Yeah, I definitely think that in many occasions business will be a growth area for import because we have a lot of room to grow in the areas where we haven’t participated in the past. Specifically in the mid tier and entery level phones and specifically in greater China.

So, those are all green field for us and so even though the high end could be saturated, we believe that there is a lot of share gain to be had in the other tiers of the smartphone market..

Okay, great.

And if I could squeeze in one last question, also related to comps business your largest customer has talked about the expectations for second source supply modem their largest customer, if and when that happens how should we think about the impact on your P&L if there is any?.

I wouldn’t spend a lot of time thinking about. I want to tell you truth because I think import one of the beauties of being broad line supplies, we supply to many different customer and so I think no matter what way it turns out we will have a piece of the business..

Very helpful, thanks so much..

Thank you. And our next question comes from the line of Atif Malik with Citigroup. Your line is now open. Please go ahead..

Hi, thanks for taking my question. This is a follow-up Joanne, including those 35 million loss revenue your gross margins would have where in the June quarter and what is the bridge from there to the 20% number you talked about at 1 billion level when can you just talked about that..

Okay, let me take your first question first and then you can remind me your second question. So if I add the $20 million to our $100 million of gross profit at the mid point, I get a 120 and if we divide by the 875 that puts margins right after 14%, it's a very comparable to the 868.

The $35 million of lost revenue you can assume about that 50% incremental fall through. So there is some variability when it comes to obviously materials and labor. So not all of that impacts the profit line. And then if you could remind me your second part of your question..

I can probably address, I think you’re asking us how we get to 20% gross margins is that correct?.

Right..

Okay. So the way I think about it is if I start with our Q2 revenues, if I exclude earthquake effect, we're forecasting Q2 revenue at 910. We believe that at a $1 billion will be a 20% gross margin. So we're looking at a revenue increase requirement of roughly 10%. And at $1.1 billion we can expect gross margin in the 25% range.

So the question would be is that realistic and the answer is yes. In fact in the second half of 2014 we were operating in that range. We had combined revenues in the second half of '14 of roughly $1.05 billion per quarter. So right between $1 billion and $1.1 billion.

So I think if we see a reasonable market recovery some success, some of these new smartphones will certainly be operating in that area and then as soon as the second half of this year. Although we're not making a forecast yet..

Okay.

And then if you can breakout what percentage of your CapEx this year is on slim and swift type advanced technologies and then also if you can remind us if you still expecting free cash flow to be positive this year?.

On the CapEx side, 650 is the total for the year 170 of that is for K5. A lot of this swift and slim spending right now is more on the R&D side. And the we'll start to build those lines in 2017 closer to the time we expect to ramp. As far as free cash flow goes, as a reminder our business generates strong cash flow and EBITDA.

Last year in a down market we were free cash flow positive despite the spending of $150 million for K5 at that year. And we are managing CapEx very tightly. We expect to be have we not, if we didn't have to spend the K5 money we would certainly expect to be free cash flow positive. With K5, we may not get the free cash flow positive this year..

Okay. Thank you..

Thank you. And our next question comes from the line of Ana Goshko with Bank of America. Your line is open, please go ahead..

Hi, thanks very much. I just got preempted on that free cash flow question.

But just on K5 could you just provide us an update on when that proceed to be complete over the course of the year and what the CapEx should we expect the rest of that's really be front loaded into the first half of the year?.

The building is largely complete. I think we're finishing up this quarter. And so the next step will be to saw an equipment and we don't expect that to happened until late this year, where we'll start to build some capacity for swift and wavier for fan-out.

We look at that spending more as the normal course of business spending, because we will be spending that money whether it was K5 or some other resilient core. But I think the heavy lifting on K5 is pretty much behind us as far as the construction of the building..

From a payment side, the $170 million expect to hit us in the first half of this year. We will likely borrow about $100 million or so to help offset some of those payments..

Okay. And then that should reverse to some degree in the second half just from a timing of cash flow. So for the full year probably still negative but to revert to positive in the second half..

That's absolutely correct..

Okay great. Thank you very much..

Thank you, Ana..

Thank you. And our next question comes from the line of Umesh Bhandary with Jefferies. Your line is open, please go ahead..

Thank you for taking my question. So maybe just to sticking with the K5 question here. Maybe can you remind us what was the purpose for spending this CapEx in K5.

Is that really for to drive revenue growth or I mean what was the sort of the rationale for that?.

A couple of things. First of all, as we look at the requirements for future technology. You're looking a very clean environment. So basically looking at that way perhaps for packaging. And you need a specialized building to really build these complex modules and other products.

So that's a primary purpose as to go to the state-of-the-art assembly and test factory that is good for the next 10 years. Secondly, it's a way for us to consolidate our operations in Korea. So today we have three factories in Korea and when we're done we'll have two, we'll have K5 and then Incheon, and we’ll have K4 in Kwangju.

So I think we'll have a more efficient operation once we're able to consolidate the remaining business into those two facilities. The third aspect of this is R&D and as you know we'd like to conduct our R&D on our production lines.

So I have state-of-the-art facility for production as well as align our R&D can work, that was the third rational for K5..

Great, thank you for that. So as you consolidate the three factories into two, would the third factory that is sort of goes out of commission.

I mean what is the plan they are just biggest from a real estate perspective from the factory perspective is that way to sort of monetize that particular property?.

From a monetization standpoint yes. So this is real estate and downtown full. So we would expect that proceeds on sale of about a 150 to 200 million more so in early stages of marketing. So I don’t have an exact seller math to give to you on what we'd expect.

But the second facility is not quite a center located to what we'd expect from proceeds from now on as well..

Okay and then you still have any thoughts on how you'd like to spend that $150 to $200 million cash that maybe coming in?.

So we can certainly look to reducing debt or depending where we're on the business cycle, we investing into business..

Got you and the next question I had was with J-Devices. It seems like J-Devices last year declined about 12% sort of 15% for Amkor.

What is the business mix at J-Device because I was on the impression that it’'s more auto, so how the product they have been more stable?.

You’re right. The business mix of J-Devices is roughly 15% automotive. The biggest issue J-Devices has is they have a probably more factories than they need. So what we’re focused on right now is to consolidate and fill strategy where overtime we reduced a number of factories J-Devices operates and so for many factories.

So we think we can get J-Devices into the 15% to 20% gross margin range over the next two to three years..

Joanne, if I may just one final question for me, had you sort of started elude to sort of the consolidation within the OSAT space.

Do you simply need you need to get bigger and if that is the case how do you think you know you can sort of get to that level? Obviously consolidate the device right now or do you think you need to bulk up more?.

Right now we see a lot of organic growth possibilities. So we're clearly number two right now in the industry and we think with the market strengthening we can grow quite nicely organically.

However, we're always looking at ways to increase our revenues and in the past we have engaged in plug in transactions where factories may become available and if they fit in Amkor we could purchase the factories and bring some business with the factories..

Let me just ask one quick follow up on that, do you think there needs to be probably more consolidation within the tier II pairs then?.

I really don't know to tell you truth. I think our focus really is on tier I players because both for our investment most of our growth is in the advanced packaging space. And that space is consolidating very rapidly..

Thank you. And our next question comes from the line David Duley with Steelhead Security. Your line is open. Please go ahead..

Thanks for taking my question. Joanne, your prepared remarks you talked about how your advanced packaging revenue was up like your units were done and I didn't catch the explanation.

Could you just give a little bit more color as to what you are referring to?.

So when you look at the data set that we provide in the press release, there is a disconnect. You see revenue dollar growth. But then you see a pull down in the units. So the reason why there is a pull down in units, wafer level CSP we don't count but first we count the number of dies on the wafer.

So depending on the wafer mix we have within wafer level CSP, the die count can very quite significantly. So we process the lot of way for levels CSP this quarter that had large die sizes. So then fewer die count as compared to the sequential quarter which it was smaller die sizes more die count..

Is that a trend that you'll see going forward given whatever I'm assuming this is in the mobility space?.

I would certainly expect the smaller die size wafer level CSP processing to heat up in he coming quarters..

Okay. And then you gave some very helpful math about improvements in gross margin at certain revenue levels. And I was wondering if it was just purely revenue growth that you refer to improve the margins or some of these consolidations or filling in with the better utilization of the J-Device factories.

What are the move the pieces there?.

The sensitivity model that we provided is revenue based. Because we were operating at a higher revenue threshold prior to the cyclical correction. We just wanted to give people the sense of where we would be when the revenue comes back. There is certainly opportunity to cost reduce as Steve mentioned with J-Devices.

There is the opportunity to consolidate infield to help reduce their fixed cost and then just broadly within in Amkor there we always look for opportunity to reduce our fixed cost..

Would you help us understand an overtime now that you've guiding on around on J-Devices.

Is there a significant gross margin or operating margin improvement opportunities and then maybe you could quantify what that might be that are revenue driven if I mean?.

Yeah. So J-Devices is principally in the mainstream space. So they are very standard wire bond packages. So overtime, right now they're in the low teens, overtime we'd like to get them to the 15% to 20% range. We think we can do that through their portfolio mix as well as from cost initiatives..

Okay and final thing from me. You've talked about just in your second quarter guidance you gave us also detail about what might be missing from the factories that are up and running in Japan.

Could you just about without that impact, what are the in-market sectors doing in the second quarter for Amkor?.

Yeah. I'll make a few comments here. First, we think the high end Android market will continue to be strong this quarter, we're seeing that in our forecast. We see broad base strength as well. Three weeks into the quarter we seen incremental improvements in our forecast each week this quarter.

Specific markets we see strength in Greater China in automotive. The other two things I would sight would be customer sentiment and again this is an informal measure. But certainly the sentiment is better today than it was three months ago.

And the last thing is will be more expedite unless request to price down, for us it's always nice and it's a leading indicator. Just put it that way..

Always a good indicator. Good luck going forward and thank you very much that was very helpful..

Thank you..

Thank you, David..

Thank you. [Operator Instructions] Our next question comes from the line of Sean Dixon with Bradford & Marzec. Your line is open, please go ahead..

Hi guys, Bradford & Marzec. Hey Steve, quick question, high end android smartphones I assume is mostly Samsung. I know they've recently their launch to S7 device. Is there sort of....

is there anything different that lead you to believe there is better sale through on that device and therefore better follow through on demand for Amkor or is it kind of similar to what they do every year in the past?.

Yeah you're correct that the Samsung Galaxy phones is what I'm referring to. I don't have insight to their sale through. All I see is the amount of part that we're shipping to our customer. It was stronger we expected in Q1 and continues to be very strong this quarter..

Okay.

So is there any different than yours then quarters past or years past when they've launched the flagship device in terms of when you sell a chip into them or deliver a chip or whatever however you want to phrase it, that you're seeing a reorder or multiples of reorders such that you could sort of draw conclusion that there is better demand pool coming.

Or is it... because I know Samsung is probably pulled back a little bit or gotten a little more rationale but maybe they are seeing some success. I know it's still very early on the cycle..

It's difficult to make comparisons because we have a different share this year than we have than we have in the past and also other issue downstream, it’s really difficult to compare this launch with past launches..

Okay, that’s enough for me, thank you..

Okay. Thank you..

Thanks very much Sean that’s end of the Q&A today. And I would like to turn the call back to Steve for his closing remarks..

Thank you very much. I would like to recap our key messages. First, our first quarter results were better than expected driven by strength in Japan in the high end android market. Secondly, market conditions are improving.

But Amkor revenue growth in the second quarter will be limited by the impact of the Japan earthquakes and finally our growth initiatives particularly our efforts in the automotive in Greater China markets are gaining traction. Thank you for joining us today. Operator Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Everyone have a great day..