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AMKOR TECHNOLOGY, INC. 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

AMKOR TECHNOLOGY, INC.

Filing date:

02/21/2025

TLDR:

Amkor Technology experienced a slight revenue decrease in 2024 but improved gross margins. Strategic investments in advanced packaging and geographic diversification offer future growth opportunities, while cyclical industry conditions and customer concentration pose risks.

ELI5:

Amkor, a company that packages and tests computer chips, had a slightly lower income this year. They’re investing in new technologies and locations to grow, but they face challenges because the chip market goes up and down, and they rely on a few big customers.

Accession #:

0001047127-25-000030

Published on

Analyst Summary

  • Revenue decreased by 2.9% from $6.50B in 2023 to $6.32B in 2024.
  • Gross margin slightly improved from 14.5% in 2023 to 14.8% in 2024.
  • Operating income margin slightly decreased from 7.2% in 2023 to 6.9% in 2024.
  • Free cash flow significantly decreased from $533.6M in 2023 to $359.3M in 2024.
  • Top 10 customers account for 72% of net sales, highlighting customer concentration.
  • Basic EPS decreased from $1.46 (2023) to $1.44 (2024)
  • Diluted EPS decreased from $1.46 (2023) to $1.43 (2024)
  • Revenue Growth decreased by -2.85% (2024) vs. -8.32% (2023)
  • Net Income Growth decreased by -1.61% (2024) vs. -53.06% (2023)
  • EPS Growth decreased by -1.37% (2024) vs. -53.35% (2023)

Opportunities and Risks

  • Risk: The semiconductor industry is cyclical, and downturns can significantly impact Amkor’s financial performance.
  • Risk: Dependence on a few key customers poses a risk if those customers reduce orders or shift to competitors.
  • Risk: Operating in multiple foreign jurisdictions exposes Amkor to various political, economic, and regulatory risks.
  • Risk: Substantial indebtedness could limit financial flexibility.
  • Risk: Intense competition from established players and emerging Chinese firms.
  • Opportunity: Strong position in advanced packaging technologies positions Amkor to benefit from growth in HPC, automotive, IoT, and mobile communications.
  • Opportunity: Strategic investments in Vietnam and the planned Arizona facility provide geographic diversification and mitigate supply chain risks.
  • Opportunity: The potential receipt of government incentives under the CHIPS Act could provide financial support for the Arizona facility.

Potential Implications

Company Performance

  • Strategic focus on advanced packaging and geographic diversification offers significant growth potential.
  • Decrease in free cash flow and operating cash flow is a concern.
  • High debt level warrants monitoring.

Stock Price

  • P/E ratio of 15.44 is moderate.
  • P/B ratio of 1.32 suggests the market values Amkor slightly above its book value.
  • P/S ratio of 0.87 is relatively low, suggesting that the company’s sales are not highly valued by the market.
  • EV/EBITDA of 5.34 is relatively low, suggesting that the company may be undervalued compared to its earnings.

Amkor Technology, Inc. (AMKR) 2024 10-K Filing Analysis

Executive Summary

This report analyzes Amkor Technology, Inc.’s 2024 10-K filing. Amkor experienced a slight revenue decrease in 2024, primarily due to weakness in the automotive and communications sectors, offset by growth in computing and consumer. Gross margins improved slightly due to changes in depreciation estimates and favorable currency movements. Key risks include cyclical industry conditions, customer concentration, and international operational complexities. Amkor’s strategic investments in advanced packaging and geographic diversification, particularly the Vietnam and planned Arizona facilities, present opportunities for future growth. Overall, a HOLD rating is suggested, pending further clarity on the automotive and communications market recovery and the successful ramp-up of new facilities.

Company Overview

Amkor Technology, Inc. is a leading outsourced semiconductor assembly and test (OSAT) provider. The company serves the communications, computing, automotive, industrial, and consumer markets. Amkor’s strategy focuses on advanced packaging technologies, geographic diversification, and strong customer relationships.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management attributes the revenue decrease to lower sales in the automotive and industrial and communications end markets, partially offset by growth in the computing and consumer end markets. The tone is cautiously optimistic, highlighting strategic investments and growth opportunities while acknowledging industry cyclicality and global economic uncertainties. The MD&A emphasizes the importance of advanced packaging in driving future growth.

Financial Statement Analysis

Key Ratios and Trends:

  • Revenue: $6.32B (2024) vs. $6.50B (2023) – A decrease of 2.9%.
  • Gross Margin: 14.8% (2024) vs. 14.5% (2023) – Slight improvement.
  • Operating Income Margin: 6.9% (2024) vs. 7.2% (2023) – Slight decrease.
  • R&D Expense: $163.0M (2024) vs. $177.5M (2023) – Decrease in R&D spending.
  • Capital Expenditures: $743.8M (2024) vs. $749.5M (2023) – Relatively stable.

Balance Sheet Highlights:

  • Cash and Short-Term Investments: $1.65B (2024) – Strong liquidity position.
  • Total Debt: $1.16B (2024) – Significant debt level.

Cash Flow Analysis:

  • Operating Cash Flow: $1.09B (2024) vs. $1.27B (2023) – Decrease in operating cash flow.
  • Free Cash Flow: $359.3M (2024) vs. $533.6M (2023) – Significant decrease in free cash flow.

Uncommon Metrics & Red Flags:

  • Customer Concentration: Top 10 customers account for 72% of net sales. Apple and Qualcomm account for 30.8% and 10.2% of net sales, respectively. This highlights a significant dependency on a few key customers.
  • Geographic Concentration: A large portion of property, plant, and equipment is located outside the United States, exposing the company to international risks.
  • Conditional Reduced Tax Rates: A significant portion of income is earned in jurisdictions with conditional reduced tax rates, which may expire in the future, increasing the effective tax rate.

Risk and Opportunity Assessment

Risks:

  • Cyclicality: The semiconductor industry is cyclical, and downturns can significantly impact Amkor’s financial performance.
  • Customer Concentration: Dependence on a few key customers poses a risk if those customers reduce orders or shift to competitors.
  • International Operations: Operating in multiple foreign jurisdictions exposes Amkor to various political, economic, and regulatory risks.
  • Debt Burden: Substantial indebtedness could limit financial flexibility.
  • Competition: Intense competition from established players and emerging Chinese firms.

Opportunities:

  • Advanced Packaging: Strong position in advanced packaging technologies positions Amkor to benefit from growth in HPC, automotive, IoT, and mobile communications.
  • Geographic Diversification: Strategic investments in Vietnam and the planned Arizona facility provide geographic diversification and mitigate supply chain risks.
  • CHIPS Act Funding: The potential receipt of government incentives under the CHIPS Act could provide financial support for the Arizona facility.

Conclusion and Actionable Insights

Amkor Technology faces challenges related to industry cyclicality and customer concentration. However, its strategic focus on advanced packaging and geographic diversification offers significant growth potential. The decrease in free cash flow and operating cash flow is a concern. The company’s high debt level also warrants monitoring. A HOLD rating is recommended at this time. Investors should closely monitor the recovery of the automotive and communications markets, the successful ramp-up of the Vietnam and Arizona facilities, and the impact of changing tax laws on the company’s effective tax rate.

Amkor Technology, Inc. Financial Analysis – 2024

1. Financial Ratio and Metric Analysis:

Profitability:

  • Gross Profit Margin:

    • Calculation: Gross Profit / Net Sales = $933,212 / $6,317,692 = 14.77%
    • Trend: 14.77% (2024) vs. 14.50% (2023). Percentage Change: 1.86%
    • Industry: The semiconductor industry generally has higher gross margins, often in the 30-50% range. Amkor’s lower margin reflects its position as an outsourced semiconductor assembly and test (OSAT) provider. Competitors like ASE Technology often have similar margins.
  • Operating Profit Margin:

    • Calculation: Operating Income / Net Sales = $438,455 / $6,317,692 = 6.94%
    • Trend: 6.94% (2024) vs. 7.23% (2023). Percentage Change: -4.01%
    • Industry: Typical operating margins for semiconductor companies can vary widely, but Amkor’s is relatively low, reflecting the cost-intensive nature of its operations.
  • Net Profit Margin:

    • Calculation: Net Income Attributable to Amkor / Net Sales = $354,012 / $6,317,692 = 5.60%
    • Trend: 5.60% (2024) vs. 5.53% (2023). Percentage Change: 1.27%
    • Industry: This is a relatively low net profit margin compared to other semiconductor companies, reflecting the competitive OSAT market.
  • Return on Assets (ROA):

    • Calculation: Net Income Attributable to Amkor / Total Assets = $354,012 / $6,944,328 = 5.10%
    • Trend: 5.10% (2024) vs. 5.31% (2023). Percentage Change: -3.95%
    • Industry: An ROA of 5.10% is moderate. Semiconductor companies can have ROAs ranging from 5% to 20% depending on their business model and asset intensity.
  • Return on Equity (ROE):

    • Calculation: Net Income Attributable to Amkor / Total Amkor Stockholders’ Equity = $354,012 / $4,149,545 = 8.53%
    • Trend: 8.53% (2024) vs. 9.08% (2023). Percentage Change: -6.06%
    • Industry: An ROE of 8.53% is reasonable. Semiconductor companies can have ROEs ranging from 10% to 25%.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Basic EPS Calculation: $354,012 / 246,344 = $1.44
    • Diluted EPS Calculation: $354,012 / 247,818 = $1.43
    • Trend: Basic EPS: $1.44 (2024) vs. $1.46 (2023). Percentage Change: -1.37%. Diluted EPS: $1.43 (2024) vs. $1.46 (2023). Percentage Change: -2.05%
    • Industry: EPS is highly company-specific.

Liquidity:

  • Current Ratio:

    • Calculation: Total Current Assets / Total Current Liabilities = $3,073,472 / $1,455,275 = 2.11
    • Trend: 2.11 (2024) vs. 2.31 (2023). Percentage Change: -8.66%
    • Industry: A current ratio above 1 indicates good liquidity. A ratio of 2.11 is generally considered healthy.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: (Total Current Assets – Inventories) / Total Current Liabilities = ($3,073,472 – $310,910) / $1,455,275 = 1.89
    • Trend: 1.89 (2024) vs. 2.00 (2023). Percentage Change: -5.50%
    • Industry: A quick ratio above 1 is generally desirable.
  • Cash Ratio:

    • Calculation: (Cash and Cash Equivalents + Short-Term Investments) / Total Current Liabilities = ($1,133,553 + $512,984) / $1,455,275 = 1.13
    • Trend: 1.13 (2024) vs. 1.10 (2023). Percentage Change: 2.73%
    • Industry: A cash ratio above 1 indicates a strong ability to cover short-term liabilities with cash and near-cash assets.

Solvency/Leverage:

  • Debt-to-Equity Ratio:

    • Calculation: Total Liabilities / Total Amkor Stockholders’ Equity = $2,761,163 / $4,149,545 = 0.67
    • Trend: 0.67 (2024) vs. 0.70 (2023). Percentage Change: -4.29%
    • Industry: A debt-to-equity ratio of 0.67 is moderate and suggests a reasonable balance between debt and equity financing.
  • Debt-to-Assets Ratio:

    • Calculation: Total Liabilities / Total Assets = $2,761,163 / $6,944,328 = 0.40
    • Trend: 0.40 (2024) vs. 0.41 (2023). Percentage Change: -2.44%
    • Industry: A debt-to-assets ratio of 0.40 indicates that 40% of Amkor’s assets are financed by debt, which is a moderate level.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: Operating Income / Interest Expense = $438,455 / $64,945 = 6.75
    • Trend: 6.75 (2024) vs. 7.97 (2023). Percentage Change: -15.31%
    • Industry: An interest coverage ratio of 6.75 is generally considered healthy, indicating that Amkor can comfortably cover its interest expenses.

Activity/Efficiency:

  • Inventory Turnover:

    • Calculation: Cost of Sales / Average Inventory = $5,384,480 / (($393,128 + $310,910)/2) = 15.29
    • Trend: 15.29 (2024) vs. 14.91 (2023). Percentage Change: 2.55%
    • Industry: This is a relatively high turnover, indicating efficient inventory management.
  • Days Sales Outstanding (DSO):

    • Calculation: (Accounts Receivable / Net Sales) * 365 = ($1,055,013 / $6,317,692) * 365 = 61.02 days
    • Trend: 61.02 days (2024) vs. 63.99 days (2023). Percentage Change: -4.64%
    • Industry: A DSO of 61.02 days is within a reasonable range for the industry.
  • Days Payable Outstanding (DPO):

    • Calculation: (Trade Accounts Payable / Cost of Sales) * 365 = ($712,887 / $5,384,480) * 365 = 48.31 days
    • Trend: 48.31 days (2024) vs. 49.68 days (2023). Percentage Change: -2.76%
    • Industry: A DPO of 48.31 days is within a reasonable range for the industry.
  • Asset Turnover:

    • Calculation: Net Sales / Total Assets = $6,317,692 / $6,944,328 = 0.91
    • Trend: 0.91 (2024) vs. 0.96 (2023). Percentage Change: -5.21%
    • Industry: An asset turnover of 0.91 indicates that Amkor generates $0.91 of sales for every dollar of assets. This is typical for a capital-intensive business.

Valuation:

  • Price-to-Earnings Ratio (P/E):

    • Calculation: Stock Price / EPS = $22.24 / $1.44 = 15.44
    • Trend: N/A
    • Industry: A P/E ratio of 15.44 is moderate. The semiconductor industry’s P/E ratios can vary widely based on growth expectations.
  • Price-to-Book Ratio (P/B):

    • Calculation: Market Cap / Book Value of Equity = (22.24 * 246,684) / $4,149,545 = 1.32
    • Trend: N/A
    • Industry: A P/B ratio of 1.32 suggests the market values Amkor slightly above its book value.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Market Cap / Net Sales = (22.24 * 246,684) / $6,317,692 = 0.87
    • Trend: N/A
    • Industry: A P/S ratio of 0.87 is relatively low, suggesting that the company’s sales are not highly valued by the market.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: EV = Market Cap + Total Debt – Cash and Cash Equivalents = (22.24 * 246,684) + $1,164,462 – $1,133,553 = $5,522,149
      EBITDA = Operating Income + Depreciation and Amortization = $438,455 + $594,663 = $1,033,118
      EV/EBITDA = $5,522,149 / $1,033,118 = 5.34
    • Trend: N/A
    • Industry: An EV/EBITDA of 5.34 is relatively low, suggesting that the company may be undervalued compared to its earnings.

Growth Rates:

  • Revenue Growth:

    • Calculation: ($6,317,692 – $6,503,065) / $6,503,065 = -2.85%
    • Trend: -2.85% (2024) vs. -8.32% (2023). Percentage Change: -65.74%
  • Net Income Growth:

    • Calculation: ($354,012 – $359,813) / $359,813 = -1.61%
    • Trend: -1.61% (2024) vs. -53.06% (2023). Percentage Change: -96.97%
  • EPS Growth:

    • Calculation: ($1.44 – $1.46) / $1.46 = -1.37%
    • Trend: -1.37% (2024) vs. -53.35% (2023). Percentage Change: -97.43%

Other Relevant Metrics:

  • Share Repurchases: Amkor repurchased a small number of shares during October-December 2024 (5,883 shares at an average price of $25.58). This suggests a limited capital return program.
  • End Market Distribution: There is a shift in end-market distribution, with Communications decreasing from 50% to 48% and Computing increasing from 16% to 19% between 2023 and 2024. Automotive, industrial and other decreased from 21% to 18% and Consumer increased from 13% to 15%.

2. Commentary:

Amkor’s financial performance in 2024 shows a slight decline in revenue and net income compared to 2023, but profitability margins remained relatively stable. The company maintains a strong liquidity position, as indicated by its current and cash ratios. While revenue and net income growth were negative, they improved compared to the prior year. The company’s valuation metrics, such as P/E and EV/EBITDA, suggest it may be reasonably valued or even undervalued relative to its earnings. Overall, Amkor appears to be financially stable, but faces challenges in achieving significant growth in a competitive market.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️