Amkor Technology, Inc.
Amkor Technology, Inc.
1345 Enterprise Drive
West Chester, Pennsylvania 19380
Telephone: (610) 431-9600
Fax: (610) 431-5881
Web site: http://www.amkor.com
Sales: $1.6 billion (2003)
Stock Exchanges: NASDAQ
Ticker Symbol: AMKR
NAIC: 334413 Semiconductor and Related Devices
Amkor Technology, Inc. is a publicly traded company providing contract semiconductor assembly and test services. Assembly and testing are two of the three steps required to produce a finished integrated circuit ready for use in a host of electronic applications. After transistors and electronic circuitry are deposited onto a silicon wafer, the wafer is assembled, or "packaged," by being cut into separate integrated circuits, which are connected electrically to a system board through a protective housing. The packaged integrated circuit is then subjected to testing to verify function, current, timing, and voltage. In addition, Amkor offers value-added services such as electrical package characterization and thermal package characterization, which help designers to learn how a device will perform in a finished package. The company also can help in the design of a package and provide other services, including die processing, package signal integrity analysis, failure analysis, and qualification testing. Amkor serves major global customers such as Agilent, Intel, Philips, Sony, and Toshiba. Amkor maintains its corporate headquarters in West Chester, Pennsylvania, where its founder and chairman, James J. Kim, lives, but most of the company's U.S. operations are located in Arizona, and manufacturing is conducted overseas in seven Asia-Pacific countries.
Founding the Company in the 1960s
James J. Kim was born Joo Jin Kim in 1936 in Seoul, Korea, the son of a Korean entrepreneur, Hwang Soo Kim. He started law school in Seoul in 1954 but soon realized he was not suited to the profession. A family friend suggested that he attend the Wharton School of business at the University of Pennsylvania, and in 1955, at the age of 19, Kim traveled to the United States. He spent a year in Colorado with a friend learning English before entering Wharton to study economics. He earned a B.S. in economics in 1959, followed by a master's degree in economics in 1961. In that same year, he married a Korean immigrant, Agnes Kim, who lived in the area, and they decided to stay in the United States. Kim then became an assistant professor at another Philadelphia school, Villanova University. The couple became U.S. citizens in 1971. In the meantime, Kim's father had started a company that provided workers to the mechanical manufacturing industries, and with the emergence of the Japanese electronics industry, he turned his attention to supplying labor for this sector. In 1968 Kim urged his father to become a manufacturer himself. The elder Kim agreed, starting a company called Anam Industrial Co. Ltd. and opening a factory in Seoul to assemble electronic packages.
Anam ran into problems in the late 1960s when a partner of Hwang Kim quit. In 1968 his son began to help by acting as Anam's marketing agent in the United States. James Kim would then give up his academic career, quitting his Villanova post in 1970. He set up an office in his garage and incorporated Amkor Electronics Inc. (Amkor standing for American-Korean). The company was formed to design semiconductor packages and provide packaging services, with Anam acting as supplier. During the day Kim worked with U.S. engineers in determining the best way to take advantage of Anam's facilities, and at night he sent instructions to Korea by way of a telex machine. Well versed in the intricacies of U.S. tax law, Kim also set up Amkor to receive fees for its services, which were taxed at a lower rate. He also established several other companies to provide fee-based services to Anam. In addition to running this small stable of Amkor-related companies, he became involved in a business launched in 1977 by his wife, who opened a kiosk in a Philadelphia-area shopping mall that sold calculators and digital watches. A retail chain called The Electronics Boutique grew out of this initial venture. It began to show strong growth after adding video games and then moved into the home computer market by offering both hardware and software. The chain was located in 25 malls by the early 1980s, generating revenues of $13 million.
Once both of his companies became too large to manage by himself, Kim turned over the presidency to outsiders—Amkor in 1980 and The Electronics Boutique in 1984. By the mid-1980s, Amkor had sales offices located around the world, selling to 100 European and Japanese semiconductor companies and producing sales in excess of $100 million. The business for both Amkor and Anam continued to grow at a fast clip well into the 1990s, due in large measure to the economic development policies pursued by the South Korean government. Another important factor was the hiring of John Boruch, the company's longtime president. He learned the semiconductor business at Motorola after earning a degree in economics from Cornell University, and joined Amkor in 1984 to take charge of worldwide sales. Five years later he was named president and began moving Amkor away from the commodity side of the semiconductor industry, instead focusing on the value-added semiconductor packaging business.
Launching an Expansion Program in the Early 1990s
Amkor worked with Anam to launch an expansion program. In 1991 they acquired a packaging plant in the Philippines from Advanced Micro Devices and bought a second plant in the country from American Microelectronics Inc. Amkor then built a third plant in the Philippines from scratch. Later the Amkor/Anam group built a fourth plant in Korea. As a result of increased production capacity, Amkor experienced rapid growth in the early 1990s and emerged as a world leader in the semiconductor packaging industry. Sales topped $300,000 in 1992, then improved to $442 million in 1993 and $573 million in 1994, before jumping to $932.4 million in 1995. Net income also reached $59.1 million in 1995. A year later sales topped the $1 billion mark, totaling $1.2 billion, or about one-third of a $4.4 billion semiconductor packaging market. Because of the rising need for integrated circuits for home computers, cell phones, and other consumer electronics, the demand for semiconductor packaging services was growing steadily, boding well for Amkor and Anam despite the influx of new competition.
Although there was strong demand for their products, the health of Amkor and Anam was jeopardized by an economic meltdown in Korea that led to a currency devaluation. The fate of the companies was in jeopardy because they had taken on a considerable amount of debt, mostly from Korean banks, in expanding production capacity. Amkor owed more than $500 million, and Anam was especially overextended, owing more than $1.2 billion. James Kim, who had become Anam's chairman in 1992, now took steps to relieve the situation by taking Amkor public to raise funds to pay off a major portion of that debt.
Going Public in 1998
In September 1997 Kim formed a holding company, Amkor Technology, Inc., incorporated in Delaware, then filed for an initial public offering (IPO) of stock to be conducted in November 1997. After a delay of several months, the IPO was back on track, and in preparation the various Amkor companies were merged with the new Amkor Technology entity. Then, in May 1998, the IPO was conducted, with Salomon Smith Barney acting as lead manager. Amkor netted about $300 million from the sale of stock and also raised another $180 million in convertible subordinated notes. The company earmarked $313 million to pay down debt, with the balance providing working capital. Later in 1998 bankrupt Anam underwent a restructuring of its debt with Korean financial institutions.
As part of the plan to rescue Anam, Amkor arranged to buy the largest and newest Anam manufacturing plant, located in Kwangju, Korea, for $600 million and the assumption of another $7 million in debt. Amkor also purchased Anam's interest in a Philippine facility, and two months after its IPO Amkor paid $9.5 million to acquire Anam affiliate Anam/Amkor Precision Machine Company Inc. In the second quarter of 1999 Amkor agreed to purchase a stake in Anam worth $150 million. Amkor acquired more Anam assets in early 2000, paying $1.4 billion to add Anam's three remaining packaging and test factories. Thus the once dominant partner in the Anam-Amkor relationship was now just a foundry services provider for Amkor, manufacturing 17,000 silicon wafers each month contracted to Texas Instruments Inc. Some of the money that Amkor poured into Anam, however, was intended to increase the foundry's production capacity to around 30,000 wafers each month, hopefully to allow the former giant to make inroads in the foundry business.
As the demand for outsourcing continues to grow and supply chains continue to shorten, Amkor is committed to increase our role in the customer's value chain.
While Anam was fortunate to be saved, Amkor emerged as the leading semiconductor packaging-and-test services provider in the world. Revenues topped $1.5 billion in 1998, reached $1.9 billion in 1999, and approached $2.4 billion in 2000. Net income during this period grew from $75.6 million in 1998 to $154.2 million in 2000. Amkor took steps in 2000 to increase production capacity of its plants in Korea and the Philippines by more than 800,000 square feet. In 2001 the company also began to grow externally through acquisitions in an effort to expand its geographic presence to better serve its customers as well as to capitalize on the opportunities in new markets. In January 2001 an Amkor subsidiary launched operations in Japan after acquiring a Toshiba Corporation packaging and test facility as part of a joint venture with Toshiba formed in December 2000. Later in 2001 Amkor established a manufacturing presence in Taiwan through a pair of acquisitions at a total cost of $145 million in stock. It acquired a 69 percent interest in Taiwan Semiconductor Technology Corporation and a 98 percent stake in Sampo Semiconductor Corporation. Entering the Taiwan semiconductor market was important because it was home to the largest silicon foundries in the world, and it also allowed Amkor to serve the major chip manufacturers located there as well. Amkor further bolstered its Asian presence in 2001 with the opening of a new packaging and testing plant in Shanghai, China, to provide integrated circuits for the country's burgeoning cell phone and computer industries. In the meantime, Amkor did not lose sight of the European market. In 2001 it formed an alliance with Netherlands-based Philips Semiconductors, which included a technology exchange and joint product development efforts.
But even as Amkor was expanding its production capacity, it had to contend with another rough patch in the volatile semiconductor industry, which had suffered down cycles in 1975, 1985, 1996, and 1998. Late in 2000 demand began to soften and the situation grew worse in 2001, as the industry lost about one-third of its worldwide market. To compensate for falling sales, Amkor cut its payroll by 10 percent. As a result of the recession, revenues dropped to $1.3 billion and the company took a net loss of more than $450 million in 2001. The following year brought only a slight improvement, with sales reaching $1.4 billion. Amkor completed a pair of acquisitions in 2002, part of a trend in which integrated device manufacturers outsourced their packaging and test operations to outside providers. Amkor added Agilent Technologies' assembly business for semiconductor packages used in printers, and also acquired the Japanese semiconductor packaging business of Citizen Watch Co., Ltd. A deal to add the Fujitsu Ltd. operations in Japan fell through, however.
In 2003 Amkor sold back the wafer fabrication services business to Anam for $62 million and obtained a release from Texas Instruments on the foundry's contractual obligations. The money helped to shore up Amkor's finances, as did the sale of a 21 percent stake in Anam to Korea's Dongbu Group for $93 million in cash and notes. Amkor still owned 21 percent of Anam, but Amkor was expected to eventually divest itself of that interest as well. The sale of the wafer foundry also marked the end of the idea that Amkor could grow into a full fabrication and packaging services provider. The company was too much in debt, and demand for semiconductors was too soft to support that concept. Moreover, no synergy had ever been created between chip fabrication and the assembly and testing sides of the business.
Sales showed some improvement in 2003, increasing by 14.1 percent, or $197.6 million, to $1.6 billion. Business continued to rebound in 2004, and the company's long-term prospects were buoyed by an agreement Amkor signed to acquire an IBM assembly plant in Shanghai and a testing facility in Singapore; in return IBM contracted for about $1.5 billion in assembly and testing revenues over the next several years. After a difficult period, Amkor appeared to be ready to resume its extended trend of growth.
Amkor Technology Hong Kong, Ltd.; Amkor Technology Singapore Pte. Ltd.; Amkor Technology Japan, KK; Amkor Technology Philippines (60%); Amkor Technology Taiwan Ltd. (84%); Amkor Technology Greater China, Ltd.
ASE Test Limited; Siliconware Precision Industries Co. Ltd.; STATS ChipPAC Ltd.
- James Kim serves as marketing agent for Anam Industrial Co.
- Kim founds Amkor Electronics Inc.
- A semiconductor assembly plant is acquired.
- Amkor Technology, Inc. is formed as a holding company.
- Amkor is taken public.
- Amkor acquires most of Anam's assets.
Abelson, Reed, "Native Korean Plugged in to S.S. Electronics Market," Philadelphia Business Journal, November 17, 1986, p. 10.
Fernandez, Bob, "Philadelphia-Based Retail Mogul Takes $3 Billion Loss in Stride," Philadelphia Inquirer, April 4, 2001.
Ojo, Bolaji, "Amkor Secures Its Fate by Rescuing Anam," Electronic Buyers' News, December 6, 1999, p. 5.
Steffora, Ann, "Amkor's Dilemma—IPO or Sell," Electronic News, April 20, 1998, p. 48.
Young, Lewis H., "An American-Korean One-Two Punch," Electronic Business Today, October 1997, p. 55.