Good afternoon, everyone. My name is Steve Barger. I'm with KeyBanc Capital Markets, and I cover semi-cap equipment. I'm here today with Giel Rutten, CEO of Amkor. Giel, can you just start by giving us a quick overview of Amkor and where you sit in the semiconductor supply chain?
Okay. Good, Steve. Well, thanks for that short introduction. Well, Amkor is one of the pioneers of the outsource semiconductors, supply chain. We are in this business already for 55 years. In 2023, we celebrated over 55th year's anniversary and also over 25th years as a Nasdaq-listed, public company. You know, during these 55 years, we built a strong portfolio on technology and manufacturing capabilities, but also deep relations with the leaders in the industry. So we are an established player. You know, in 2023, we did $6.5 billion in revenue. That was down 8%, year-on-year, significantly better than the overall industry performance. So in the last two years, we were consistently gaining market share in critical markets like communication, automotive, where we are a leader, but also high-performance computing, which is very much in the spotlight. And we can talk more about that today.
That's for an introduction, Steve. That should do it. We can go more into the details later.
Sure. Sure. That's great. For those of us who don't know, can you talk about who the primary competitors are and how Amkor differentiates its products and services?
Yeah. Let me let me try to, to give a bit of an insight there. I mean, the competitive landscape for outsourced manufacturing or specifically outsourced assembly and test manufacturing is a very broad landscape. I mean, there are many players, and there are smaller companies, but they're mainly focused on the wire bonds part, more the mainstream low-tech part of that supply chain. If we take the more advanced technology that's being delivered into the more demanding applications, then there are basically only three to four companies, which is ASE. It's a Taiwanese company. It's a merger between the two leading companies in Taiwan. It's JCET, which is a Chinese company, and it's Amkor. Now, how does Amkor differentiate in that environment? We differentiate by being a technology leader. I already mentioned we are in this business for the last 55 years.
We build up very strong relations with lead customers there, and customers knock on our door because we are a technology leader. We can work closely with their engineering teams to bring technology to the markets. And we have a broad technology portfolio and expertise. The second important element where we differentiate from our competitors is our global footprint. You know, in the geopolitical landscape currently and the tensions between the U.S. and China, Amkor has a manufacturing footprint present in jurisdictions which are considered low risk. We have a strong presence in Korea. We have a presence in Japan. We built a large manufacturing location that was opened in October last year in Vietnam to offer our customers an alternative to a China-only supply chain. And I think that was basically requested by our main customers. Now, we acquired a company in Europe.
It was called Nanium in 2017. We're expanding there. We recently announced also with GlobalFoundries, a collaboration there, for offering a seamless manufacturing supply chain for the automotive industry. We also announced recently to establish an advanced packaging and test facilities in Arizona here in the U.S. as part of the on-shoring of the manufacturing for semiconductors back into the U.S. We have a diversified footprint. We have technology leadership. Then last but not least, I think we are well anchored in the single growth drivers of the industry where we work with lead customers there in the individual markets, beginning in the communication markets where we work with the leaders, companies that you all know, companies like Qualcomm, companies like the Cupertino company, which is our number one customer.
Then in the automotive industry, we work with the leaders also on power management, for example, do the same in high-performance computing and in consumer markets, the same. So deep relations, trusted relationships with lead customers in these industries. And that anchors us in our business.
I think you made it through that whole explanation without saying AI. So it wouldn't be right if I didn't ask the AI question. Just at a high level, can you talk about how that's going to drive your business in coming years?
Yeah. AI is definitely an important element to our business. It's still an emerging market. AI, if we see it now, you know, these requirements drive a transition to more advanced packaging where the latest devices, generally the GPUs, require advanced silicon in combination with advanced packaging to enable, let's say, the co-packaging of high-bandwidth memory and the, let's say, the driving ASIC in the GPU. That's a big opportunity for Amkor. Amkor currently is the only OSAT that delivers that packaged technology to the market. We're already working on the third generation there. We started low-volume production already back in 2017. So we have the manufacturing and technology experience in that market. And we continue to invest there. We work with the leaders in the AI business currently. We doubled our capacity towards the end of 2023.
We're tripling our capacity by the end of the second quarter this year. Although from a small scale, it will significantly contribute to our business.
I think that capacity is for 2.5D, right? Is that the primary driver of your business going forward, or will you get involved with other packaging schemes?
Yeah. Good, good point. I mean, 2.5D is a packaged technology. And I already mentioned that before. It's a fairly mature, well-proven technology. What we see on the roadmap, 2.5D evolving into what is called a high-density fan-out package, which is a lower-cost, higher-performance packaging technology that will be brought to market by 2025. So we are engaged with customers for that also. And the customer base is increasing, there, Steve. So, you know, beyond AI, we also see that in the high-performance computing space, there are multiple trends that will help us to grow. One trend is the transition of x86 architectures in ARM-based computing architectures. That's ongoing. And that helps also for saving power in the data centers. You know, another element is accelerated computing, also transitioning into ARM-based computing. So, you know, overall, I think there are multiple opportunities.
And then on top of that, we see in that space that there is a de-verticalization of the supply chain where previously, if you go back five years ago, it was a vertically integrated player there that did in-house manufacturing of the wafers as well as the backend. But currently, all the newcomers use an outsourced supply chain. And that's a huge opportunity for companies like Amkor.
How do you continue to position for that? Do you have the footprint you need, or do you expect this as a long-term investment process?
Well, we expect that, that this growth scenario for high-performance computing, with, with all these dynamics, is a multi-year, growth scenario. We have the basic capabilities and capacity in place currently in our most advanced factory in, in Korea. But also our new factory and facility in the U.S. will cater for these, technologies. We expect that with, you know, more on-shoring of manufacturing back into the U.S. and probably the ambition of the government of getting more control of advanced data centers, that that will help us to build that base also. Amkor is the advanced products, leader in the industry. You know, oh about 80% of our product portfolio is in advanced products. So in that sense, I think that new emerging area like driver assistance, infotainment systems, I think that, that helps us to, to grow.
In 2023, Amkor was able to grow its advanced products in automotive with close to 6% while it was a fairly flat market during that year. So overall, we're pretty happy with that position.
There's been a lot of talk about the increased chip content in EV. Can you talk about content in terms of ICE versus hybrid versus EV and, and just where you see the penetration for your products and, and where the opportunities are?
Yeah. That's a good question. I mean, if we take the different cars like electric vehicles or internal combustion engine vehicles, a lot of the functionality across these cars is the same. I mean, if you take the driver assistant features or the infotainment features, digital dashboards, they go across EVs and internal combustion engines. What's unique for electric vehicles is everything that has to do with engine control, the electric engine control, power management. And that requires quite a bit of new technology. You probably all heard about silicon carbide where the architecture of electric vehicle is going to an 800-volt, let's say, battery system. They do that to have a faster charging time, etc. And that requires different materials like silicon carbide. And that requires different packaged technologies.
So there, I think we invested in Japan as well as in Malaysia for silicon carbide components as well as modules. And we believe that that will be a growth area there. But overall, I think the adoption of more semiconductors in the car across EV and in the internal combustion engines is expected to increase. I mean, currently, an average car has about $500 of semiconductors in it. And yes, I think EV may be a little bit more, but about $500. It's expected that over the next 5-7 years, that will go up to about $900-$1,000. So if you look to the semiconductor growth years per market segment, the automotive market is a very fast-growing market. And it's even claimed that it's the fastest-growing market out there for the semiconductor industry.
I just have to look and see how much time we have. It's about two minutes. So.
Okay.
For compute, we know traditional server's been under pressure as customers focus on AI servers. Can you talk about how you see the trends for traditional going into the back half of 2024 and 2025?
For traditional servers?
Yeah.
Well, I mean, what we understand, I'm not a specialist in the servers market, but what we understand is that ultimately, the owners of the data centers are the hyperscalers. And worldwide, there are about six companies, the big six companies that spend $millions, $hundreds of millions of dollars of upgrading their data centers. Currently, they favor upgrading the data centers for AI functionality instead of upgrading the data centers for more compute power. So I believe that AI servers will be the preferred growth segment if at least the GPU components are available to equip these servers with functionality. You know, that's my expectation for 2024. For after that, you know, the data centers will be upgraded also from the compute power. But priority one, I think for this year is upgrading for the AI functionality.
Very good. We're almost out of time. Any other final thoughts you'd like to leave with investors?
Well, the only thought I would like to leave is that, you know, the single growth drivers in the industry will we truly believe that they are still in place? Yes, we had a correction year in 2023. We have a transition year in 2024. But the basic growth drivers, be it in communication or high-performance computing, automotive, or in the consumer market, IoT market, are in place. And they will drive this industry forward. It will not be a straight line. But in a cyclical market like this, I think we need to be confident that's there. That's where we invested in. I think we decided last year to continue to invest in manufacturing capability and capacity. And, you know, we're prepared to be elite player in that market.
Appreciate the time.
Thank you. Thanks, Steve.