Conference Transcript - AMKR 2026-09-09

Jim Schneider, Analyst — Goldman Sachs

We'll get started. Good morning, everybody. Welcome to the Goldman Sachs Community Co-Pain Technology Conference. My name is Jim Schneider. I'm the semiconductor analyst here at Goldman Sachs. It's my pleasure to welcome Amcor Technology and Megan Faust, CFO, as well as Doug Scott, who is the VP of the Advanced and Mainstream Business Units. Welcome, both.

Megan Faust, CFO

Good morning. Good morning, Jim. Good morning, everybody.

Jim Schneider, Analyst — Goldman Sachs

So maybe you start out with some breaking news, I think, as of last night. You know, going back to your investor day, you outlined a strategy for your global diversification, including a big component in the U.S. You've since announced a partnership with TSMC, a partnership with NVIDIA, and then last night, your expansion of Arizona for phase two, expanding from $7 to $12 billion in that phase. So maybe just kind of big picture, what is driving this expansion of demand in your business and why is now the right time to go to phase two this quickly?

Megan Faust, CFO

Yeah, sure. So we're very excited about our announcement last night. But stepping back, you know, at our investor day, we really outlined our priorities around strategic partnerships, technology leadership, and our geographic footprint. And we've made meaningful progress, as you mentioned, Jim, with our recent announcements with both NVIDIA and TSMC, and then last night announcing that we are further expanding our footprint here in the U.S. And what's driving that is really the demand for advanced packaging continues to strengthen. Our customers are collaborating with us very closely, and they are looking for longer-term arrangements in order to secure their supply. And so we have fully committed our phase one. And so with these recent announcements and ongoing conversations with other partners and customers, it's really given us the confidence that now is the right time to advance and expand further for phase two. why don't you share a little bit about the space that we have planned for phase two?

Doug Scott, Other

It's worth highlighting the scale of the expansion. So when we first announced that we were going to build in Arizona and the United States, we targeted phase one to be 33,000 square meters of clean room manufacturing space. The customer demand and really need for that in the United States has been very nice to see. And because of that, with our customers, we've moved forward with phase two, which is actually our phase two is we're going to be larger than we originally planning so we're moving forward with 60,000 square meters of clean room space in phase two and that was about double what we originally were planning based on initial customer discussion so when you look at the Arizona campus for phase one and phase two that'll be 93,000 square meters of manufacturing space if you were to do square footage that's about 850,000 square feet of clean room space so it's an incredible scale on our campus that's about six seven miles from TSMC's campus that they're building in Peoria we have a hundred and seventy acres with phase one and phase two we still actually have room to build a phase three on that same area in the future when we continue to work with our customers so I mean it's important to understand what's really driving this. Obviously, supply generally in the market for advanced packaging, demand is much higher than supply, so that's certainly driving it. But what we've seen is customers really wanting to be in the United States. They want advanced packaging. Packaging is really the enabler of the semiconductor market at this point. It's where you take the memory and the silicon and make it into the advanced packaging for your advanced compute. So it's really something we're seeing from our customers, both current customers and, you know, discussions we're having. So the need is there, and because of that, we are investing much more than we were expecting, but we still believe that for us the risk is low based on what we're seeing in the market. Great.

Jim Schneider, Analyst — Goldman Sachs

Anything else you can offer in terms of dimensionalizing how much revenue they can ultimately support?

Megan Faust, CFO

From a partnership, from a...

Jim Schneider, Analyst — Goldman Sachs

Well, no, from the Arizona facility once Phase 2 is completed in total, how much of that facility does that support in terms of revenue?

Megan Faust, CFO

Yeah, so we are still in the process of working through specific products, volumes, product lines, and so I would look at it as scaling similarly to what we've disclosed for Phase 1. And as a reminder for Phase 1, We've currently shared that that could be about a billion dollars in revenue, greater than 30% margin. So I think for now, scaling that pro rata would be appropriate.

Jim Schneider, Analyst — Goldman Sachs

Now, as I said, you held Investor Day back in March. You outlined a few strategic objectives. We just talked about one of them. But the other two, technology leadership and partnerships, you sort of refer to the partnerships. Maybe unpack those areas of the strategy. Maybe if you want to talk about the technology piece, because that's one piece we didn't cover so far.

Megan Faust, CFO

Yeah, so the strategic priorities are really what's centered around Amcor's growth. And I would say what we just talked about, the geographic diversification, that's really a differentiator for Amcor and what's driving our growth in Arizona. But stepping back on the strategic partnerships, I mean, I would say historically advanced packaging was planned very late in the process. Today, with how advanced packaging is becoming more complex and an enabler for systems, that is where these partnerships are becoming deeper, longer term, more strategic. And you're seeing that in our announcements, in the multi-year strategic announcements. And that's what's bringing more visibility into not only our portfolio, but our roadmap. And so that pillar is really critical to our growth. The technology is really essential for everything to happen, especially with AI. We are developing systems with our partners in order to enable things that are going to support compute, and that is our fastest-growing market. So it's centered around the complexity of the architectures needed. And I would say we're not just developing technology, but we're developing platforms around 2.5D, high-density fan-out. We have many engagements today in 2.5D. We also have engagements in high-density fan-out, development around bridge technology, as well as co-packaged optics. And those three pillars are what we see are going to drive Amcor's growth, optimize our utilization, expand our profitability, and ultimately bring shareholder value.

Jim Schneider, Analyst — Goldman Sachs

Now, from an operational perspective, sort of what's the one or two key strategic objectives you're going after in the next 12 to 18 months? I think I can kind of guess, given her conversation just now, but maybe if I also sort of step back and look at, you know, investor expectations for your business in 2027, if you were to outperform, what would be the kind of key area of upside that you expect?

Megan Faust, CFO

So our goal is to really help this supply constraint that everyone is seeing specifically around advanced packaging. So it is critical that we execute on our high-density fan-out product launches that we have going right now. So that is what's really going to drive the scale and the volume. In addition, continuing to develop the next-generation technology around bridge, as well as co-packaged optics, that focus is one of our key priorities. Second to that would be expanding space and optimizing our footprint and so we're making some very intentional strategic decisions not only here in the US but we are shifting and transitioning some of our products from Korea to Vietnam's SIP in order to enable more space for faster scaling in Korea which is our center of excellence for this high-value advanced packaging. So together, those are the two focus areas for us. As far as upsides, that's really going to be centered around the speed that we're able to scale these products. That can provide upside. And then I would say the level of engagement with our customers is unprecedented. And so what we're seeing with what they need for supply security and their level of commitment, that can also equate to upsides.

Jim Schneider, Analyst — Goldman Sachs

One more high-level question for you. If we're back on stage here again in five years, what do you think is the one thing that investors are going to be most surprised at looking back?

Megan Faust, CFO

I think we're all going to be surprised at the magnitude of the structural shift we're seeing for an advanced packaging-led era. The level of customer engagement and the duration of their agreements is unprecedented. And even though we're seeing that today, I don't think we're done. So I think that's going to surprise us.

Jim Schneider, Analyst — Goldman Sachs

Okay, now sort of diving into your overall business trends more shorter term, you know, smartphones are still a pretty large part of your business today. I think a lot of people saw the memory price destruction in terms of unit demand occurring, but I think it's fair to say that what's played out is a little different than what many people expected in terms of sort of immediate pull-in of builds. That's kind of what we got rather than sort of the immediate sort of drop-off. So maybe talk through some of the dynamics you saw for smartphones in the first half of the year, and how do you expect that market to play out into year-end?

Doug Scott, Other

Sure, maybe I'll take that one. So communication smartphones is still our largest end market, and it's still a strategic path for us. So we continue to support that market. If you look at our percentage increase year over year, maybe first half over first half. So first half of 2026 was up 37% over the first half of 2025 in communications. So we definitely did see an increase. A lot of that is driven by the iOS ecosystem over Android. And some of that is related, obviously, to what you mentioned, that memory is constrained and the pull-in of trying to get that built. But, you know, when we look at communications, there's a number of factors that could dampen the second half for us. Certainly, if you look at memory constraints, that is something that is impactful. Our move from our SIP business units, our business support from Korea to Vietnam will also affect some of the potential revenue in second half. That's strategic. We need to make sure we move that to Vietnam, which is a lower cost region, so we have more space in Korea to expand in higher margin and packaging. So that's very important. And then the build cycles. We may see a different build cycle on iOS this year. I time this morning, which will highlight the details, but, you know, the combination of things, we may see a more muted second half, fourth quarter in communications, but communications for us still year over year is a growth driver. The content per phone, really the complexity that's being integrated in communications is something that is also driving our advanced packaging needs. So we see a muted second half, maybe a fourth quarter, but it's certainly a priority for us to continue to stay in that market.

Jim Schneider, Analyst — Goldman Sachs

And then looking into 2027, I think it's pretty hard to have a clear view on that market. But if the dynamics continue with DRAM prices moving higher, how do you think your customers are likely to react to that market environment? What do you think it means for your business in good volume?

Doug Scott, Other

So we participate in both iOS and Android premium tier ecosystem. We've seen iOS being more successful in securing the material and the parts needed to support their premium tier. So I think that when we look in 2027, short-term memory cycles may dampen maybe short-term, but the fact is that the material will be available for those that secure it. So I think that we'll continue to support the premium tier. We'll see maybe a modest impact.

Jim Schneider, Analyst — Goldman Sachs

Yeah, got it. Okay, then on the computing market for a second, that's obviously been very strong for you. As we know, your revenue is up 20% sequentially in Q2. You're guiding for another 30% step up in Q3. Maybe unpack some of the elements of the growth you're seeing between 2NFD packaging, high-density fin-out, and CPU product?

Doug Scott, Other

Sure. So, you know, computing is our largest growth driver now and certainly going into the future. So it's a very important market. We invest heavily for it. We have customers who are securing allocations. So what's interesting is that the technology that we're using to support our customers, it's really quite diverse. And not all of it is high-density fan-out, bridge technology. There's a lot of flip chips, a lot of wafer services. If you look at Ampor support of this market, we were supporting 2.5D over a decade ago, long before AI even was something. So we've been well-positioned in advanced packaging technology for a long time. So as we move forward, we continue to see demand for more complex packages. As complexity increases, we actually position ourselves in the market better than some of our competition because of that ability to support advanced packaging technologies, you know, really across the supply chain. So we see, I think we saw a 30% growth year over year from a compute standpoint. We expect that to continue at the same trend going into 2027. So we are very optimistic in our compute placement, but also, you know, this is another area we talked about where supply is not holding up to the amount of demand. So we have, as the complexity increases, there's more opportunities for us to not only invest but keep our lines highly utilized.

Jim Schneider, Analyst — Goldman Sachs

So you think you can hold that kind of 30% growth rate heading for compute into 2027? Okay, great. Megan, I think you talked about a strategic partnership with NVIDIA. We referred to it before over the next several years. I think you're going to make a prepayment of $1.5 billion to help you with your facility expansion. Maybe help us understand the scope of that agreement, what products it all covers, and what shipments are expected to start.

Megan Faust, CFO

Sure. So we're very excited about our partnership with NVIDIA. Again, this is just a testament to customers really wanting to shore up their supply. As Doug said, the imbalance is unprecedented. So this multi-year strategic partnership has really aligned a technology roadmap and also enabling our U.S. expansion. So we have not disclosed specific products. It also is not indicative of a revenue stream. It's actually the partnership in order to provide that supply security. We have shared that as the services are provided to NVIDIA, that will then be applied to their services over time. So depending upon the production levels, the timing, the speed, that arrangement could be anywhere from five to ten years. But it really is a testament in the confidence to Amcor and their confidence in us being able to develop this technology. We've already proven that technology. We have engagements in production today. And expanding in this critical U.S. market to enable an end-to-end supply chain is what we're really achieving together.

Jim Schneider, Analyst — Goldman Sachs

And then, I mean, help frame for us, like, how much bigger do you think this could potentially be than the billion-and-a-half dollars? I realize that still very early days, you're still a little ways away from revenue, but five to ten years, it's a big time frame, might be dimensionalized for this, that for us, and help us understand sort of relative to the Arizona capacity expansion, I'm sure it had some impact.

Megan Faust, CFO

So it's really a, you know, showing that they're an anchor customer and that they are committed to us expanding in the U.S. So that billion and a half is really going towards the $12 billion of expansion. That's how I would frame it. It is not necessarily a revenue stream or what it could potentially be. But by having that anchor customer and having that partnership to develop the next generation technologies, that's what's going to really grow Amcor. And as Doug mentioned, we'll keep our eyes on what further expansion may be needed in the U.S.

Doug Scott, Other

Maybe I can just add another piece to that. So the technologies that we're going to be using for a majority of our customers in Arizona aren't new technologies. They're not licensed technologies. They're technologies that we have developed in our Korea location that we're already ramping to HVM volume. So it's a transfer. So it will shorten the cycle to be able to bring our customers up in Arizona because we're essentially transferring no technology, no processes, no yields. And it's also, I know we talked about the $1.5 billion from NVIDIA, but it's really not a single customer discussion. We have multiple customers with known technologies. They are securing allocation. And as current products ramp in Korea, those products will come up in the United States and Arizona. New devices, next generation will come in after that. And then as those ramp, they get through qualification, they ramp for deduction. That's where the revenue really starts coming in the U.S. But because we're leveraging existing technologies and existing processes with existing relationships with these large customers, we expect the United States or Arizona to come up much faster than it would be if it was an external transfer of technology or a brand-new build, say, Greenfield, that we're starting from scratch. Got it.

Jim Schneider, Analyst — Goldman Sachs

Let's talk about the competitive landscape for a second. And, you know, in Compute specifically, you know, TSMC was very early with their co-op product. You've been a fast follower with your 2.5D packaging. You've seen strong engagement with high-density fan-out. Now Intel seems to be making some good progress with their EMT product that enables the larger panel sizes. So how should investors be thinking about Amcor's market position, and where do you think you have a particular right to win?

Doug Scott, Other

So I think it's safe to say that the Compute market in particular is a fast-growing market. And the ability for OSAPs, foundries, whoever's doing advanced packaging, for example, cannot keep up with the level of demand. So we believe that the market opportunity is growing and it will continue to grow. As I mentioned earlier, we've been doing this for a long time. We have known technologies, and we believe we're well-positioned in that when a customer has very extensive silicon, limited memory supply, limited substrates, they need to go somebody to a company that can produce high output yield. And otherwise, they're not going to be able to make their output demand. So we feel that we're positioned quite well in this area. Certainly, there's new technologies that are being looked at. We continue to pathfind and look at those technologies also. And we will be in position to support the market when the market's ready for an HVM solution. It really, it would be foolish for the market not to look at different options of technology because, again, because of the constraints. But at the end of the day, it has to be manufacturable, it has to be high yield, and it has to have low cost options. And this is somewhere we've been involved with and we continue to be involved with the largest companies in the world.

Jim Schneider, Analyst — Goldman Sachs

Got it. And maybe just finally touch on the automotive end market. Help us understand where you see that business trending, given some of the stronger trends you saw there in Q2 and you guys for Q3.

Doug Scott, Other

Yeah, so automotive is a nice story. We saw really quarter after quarter of reduction in automotive, and certainly there was supply constraints, or not constraints, but there was actually oversupply in the market. But automotive is our second largest market of growth for Amcor behind compute. So we're seeing a number of different reasons. One, as you look at automotive, really the complexity of the packaging needed for automotive is increasing. So ADAS and infotainment, electrification, those are all driving advanced packaging solutions. So that puts us in a very good position. Also, our wire bond mainstream business that we've had supporting automotive for a long time, that is also recovering. So we're seeing a good momentum on our own automotive. We expect that to continue. And really, it comes down to automotive is a different market than some of the others in that the device lifespan is much, much longer. So it's harder to qualify. It's harder to make sure you secure sockets. sockets, but once you're qualified, once you have reliable partners, those parts could last decades. And so we see a lot of momentum both on our legacy business, but also on the new technologies that are driving more advanced compute within an automobile. So that's a very nice trend we're seeing on automotive.

Jim Schneider, Analyst — Goldman Sachs

Great. Now, I wanted to kind of shift back to the sort of factory footprint side of things for a second. You sort of precociously outlined the rationale for the Arizona build-out proximity to TSMC, but there's other customers there, too, including Samsung and some others. Maybe talk about, you know, beyond the U.S. manufacturing, how important is proximity to front-end wafer manufacturing as part of the strategy, and specifically in Arizona?

Megan Faust, CFO

Yeah, I can start on that, and then if you would like to add, Doug. So, as you know, we are in very close proximity to TSMC in Arizona. When we were looking for the right footprint, we didn't only look in Arizona. We did look nationwide, but ultimately it provided all the right ingredients with respect to land, infrastructure, community, workforce, et cetera. And then I would say the cherry on top is we're within six miles or so of TSMC. So that does provide a lot of value with respect to feedback loops, cycle time, logistics, et cetera. So there is a significant amount of value in proximity. But as Doug mentioned, we are not exclusive to one foundry. We can support multiple foundries. And, you know, other foundries in the U.S. are able to use Amcor. And our customers want options as far as, you know, how they're going to manage their supply chain. So I would say it's important. It does provide value, and we're going to be able to support all front-end partners at our Arizona location. Anything to add?

Doug Scott, Other

No, that's a good point. I mean, if you just look at silicon, you know, a foundry makes silicon, ships it, we process the silicon, we put it in a part in a device. And so that structure, it doesn't maybe matter as much. But when you look at processing partners and being able to take silicon, do some processing, maybe send it back, have them do some processing, send it back, do additional processing. The close proximity makes a significant difference. Going into a truck five miles down the road versus going on a plane across the world, that could benefit the supply chain for sure.

Jim Schneider, Analyst — Goldman Sachs

Okay, great. Then, you know, in terms of what else is happening in your factory network, you talked about the rebalancing of making space in Korea, basically moved from SIP to Vietnam, as you said before. You know, what other changes should, I mean, I think that caused a little bit of questions from investors this past quarter. So going forward, what other changes should we expect as you rebalance the factory network?

Megan Faust, CFO

Yeah, so it's all about centralizing our products, right? So we develop new technology in Korea, and then we want to make sure that we have economies of scale for efficiency, profitability, et cetera. So that's really what drove this strategic decision that has been planned since the beginning of Vietnam to centralize our SIP business. And it takes time. Our customers need to move those products. That's what's creating a little bit of noise in this transition during Q3. As far as the rest of our factory network, we are continuing to expand outside of Arizona and Korea. We do have programs that are being expanded in Taiwan, which is a very important market for advanced packaging, but that's within the footprint. We also are expanding our advanced packaging capacity in Portugal. And Europe is also a very important region where customers are requiring, you know, regionalized support. And so that trend of geographic flexibility is we're seeing everywhere, not only in the U.S., but in Europe, in Asia. So all of those things are what's contributing to our decision. But no other major, I would say, changes in our footprint at this time.

Jim Schneider, Analyst — Goldman Sachs

Got it. Then at your investor day, you laid out financial targets for 2030, pretty ambitious targets, revenue over $11 billion. gross margin, 22%, earnings per share, $5. So maybe walk us through some of the elements and how you expect that revenue growth story in particular to sort of unfold off the larger-based business you've got this year.

Megan Faust, CFO

Yeah, so that growth up to, you know, the $11 billion plus, there's really two contributors to that. The primary contributor is what we're seeing as far as the growth in AI and our compute business. That is, as we mentioned, over 30% in 26. We see similar growth into 27. That is the primary driver for that growth up to $11 billion. The second factor will be bringing on the Arizona facility. And we have shared that timeline as far as when we'll begin production in 28 and how that will scale and expecting that to be at full capacity by 2030, that will add about a billion dollars to that growth for our revenue. The announcement for phase two, the timing for phase two, we anticipate breaking ground by the end of next year. That will then be a two-year construction period. So we'll begin, you know, producing in 2030. So I would say there's some upside to 2030, but it's all dependent on the speed of the construction and the production ramps of our customers.

Jim Schneider, Analyst — Goldman Sachs

Got it. Now, at the same time, on the gross margin side, you've talked about some of the dynamics of dilution as you ramp Arizona. I think you said you're also absorbing these starve costs into OPEX initially until products get qualified, then they hit gross margins. So maybe help us understand moving parts between OPEX and gross margins for 27 and 28.

Megan Faust, CFO

Sure. So this is the same framework that we had when we opened our flagship K-5 facility as well as Vietnam. When construction completes and depreciation begins on the building, as well as other preparations for workforce and production, those costs are in operating expenses. and so we would anticipate that we would start to see that those prep costs in 27 after we finish our construction of phase one we have shared that that could have a dilution factor of one to two percent on operating income margin once we begin to qualify a program those costs then move into cost of goods sold. So they'll still be in an ROP income margin, but they'll transition probably into 28 into COGS, and therefore you'll see some of that solution in gross margin. But that's going to improve as we scale the facility, and then we will have an accretive performance in 2030 once we pass that midpoint, which we believe the transition will be in 29, and then into 2030 at full scale.

Jim Schneider, Analyst — Goldman Sachs

2030 is when the gross margins for Arizona get accretive.

Megan Faust, CFO

Yeah. They'll start to be accretive exiting 29, but for the full year, it'll most likely be neutral.

Jim Schneider, Analyst — Goldman Sachs

Excellent. Then finally, just thinking about some of the free cash flow and CapEx dynamics investors should be watching for over the next 18 months or so, sort of remind us of how you're thinking about those issues, especially in the context of phase two, and then how you think about buybacks and debt pay down over, say, the next few years?

Megan Faust, CFO

Sure. So we did announce that we have increased our investment in Arizona from $7 billion to $12 billion. That's really centered around refining our estimates around phase one, as well as the scale of what we're planning to build for phase two. So that $12 billion is a multi-year investment. Obviously, we've given our 26 guide. we're not going to be giving 27 guide or whatnot, but to give you a flavor for how to think about that investment. In the next, you know, 26, 27 is the finishing the construction of phase one. Beginning in 28, you're going to have a little bit of a stack. You're going to have the equipment coming on for phase one, but we're also going to have the construction of phase two. So I would see that the years 28 and 29 will be peak capex outlay of our investment in Arizona. And then when you get to 29 and 30, that will just be the equipment for phase two. So to try to bring some magnitude to that, for the $12 billion, we would anticipate about 10 to 15% of that in 26 and 27. That'll step up to about 20 to 25% in 28 and 29 and then when you get into 2030 and 2031 that'll step back down to 10 to 15 percent so that's a bell-shaped curve is how you would want to think about our investment in Arizona so over time with that investment there will be some pressure on free cash flow but we do see that as phase one starts to ramp and becomes fully utilized in 2030, that's really going to provide an earnings engine that will help support, you know, the onboarding of phase two as well. You asked about buybacks and priorities. We did announce a buyback program. We expect to modestly, you know, execute on that really to offset solution to stock-based compensation. And then as I think about debt priorities, our current debt levels are reasonable. Our leverage is reasonable. We will continue to have incremental debt capacity as our business expands, and we will keep our eye on our long-term goal of 1.5 times or below for leverage.

Jim Schneider, Analyst — Goldman Sachs

I think with that, we're basically out of time, but thank you very much for Megan and Doug for being here. We appreciate it. Thank you.