Amkor Technology, Inc. (NASDAQ:AMKR) stock lost over on the back of lower than expected first quarter of 2018 performance.
Revenues fell 11% on a sequential basis, post a solid fourth quarter. The major part of the sequential decline was hurt by a slowdown in the high-end smartphone market. This is a normal seasonal pattern in the high-end smartphone space and was fully expected in their first quarter guidance. Moreover, the group forecasts the second quarter performance to be similar to the first quarter. Their midpoint revenue forecasts are $1.03 billion which is roughly flat sequentially and up 2% year-on-year. In the communications market, the second quarter revenues are expected to be flat to slightly down sequentially hurt by the ongoing weakness in high-end smartphones which would be partly offset by a rising demand in the low and mid-tier android market.
On the other hand, in other end markets, the group continued to witness a solid demand in the second quarter and forecasts the general semiconductor market to remain strong. As per IMS recent update, the world economy rose 3.8% in 2017, while it is expected to grow at a much better pace of 3.9% in 2018 as well as 2019.
The Electronic content is also rising having several applications while the high end smartphone production is expected to rise in the second half to support the launch of multiple new flagship phones. The group sees that being a high fixed cost technology company, the only way to boost their financial performance over the long-term is to enhance their revenue. Therefore, first they have moved to generate a higher percentage of their revenue in more stable markets like automotive. This would decrease their dependence on the more dynamic communication segment.
Moreover, the group sees the balanced growth approach is leading two sustainable gains in factor utilization and financial performance. They also produce a better results in trough quarters as shown in the first quarter. Their automotive growth initiative has been a major part of their balanced growth strategy. Four years ago, automotive comprised just 11% of Amkor’s total revenue but this part is now comprising more than 25%. Over the same time period, the revenue from the communications market moved from 56% of total revenue to 44%. The group’s greater China growth initiative widened their communications market. The group is currently positioned well in the mid and lower tiers of the market while forecasts a rise in mid and low tier demand to partially offset weakness in the high end.