Amkor
Annual Report 2010

Plain-text annual report

2 0 1 0 A N N U A L R E P O R T AMKOR TECHNOLOGY, INC. AMKOR TECHNOLOGY, INC. ENABLING A MICROELECTRONIC WORLD® w w w. a m k o r. c o m E N A B L I N G A M I C R O E L E C T R O N I C W O R L D ® Corporate Management Corporate Headquarters Amkor is one of the world’s largest providers of semiconductor assembly and test services. Founded in 1968, Amkor pioneered the concept of having a highly focused third party provide assembly and test to semiconductor manufacturers. By capitalizing on strong outsourcing trends and consistently meeting customer needs, Amkor has enjoyed significant growth over its 40-year history. Today we are a strategic manufacturing partner for many of the world’s leading semiconductor companies and electronics OEMs, providing our customers with a broad array of package design, assembly and test solutions. Amkor’s operational base encompasses more than 5 million square feet of manufacturing facilities, product development centers, and sales and support offices located in key electronics manufacturing regions in Asia, Europe and the United States. Semiconductor manufacturing is generally defined in two stages. In the first stage, called the “front end”, complex electronic circuitry is deposited onto silicon wafers through a process called wafer fabrication. In the “back end”, also known as packaging (or assembly) and test, the silicon wafer is cut into individual chips, and each chip is placed in a protective housing that provides a proper electrical connection between the chip and the system board. For most advanced semiconductor devices, these packages are custom designed for specific applications. The packages are then tested to ensure that they meet appropriate performance criteria. Board of Directors James J. Kim Executive Chairman Kenneth T. Joyce President and Chief Executive Officer Roger A. Carolin 1, 2 Venture Partner SCP Partners Winston J. Churchill 3 Chair: Nominating and Governance Committee Managing General Partner, SCP Partners and Chairman, CIP Capital Management, Inc. John T. Kim Director Stephen G. Newberry 2, 3 President & Chief Executive Officer Lam Research John F. Osborne 1, 2 Chair: Compensation Committee Director James W. Zug 1, 3 Chair: Audit Committee Retired Managing Director PricewaterhouseCoopers LLP 1 Member Audit Committee 2 Member Compensation Committee 3 Member Nominating & Governance Committee Kenneth T. Joyce President and Chief Executive Officer James M. Fusaro Executive Vice President Assembly and Test Product Management JooHo Kim Executive Vice President Worldwide Manufacturing Operations Michael J. Lamble Executive Vice President Worldwide Sales Joanne Solomon Executive Vice President and Chief Financial Officer Gil C. Tily Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary If you look inside a microelectronic product you won’t see Amkor’s name on the actual packages, but you will see the names of our customers – approximately 225 of the world’s leading semiconductor suppliers. Amkor Technology, the Amkor Technology logo, TMV, and the phrase Enabling a Microelectronic World are trademarks of Amkor Technology, Inc. Please visit our website: www.amkor.com 1900 South Price Road Chandler, AZ 85286 Tel: 480-821-5000 Stock Trading Amkor Technology, Inc.’s common stock is traded on the Nasdaq Stock Market under the symbol AMKR. Transfer Agent and Registrar Computershare Trust Co. N.A. First Class, Registered & Certified: P.O. Box 43078 Providence, RI 02940-3078 Overnight Courier: 250 Royall Street Canton, MA 02021 Phone: 877-498-8861 Fax: 781-575-3602 International Shareholders: Phone: 781-575-3602 Independent Auditors PricewaterhouseCoopers LLP 1850 North Central Avenue, Suite 700 Phoenix, AZ 85004 Phone: 602-364-8000 A copy of the company’s Form 10-K, filed with the Securities and Exchange Commission is available upon written request to: Investor Relations Amkor Technology, Inc. 1900 South Price Road Chandler, AZ 85286 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2010 Commission File Number 000-29472 Amkor Technology, Inc. (Exact name of registrant as specified in its charter) Delaware (State of incorporation) 23-1722724 (I.R.S. Employer Identification Number) 1900 South Price Road Chandler, AZ 85286 (480) 821-5000 (Address of principal executive offices and zip code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common Stock, $0.001 par value Name of Each Exchange on Which Registered The NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2010, based upon the closing price of the common stock as reported by the NASDAQ Global Select Market on that date, was approximately $599.9 million. The number of shares outstanding of each of the issuer's classes of common equity, as of January 31, 2011, was as follows: 197,189,515 shares of Common Stock, $0.001 par value. Portions of the registrant's Proxy Statement relating to its 2011 Annual Meeting of Stockholders, to be filed subsequently, are incorporated by reference into Part III of this Report where indicated. DOCUMENTS INCORPORATED BY REFERENCE: TABLE OF CONTENTS PART I Business Item 1. Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Item 3. Item 4. Properties Legal Proceedings Submission of Matters to a Vote of Security Holders Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Consolidated Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Item 5. Item 6. Item 7. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Item 9. Item 9A. Controls and Procedures Item 9B. Other Information Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART II Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions and Director Independence Principal Accountant Fees and Services PART III PART IV Exhibits and Financial Statement Schedules Item 15. EX-12.1 EX-21.1 EX-23.1 EX-31.1 EX-31.2 EX-32 EX-101 INSTANCE DOCUMENT EX-101 SCHEMA DOCUMENT EX-101 CALCULATION LINKBASE DOCUMENT EX-101 LABELS LINKBASE DOCUMENT EX-101 PRESENTATION LINKBASE DOCUMENT EX-101 DEFINITION LINKBASE DOCUMENT Page 2 15 28 29 29 30 30 32 34 48 50 96 96 97 97 97 97 98 98 98 All references in this Annual Report to "Amkor," "we," "us," "our" or the "company" are to Amkor Technology, Inc. and its subsidiaries. We , FlipStack refer to the Republic of Korea, which is also commonly known as South Korea, as "Korea". Amkor FusionQuad trademarks appearing herein are held by their respective owners. Subsequent use of the above trademarks in this report may occur without the respective superscript symbols (TM or ®) in order to facilitate the readability of the report and are not a waiver of any rights that may be associated with the relevant trademarks. are either trademarks or registered trademarks of Amkor Technology, Inc. All other , Amkor Technology , MicroLeadFrame , and Unitive , ChipArray , TMV ® ® ® ® ® ® ® ® , 1 Table of Contents Item 1. Business DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS PART I This business section contains forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," "intend" or the negative of these terms or other comparable terminology. Because such statements include risks and uncertainties, actual results may differ materially from those anticipated in such forward-looking statements. In evaluating these statements, you should specifically consider various factors, including the risks outlined under "Risk Factors" in Item 1A of this Annual Report. These factors may cause our actual results to differ materially from any forward-looking statement. OVERVIEW Amkor is one of the world's leading providers of outsourced semiconductor packaging (sometimes referred to as assembly) and test services. Amkor pioneered the outsourcing of semiconductor packaging and test services through a predecessor corporation in 1968 and over the years we have built a leading position by: • Designing and developing new package and test technologies; • Offering a broad portfolio of packaging and test technologies and services; • Cultivating long-standing relationships with our customers, which include many of the world's leading semiconductor companies, and collaborating with original equipment manufacturers ("OEMs") and material suppliers; • Developing expertise in high-volume manufacturing processes; and • Having a diversified operational scope, with production capabilities in China, Japan, Korea, the Philippines, Taiwan and the United States ("U.S."). Packaging and test are integral steps in the process of manufacturing semiconductor devices. The semiconductor manufacturing process begins with the fabrication of tiny transistor elements into complex patterns of electronic circuitry on silicon wafers, thereby creating large numbers of individual semiconductor devices or integrated circuits on each wafer (generally referred to as "chips" or "die"). Each device on the wafer is tested and the wafer is cut into pieces called chips. The chips are attached through wire bonding to a substrate or leadframe, or to a substrate in the case of flip chip interconnect and then encased in a protective material. For a wafer-level package, the electrical interconnections are created directly on the surface of the wafer without a substrate or leadframe. The packages are then tested using sophisticated equipment to ensure that each packaged chip meets its design and performance specifications. Our packages are designed based on application and chip specific requirements including the type of interconnection technology employed, size, thickness, and electrical, mechanical and thermal performance. We are able to provide turnkey packaging and test solutions including semiconductor wafer bump, wafer probe, wafer backgrind, package design, assembly, test and drop shipment services. Our customers include, among others: Altera Corporation; Broadcom Corporation; Infineon Technologies AG; International Business Machines Corporation ("IBM"); LSI Corporation; Qualcomm Incorporated; Sony Corporation; ST Microelectronics, Pte.; Texas Instruments, Inc. and Toshiba Corporation. The outsourced semiconductor packaging and test market is very competitive. We also compete with the internal semiconductor packaging and test capabilities of many of our customers. AVAILABLE INFORMATION Amkor files annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (the "SEC"). You may read and copy any document we file at the SEC's Public Reference Room, 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for information on the Public Reference Room. The SEC maintains a web site that contains annual, quarterly and 2 Table of Contents current reports, proxy statements and other information that issuers (including Amkor) file electronically with the SEC. The SEC's web site is http://www.sec.gov. Amkor's web site is http://www.amkor.com. Amkor makes available free of charge through its web site, our annual reports on Form 10-K; quarterly reports on Form 10-Q; current reports on Form 8-K; Forms 3, 4 and 5 filed on behalf of directors and executive officers; and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934 as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We also make available, free of charge, through our web site, our Corporate Governance Guidelines, the charters of the Audit Committee, Nominating and Governance Committee and Compensation Committee of our Board of Directors, our Code of Business Conduct and Ethical Guidelines, our Code of Ethics for Directors and other information and materials. The information on Amkor's web site is not incorporated by reference into this report. INDUSTRY BACKGROUND Semiconductor devices are the essential building blocks used in most electronic products. As electronic and semiconductor devices have evolved, several important trends have emerged that have fueled the growth of the overall semiconductor industry, as well as the market for outsourced semiconductor packaging and test services. These trends include: • An increasing demand for mobile and internet-connected devices, including world-wide adoption of mobile "smart" phones that can access the web and provide multimedia capabilities. The demand for digital video content has driven a range of higher performance internet connected home and mobile consumer electronics products including the new and rapidly growing tablet category. • Higher mobility, connectivity and digital content are driving demand for new broadband wired and wireless networking equipment. • The proliferation of semiconductor devices into well established end products such as automotive systems due to increased use of electronics for safety, navigation and entertainment systems. • An overall increase in the semiconductor content within electronic products in order to provide greater functionality and higher levels of performance. Our business is impacted by market conditions in the semiconductor industry, which is cyclical by nature and impacted by broad economic factors, such as world-wide gross domestic product and consumer spending. Historical trends indicate there has been a strong correlation between world-wide gross domestic product levels and semiconductor industry cycles. Semiconductor companies outsource their packaging and test needs to contract service providers such as Amkor for the following reasons: Contract service providers have developed expertise in advanced packaging and test technologies. Semiconductor packaging and test technologies continue to become more sophisticated, complex and customized due to increasing demands for miniaturization, greater functionality and improved thermal and electrical performance. This trend has led many semiconductor companies to view packaging and test as enabling technologies requiring sophisticated expertise and technological innovation. Many of these companies are also relying on contract service providers of packaging and test services as key sources for new package designs and advanced interconnect technologies, thereby enabling them to reduce their internal research and development costs. Contract service providers offer a cost effective solution in a highly cyclical, capital intensive industry. The semiconductor industry is cyclical by nature and impacted by broad economic factors, such as world-wide gross domestic product and consumer spending. Semiconductor packaging and test are complex processes requiring substantial investment in specialized equipment, factories and human resources. As a result of this cyclicality and the large investments required, manufacturing facilities must operate at a high level of utilization for an extended period of time to be cost effective. Shorter product life cycles, coupled with the need to update or replace packaging 3 Table of Contents and test equipment to accommodate new package types, makes it more difficult for semiconductor companies to maintain cost effective utilization of their packaging and test assets throughout semiconductor industry cycles. Contract service providers of packaging and test services, on the other hand, can typically use their assets to support a broad range of customers, potentially generating more efficient use of their production assets and a more cost effective solution. Contract service providers can facilitate a more efficient supply chain and thus help shorten time-to-market for new products. We believe that semiconductor companies, together with their customers, are seeking to shorten the time-to-market for their new products, and that having an effective supply chain is a critical factor in facilitating timely and successful product introductions. Semiconductor companies frequently do not have sufficient time to develop their packaging and test capabilities or deploy the equipment and expertise to implement new packaging technology in volume. For this reason, semiconductor companies are leveraging the resources and capabilities of packaging and test companies to deliver their new products to market more quickly. The availability of high quality packaging and test services from contract service providers allows semiconductor manufacturers to focus their resources on semiconductor design and wafer fabrication. As semiconductor process technology migrates to larger wafers and smaller feature sizes, the cost of building a state-of-the-art wafer fabrication factory has risen significantly and can now be several billions of dollars. The high cost of investing in next generation silicon technology and equipment is causing many semiconductor companies to adopt a "fabless" or "fab-lite" strategy in which they reduce or eliminate their investment in wafer fabrication and associated packaging and test assets, thus increasing their reliance on outsourced providers of semiconductor manufacturing services, including packaging and test. "Fabless" semiconductor companies do not have factories and focus exclusively on the semiconductor design process and outsource virtually every step of the manufacturing process. COMPETITIVE STRENGTHS AND STRATEGY We believe we are well-positioned in the outsourced packaging and test market. To build upon our industry position and to remain one of the preferred providers of semiconductor packaging and test services, we are pursuing the following strategies: Leading Technology Innovator We are a leader in developing advanced semiconductor packaging and test solutions. We have designed and developed several state-of-the-art package formats and technologies including our Package-on-Package platform with Through Mold Via or "TMV" technology, FusionQuad, flip chip ball grid array, copper pillar bumping and fine pitch copper pillar flip chip packaging technologies. In addition, we believe that as semiconductor technology continues to achieve smaller device geometries with higher levels of speed and performance, packages will increasingly require flip chip and three dimensional or "3D" stacking interconnect solutions. We have been investing in our technology leadership in electroplated wafer bumping, wafer-level processing and 3D packaging technologies. We have also been a leader in developing environmentally friendly integrated circuit packaging, which involves the elimination of lead and certain other materials. In the area of 3D packaging, Amkor has been a market and technology leader in both stacked die such as stacked chip scale packages and FlipStack and stacked package technologies such as Package-on-Package and TMV. The semiconductor industry is now entering a new period of 3D packaging development where Through Silicon Via or "TSV" interconnect technology will be used to create 3D integrated circuits. Amkor continues to invest in developing the key processes and package assembly technologies required for our customers to deliver 3D chip solutions to market. We have established a leadership position in wafer thinning, micro-bumping and TSV-based flip chip stacking technologies, and we are leveraging our technology development relationships with key customers in diverse applications to develop and deploy new 3D packaging technologies with high density TSV interconnections. 4 Table of Contents We provide a complete range of test engineering services from test program development to full product characterization for radio frequency mixed signal, logic and memory devices. Amkor is a major provider of radio frequency test services and a leader in strip test, an innovative parallel test solution that offers customers lower cost, faster index time and improved yields. We have approximately 400 employees engaged in research and development focusing on the design and development of new semiconductor packaging and test technologies. Long-Standing Relationships and Collaboration with Prominent Semiconductor Companies Our customers include most of the world's largest semiconductor companies and over the last four decades, Amkor has developed long- standing relationships with many of these companies. We believe that our production excellence has been a key factor in our success in attracting and retaining customers. We work with our customers and our suppliers to develop proprietary process technologies to enhance our existing capabilities, reduce time-to-market, increase quality and lower our costs. We believe that our focus on research and product development will enable us to enter new markets early, capture market share and promote the adoption of our new package designs as industry standards. We collaborate with customers and leading OEMs to develop comprehensive package solutions that make it easier for next-generation semiconductors to be designed into next-generation end products. By collaborating with leading semiconductor companies and OEM electronic companies, we gain access to technology roadmaps for next generation semiconductor designs and obtain the opportunity to develop new packages that satisfy their future requirements. Broad Offering of Package Design, Packaging and Test Services Creating successful interconnect solutions for advanced semiconductor devices often poses unique thermal, electrical and other design challenges, and Amkor employs a large number of package design engineers to solve these challenges. Amkor produces hundreds of package types which encompass more than 1,000 unique products, representing one of the broadest package offerings in the semiconductor industry. These package solutions are driven by the needs of our customers for more electrical connections, enhanced electrical or thermal performance, smaller package size and lower cost. We provide customers with a wide array of packaging solutions including leadframe and substrate packages, using both wire bond and flip chip interconnect technologies. We are a leading provider of: • Flip chip and wafer level packages where the die is connected directly to the package substrate or system board. These packages deliver improved electrical performance for use in high-power and high-speed applications such as graphics processors and microprocessors; • Three dimensional packages such as package-on-package and stacked chip scale packages, in which the individual chips or individual packages are stacked vertically to provide integration of logic and memory, while preserving space on the system board; • Stacked chip scale packages which include high density memory die stacks, typically with wire bond connections, and flip chip plus wire bond stacks called FlipStack that integrate a wire bond die on top of a flip chip die; • Advanced leadframe packages, such as MicroLeadFrame and FusionQuad, which are thinner and smaller than traditional leadframe designs, and provide more leads and better thermal and electrical characteristics. • Multi-chip or system-in-package modules used in mobile phones and other handheld end-products; • Packages for micro-electromechanical system devices, which are used in a variety of end markets including automotive, industrial and consumer electronics; • Through Mold Via technology for higher stacked interconnect densities in Package-on-Package applications that support next-generation high speed memory interface standards; and 5 Table of Contents • Fine pitch copper pillar flip chip which creates interconnections at fine pad pitches using fine pitch copper pillar bumping and a newly developed assembly process to reduce the number of substrate layers and facilitate very thin packages. We are expanding our copper wire bond capabilities in support of both advanced and commodity packages, as some customers are migrating to copper wire bond to mitigate their exposure to gold prices. We also offer an extensive line of advanced probe and final test services for analog, digital, logic, mixed signal and radio frequency semiconductor devices. We believe that the breadth of our design, packaging and test services is important to customers seeking to limit the number of their suppliers. Geographically Diversified Operational Base We have a broad and geographically diversified operational footprint. Our operations comprise more than five million square feet of manufacturing space strategically located in five countries in many of the world's important electronics manufacturing regions. We believe that our scale and scope allow us to provide cost effective solutions to our customers by: • Offering capacity to absorb large orders and accommodate quick turn-around times; • Obtaining favorable pricing on materials and equipment, where possible, by using our purchasing power and leading industry position; • Qualifying production of customer devices at multiple manufacturing sites to mitigate the risks of supply disruptions; and • Providing capabilities and solutions for customer-specific requirements. Competitive Cost Structure and Disciplined Capital Investment We believe that a competitive cost structure and disciplined capital investment decisions are key factors for achieving profitability and generating free cash flow. There has been a continuous push throughout the entire semiconductor supply chain for lower cost solutions. Some of our cost control efforts have included: (1) increasing strip densities to drive higher throughput; (2) developing smaller gold wire diameter solutions; and (3) increasing labor productivity. We operate in a cyclical industry. During an industry downturn, similar to the downturn in the second half of 2008 and the first half of 2009, we take actions to reduce our costs and drive greater factory and administrative efficiencies. Cost control efforts can include reducing labor costs by temporarily lowering compensation, reducing employee and contractor headcount, shortening work weeks and obtaining labor-related foreign government subsidies. PACKAGING AND TEST SERVICES The following table sets forth, for the periods indicated, the amount of packaging and test net sales in millions of dollars and the percentage of such net sales: Packaging services Chip scale package Ball grid array Leadframe Other packaging Total packaging services Test services Total net sales 2010 954 747 761 188 2,650 289 2,939 $ $ 32.5% $ 25.4% 25.9% 6.4% 90.2% 9.8% 100.0% $ 6 Year Ended December 31, 2009 695 500 587 152 1,934 245 2,179 31.9% $ 23.0% 26.9% 7.0% 88.8% 11.2% 100.0% $ 2008 697 751 753 144 2,345 314 2,659 26.2% 28.3% 28.3% 5.4% 88.2% 11.8% 100.0% Table of Contents Packaging Services We offer a broad range of package formats and services designed to provide our customers with a full array of packaging solutions. Our package services are divided into three families: chip scale package, ball grid array, and leadframe. We also provide other packaging services such as wafer bumping which supports our flip chip and wafer-level packages. The differentiating characteristics of package formats can include: (1) size, (2) number of electrical connections, (3) thermal and electrical characteristics, (4) number of chips incorporated, (5) types of interconnect technologies employed, and (6) integration of active and passive components. The following table sets forth the various combinations of interconnect technologies and package carriers, and some characteristics, for each package family. Interconnect Technology Package Carrier Characteristics Chip Scale Package Wire Bond Flip Chip Substrate Wafer Level Small Form Factor Low to High I/O Density Medium to Low Power Consumption 2D and 3D Configurations Ball Grid Array Wire Bond Flip Chip Substrate Leadframe Wire Bond Leadframe Large Form Factor High I/O Density Medium to High Power Consumption Variety of Form Factors Low to Medium I/O Density Low Cost Low to High Power Consumption 2D and 3D Configurations Interconnect Technologies Wire bonding and flip chip are the two interconnect technologies used to connect the die to the package carrier. Wire Bond: The die is mounted face up on the substrate or leadframe and very fine gold or copper wires are attached from the perimeter of the die to the substrate or leadframe. Wire bonding is generally considered to be the most cost-effective and flexible interconnect technology and is used to assemble the majority of semiconductor packages. Flip Chip: The interconnection between the die and substrate is made through a conductive "bump" that is placed directly on the die surface utilizing a process called wafer bumping. The bumped die is then "flipped over" and placed face down, with the bumps connecting directly to the substrate. Flip chip packages provide a higher density interconnection capability than wire bond, as flip chip technology uses the surface area of the die, and sometimes the perimeter as well, instead of just the perimeter used by wire bond packages. Flip chip technology also provides enhanced thermal and electrical performance, and enables smaller die and thinner and smaller form factors (or physical package dimensions). Hybrid: Certain 3D and system-in-package applications may contain both wire bond and flip chip die in a single package. These structures are commonly referred to as FlipStack and are supported in both chip scale and ball grid array package structures. Package Carrier Leadframe: Leadframe packages utilize metal (typically copper) as the package carrier and typically place the electrical interconnect leads to the system board around the perimeter of the package. Leadframe packages are used in virtually every electronic device and remain the most practical and cost-effective solution for many low to medium pin count applications. Leadframe packages are typically not cost or form factor effective for pin counts above 200. To address this limitation, Amkor developed FusionQuad, a proprietary leadframe package that integrates internal leads with perimeter leads to enable pin counts up to 376. Substrate: Substrate packages utilize a laminate as the package carrier and have the electrical interconnects to the system board on the bottom of the package in the form of solder balls that are distributed across the bottom surface of the package (called a "ball grid array" format). The chip is attached to the substrate through either 7 Table of Contents wirebond or flip chip technologies. Substrate packages were developed to facilitate the higher number of interconnections required by many advanced semiconductor devices. Wafer-Level: Wafer-level packages do not use a leadframe or substrate as the chip carrier. The interconnect bumping process is carried out on the entire wafer at the chip level using proprietary process technologies. The bumped wafer is subsequently singulated into individual chips ("diced") and the wafer-level package is subsequently attached directly to the system board. Chip Scale Packages Chip scale packages are substrate-based packages where the package size is not much larger than the chip itself, and which have very small form factors and fine ball pitches (or distance between balls). The size advantage provided by a chip scale package has made this the package of choice for a wide variety of applications that require very small form factors such as wireless handsets and mobile consumer electronic devices. Advances in packaging technology now allow the placement of two or more chips on top of each other within a single package. This concept, known as 3D packaging, permits a higher level of semiconductor density and greater functionality. Some of our 3D chip scale packages include: • Stacked chip scale packages that contain two or more chips placed on top of each other and are ideal for chipsets and memory applications; and • Package-on-package solutions using extremely thin chip scale packages that are stacked on top of each other, enabling the integration of logic and memory in a single footprint, as well as multiple memory applications. Our chip scale package family also includes system-in-package modules which integrate two or more chips and passive device elements into a single package, thus enabling space and power efficiency, high performance and lower production costs. Ball Grid Array Packages Ball grid array packages are large form factor substrate-based packages which are used where processing power and speed are needed, and small form factors are not required. Ball grid array packages are used for networking, storage, gaming, computing and consumer applications. Examples of ball grid array packages are: • Flip chip ball grid array incorporates a face down bumped die onto a substrate using a ball grid array format and is increasingly being used in advanced silicon nodes enabling our customers to implement more powerful new applications and smaller devices; and • Plastic ball grid array packages use wire bond technology in applications requiring higher pin count than chip scale or leadframe packages, but typically have lower interconnect density than flip chip. Leadframe Packages Leadframe packages place the electrical interconnects to the system board around the perimeter of the package. Wire bonding technology is used to interconnect the chip to the leadframe package carrier. Leadframe-based packages are the most widely used package family in the semiconductor industry. Traditional leadframe-based packages support a wide variety of device types and applications. Two of our most popular traditional leadframe package types are small outline integrated circuit and quad flat package, commonly known as "dual" or "quad" products, respectively, based upon the number of sides from which the leads extend. The traditional leadframe package family has evolved from "through hole design," where the leads are plugged into holes on the circuit board to "surface mount design," where the leads are soldered to the surface of the circuit board. We offer a wide range of lead counts and body sizes to satisfy variations in the size of customers' semiconductor devices. Through a process of continuous engineering and customization, we have designed several advanced leadframe package types that are thinner and smaller than traditional leadframe packages, and which have the 8 Table of Contents ability to accommodate more leads on the perimeter of the package. These advanced leadframe packages typically have superior thermal and electrical characteristics, which allow them to dissipate heat generated by high-powered semiconductor devices while providing enhanced electrical connectivity. We are developing increasingly smaller versions of these packages to keep pace with continually shrinking semiconductor device sizes and demand for miniaturization of portable electronic products. One of our most successful advanced leadframe package offerings is the MicroLeadFrame family of quad flat no lead packages. Another is FusionQuad, which has both bottom and peripheral leads that significantly reduce the package size. Wafer Bumping and Other Packaging Services The other category of packaging services is largely comprised of wafer bumping services. Wafer bumping is a preliminary step to manufacturing both flip chip and wafer-level packages. Wafer bumping consists of preparing the wafer for bumping and forming or placing the bumps. Preparation may include cleaning, removing insulating oxides, and providing a pad metallurgy that will protect the interconnections while making good mechanical and electrical connection between the bump and the substrate. Test Services Amkor provides a complete range of semiconductor testing services including wafer testing or probe, various types of final testing, strip testing and complete end-of-line test services up to and including final shipping. We have testing operations in our facilities in China, Japan, Korea, the Philippines and Taiwan, which enables fast feedback, streamlined logistics and shorter cycle times. We also offer many specialized logistical services including security certification and anti-counterfeit measures. In 2010, we tested 4.4 billion units. We tested 45%, 48% and 49% of the units that we packaged in 2010, 2009 and 2008, respectively. We test a variety of device types across all of our package families including radio frequency, analog and mixed signal, digital, power management, memory and various combinations such as application-specific integrated circuits, multi chip modules, system-in-package, and stacked chips. Testing solutions vary depending upon the complexity of the device. Specialized solutions are required for packages that also process non- electric stimuli, including sensors, accelerometers, gyrometers, haptics, pressure sensors and various types of micro-electro-mechanical sensor devices. Test Development Services We offer a full range of test software, hardware, integration and product engineering services, and we support a range of business models and test capabilities. Some customers develop their test solutions and provide them to us, while other customers need our engineering resources. We support a variety of co-development and collaboration models. Our test development centers are located in Korea, the Philippines, China and the U.S., and provide complete solutions covering product specific testing software, all necessary hardware for handling and contacting, correlation, release to mass production and post production support. In close proximity to many of our customers' design centers, our locations offer same time zone and same language services. Wafer Test Services Wafer test, also referred to as wafer probe, is performed after wafer fabrication or wafer bumping to screen out defects prior to packaging. A range of wafer test coverage can be deployed depending on the cost and complexity of the die, the package and the product. The range is from coarse level screening for major defects all the way up to probing at high digital speeds, full radio frequency transmit and receive, and multiple temperatures. Wafer testing can involve a range of wafer mapping and inspections. Final Test Services After the assembly process, final test is performed to ensure that the packaged device meets the customer's requirements. Final test spans a range of rigor and complexity depending on the device and end market application. More rigorous types of final test include testing multiple times under different electrical and temperature 9 Table of Contents conditions, and before and after device reliability stresses, such as burn-in. In addition to electrical testing, specialized solutions are required for packages that also process non-electric stimuli. The electrical tests are a mix of functional, structural and system-level tests depending on the customer's requirements and cost and reliability parameters. The electrical test equipment we use includes commercially available automated test equipment, customized and proprietary system level test equipment and innovative types of low cost test equipment developed by Amkor. Principal End Markets The following table lists the major end markets that use our products. The table also lists some of our applications and our packages and test services used within these key end markets. End Market Communications Consumer Computing Networking Applications Handsets (Cell Phones, Feature Phones, Smart Phones) Ethernet WiMax, 3G, 4G Wireless LAN Bluetooth Gaming Television Set Top boxes Portable Media Digital Cameras Desk Top Computer Laptop Computer Notebook Computer Netbook Computer Tablets Hard Disc Drive Computer Server Displays Printers Other Peripherals Servers Routers Switches Other Automotive Industrial Amkor Packages and Test Services Stacked Chip Scale Package ChipArray Ball Grid Array Package-on-Package Flip Stack Chip Scale Package Flip Chip Chip Scale Package MicroLeadFrame Radio Frequency Probe System-on-Chip Test Distributed Test for System-in-Package System-Level Test Flip Chip Ball Grid Array Thin Quad Flat Pack Plastic Ball Grid Array ChipArray Ball Grid Array MicroLeadFrame Strip Test MicroLeadFrame Plastic Ball Grid Array Thin Quad Flat Pack ChipArray Ball Grid Array Flip Chip Chip Scale Package High-Speed Digital Testing System-Level Test System-on-Chip Test Distributed Test for System-in-Package Flip Chip Ball Grid Array Plastic Ball Grid Array ChipArray Ball Grid Array High-Speed Digital Testing Thin Shrink Small Outline Package Small Outline Integrated Circuit Plastic Ball Grid Array Thin Quad Flat Pack Test Across Temperature Burn-in Test 10 Table of Contents For packaging and test segment information, see Note 17 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report. RESEARCH AND DEVELOPMENT Our research efforts focus on developing new package solutions and test services, and improving the efficiency and capabilities of our existing production processes. We believe that technology development is one of the key success differentiators in the semiconductor packaging and test industry. By concentrating our research and development on our customers' needs for innovative packages, increased performance and lower cost, we gain opportunities to enter markets early, capture market share and promote our new package offerings as industry standards. In addition, we leverage our research and development by licensing our leading edge technology, such as MicroLeadFrame, Fine Pitch Copper Pillar, Through Mold Via, Lead Free Bumping and FusionQuad. Our key areas for research and development are: • 3D packaging; • Advanced flip chip packaging; • Advanced micro-electromechanical system packaging and testing; • Copper Pillar bumping and packaging; • Copper wire interconnects; • Engineering and characterization tools; • Laminate and leadframe packaging; • Manufacturing cost reductions; • Through Mold Via technology; • Through Silicon Via technology; • Wafer Level Fan Out technology; and • Wafer level processing. We have key development partners within our customer and supplier base. We work with our partners and allocate our resources to develop applications that have promising potential for a healthy return on investment. As of December 31, 2010, we had approximately 400 employees engaged in research and development activities. In 2010, 2009 and 2008, we spent $47.5 million, $44.5 million and $56.2 million, respectively, on research and development. MARKETING AND SALES Our marketing and sales offices are located throughout the world. Our support personnel manage and promote our packaging and test services and provide key customer and technical support. To provide comprehensive sales and customer service, we typically assign our customers a direct support team consisting of an account manager, technical program manager, test program manager and both field and factory customer support representatives. We also support our largest multinational customers from multiple office locations to ensure that we are aligned with their global operational and business requirements. Our direct support teams are further supported by an extended staff of product, process, quality and reliability engineers, as well as marketing and advertising specialists, information systems technicians and factory personnel. Together, these direct and extended support teams deliver an array of services to our customers. These services include: • Managing and coordinating ongoing manufacturing activity; • Providing information and expert advice on our portfolio of packaging and test solutions and related trends; 11 Table of Contents • Managing the start-up of specific packaging and test programs; • Working to improve our customers' time-to-market; • Providing a continuous flow of information to our customers regarding products and programs in process; • Partnering with customers on design solutions; • Researching and assisting in the resolution of technical and logistical issues; • Aligning our technologies and research and development activities with the needs of our customers and OEMs; • Providing guidance and solutions to customers in managing their supply chains; • Driving industry standards; • Providing design and simulation services to ensure package reliability; and • Collaborating with our customers on continuous quality improvement initiatives. Further, we implement direct electronic links with our customers to: • Achieve near real time and automated communications of order fulfillment information, such as inventory control, production schedules and engineering data, including production yields, device specifications and quality indices; and • Connect our customers to our sales and marketing personnel world-wide and to our factories. SEASONALITY Our sales have generally been higher in the second half of the year than in the first half due to the effect of consumer buying patterns in the U.S., Europe and Asia. In addition, semiconductor companies in the U.S. generally reduce their production during the holidays at the end of December which results in a decrease in units for packaging and test services during the first quarter. Our business is tied to market conditions in the semiconductor industry which is highly cyclical. The semiconductor industry has experienced significant and sometimes prolonged cyclical downturns in the past. We cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery. CUSTOMERS As of December 31, 2010, we had approximately 225 customers, including many of the largest semiconductor companies in the world. The table below lists our top 25 customers in 2010 based on net sales: Altera Corporation Analog Devices, Inc. Atheros Communication, Inc. Atmel Corporation Avago Technologies Limited Broadcom Corporation Entropic Communications, Inc. Global Unichip Corporation Infineon Technologies AG International Business Machines Corporation ("IBM") LSI Corporation Marvell Technology Group Ltd. Micron Technology, Inc. Nordic Semiconductor ASA NXP Semiconductors N.V. ON Semiconductor Corporation Panasonic Corporation Qualcomm Incorporated RF Micro Devices, Inc. Samsung Electronics Co., Ltd Sony Corporation ST Microelectronics, Pte Texas Instruments Incorporated Toshiba Corporation Xilinx, Inc. Our top 25 customers accounted for 80.1% of our net sales in 2010, and our ten largest customers accounted for approximately 54.2%, 53.4% and 49.8% of our net sales for the years ended December 31, 2010, 2009 and 2008, 12 Table of Contents respectively. Qualcomm Incorporated accounted for more than 10% of our consolidated net sales in 2009. No customer accounted for more than 10% of our consolidated net sales in 2010 or 2008. For segment information, see Note 17 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report. MATERIALS AND EQUIPMENT Materials Our materials are used primarily for packaging activities. Our packaging operations depend upon obtaining adequate supplies of materials on a timely basis. The principal materials used in our packaging process are leadframes, laminate substrates, gold and copper wire, mold compound, epoxy, tubes and trays. The silicon wafer is generally consigned from the customer. We do not take ownership of the customer consigned wafer and title and risk of loss remains with the customer for these materials. Test materials constitute a very small portion of our total test cost. We purchase materials based on customer forecasts and our customers are generally responsible for any unused materials which we purchased based on such forecasts. We work closely with our primary material suppliers to ensure that materials are available and delivered on time. Moreover, utilizing commodity managers to globally manage specific commodities, we also negotiate world-wide pricing agreements with our major suppliers to take advantage of the scale of our operations. We are not dependent on any one supplier for a substantial portion of our material requirements. Equipment Our ability to meet the changing demand from our customers for manufacturing capacity requirements depends upon obtaining packaging and test equipment in a timely manner. We work closely with our main equipment suppliers to coordinate the ordering and delivery of equipment to meet our expected capacity needs. Packaging Equipment The primary types of equipment used in providing our packaging services are wire bonders and die bonders. In addition, we maintain a variety of other packaging equipment, including mold, singulation, die attach, ball attach, and wafer backgrind, along with numerous other types of manufacturing equipment. A substantial portion of our packaging equipment base can generally be used and adapted to support the manufacture of many of our packages through the use of relatively low cost tooling. We also purchase wafer bumping equipment to facilitate our flip chip and wafer level packaging services. Wafer bump equipment includes sputter and spin coaters, electroplating equipment and reflow ovens. This equipment tends to have longer lead times for order and installation than other packaging equipment and is sold in relatively larger increments of capacity. Test Equipment The primary equipment used in the testing process includes tester, handler and probe equipment. Handlers are used to transfer individual or small groups of packaged integrated circuits to a tester. Testers are generally a more capital intensive portion of the process and tend to have longer delivery lead times than most other types of packaging and test equipment. We focus our capital additions on standardized tester platforms in order to maximize test equipment utilization. ENVIRONMENTAL MATTERS The semiconductor packaging process uses chemicals, materials and gases and generates byproducts that are subject to extensive governmental regulations. For example, we produce liquid waste when semiconductor wafers are diced into chips with the aid of diamond saws, then cooled with running water. In addition, semiconductor packages have historically utilized metallic alloys containing lead (Pb) within the interconnect terminals typically referred to as leads, pins or balls. The usage of lead (Pb) has decreased over the past few years, as we have ramped 13 Table of Contents volume production of alternative lead (Pb)-free processes. Federal, state and local regulations in the U.S., as well as environmental regulations internationally, impose various controls on the storage, handling, discharge and disposal of chemicals and materials used in our manufacturing processes and in the factories we occupy. We are engaged in a continuing program to assure compliance with federal, state and local environmental laws and regulations. We currently do not expect that capital expenditures or other costs attributable to compliance with environmental laws and regulations will have a material adverse effect on our business, liquidity, results of operations, financial condition or cash flows. COMPETITION The subcontracted semiconductor packaging and test market is very competitive. We face substantial competition from established packaging and test service providers primarily located in Asia, including companies with significant manufacturing capacity, financial resources, research and development operations, marketing and other capabilities. These companies include: • Advanced Semiconductor Engineering, Inc., • Siliconware Precision Industries Co., Ltd. and • STATS ChipPAC Ltd. Such companies also have developed relationships with most of the world's largest semiconductor companies, including current or potential customers of Amkor. We also compete with the internal semiconductor packaging and test capabilities of many of our customers. Our integrated device manufacturer customers continually evaluate the outsourced services against their own in-house package and test services and at times decide to shift some or all of their outsourced packaging and test services to internally sourced capacity. The principal elements of competition in the semiconductor packaging services market include: technical competence; • • quality; • price; • breadth of packaging services offered; • new package design and implementation; • cycle times; • customer service; and • available capacity. We believe that we generally compete favorably with respect to each of these elements. INTELLECTUAL PROPERTY We maintain an active program to protect and derive value from our investment in technology and the associated intellectual property rights. Intellectual property rights that apply to our various products and services include patents, copyrights, trade secrets and trademarks. We have filed and obtained a number of patents in the U.S. and abroad the duration of which varies depending on the jurisdiction in which the patent is filed. While our patents are an important element of our intellectual property strategy, as a whole, we are not materially dependent on any one patent or any one technology. We expect to continue to file patent applications when appropriate to protect our proprietary technologies, but we cannot assure you that we will receive patents from pending or future applications. In addition, any patents we obtain may be challenged, invalidated or circumvented and may not provide meaningful protection or other commercial advantage to us. We also protect certain details about our processes, products and strategies as trade secrets, maintaining the confidentiality of the information we believe provides us with a competitive advantage. We have ongoing programs 14 Table of Contents designed to maintain the confidentiality of such information. Further, to distinguish our products from our competitors' products, we have obtained certain trademarks and service marks. We have promoted and will continue to promote our particular brands through advertising and other marketing techniques. EMPLOYEES As of December 31, 2010, we had 19,900 full-time employees. Of the total employee population, 14,700 were engaged in manufacturing services, 3,100 were engaged in manufacturing support, 400 were engaged in research and development, 200 were engaged in marketing and sales and 1,500 were engaged in administration, business management and finance. We believe that our relations with our employees are good, and we have never experienced a work stoppage in any of our factories. Our employees in China, France, the Philippines, Taiwan and the U.S. are not represented by any union. Certain employees in our factories in Japan and Korea are members of a union, and those that are members of a union are subject to collective bargaining agreements. Item 1A. Risk Factors The factors discussed below are cautionary statements that identify important factors and risks that could cause actual results to differ materially from those anticipated by the forward-looking statements contained in this report. For more information regarding the forward-looking statements contained in this report, see the introductory paragraph to Part II, Item 7 of this Annual Report. You should carefully consider the risks and uncertainties described below, together with all of the other information included in this report, in considering our business and prospects. The risks and uncertainties described below are not the only ones facing Amkor. Additional risks and uncertainties not presently known to us may also impair our business operations. The occurrence of any of the following risks could affect our business, liquidity, results of operations, financial condition or cash flows. Dependence on the Highly Cyclical Semiconductor and Electronic Products Industries — We Operate in Volatile Industries and Industry Downturns and Declines in Global Economic and Financial Conditions Could Harm Our Performance. Our business is impacted by market conditions in the semiconductor industry, which is cyclical by nature and impacted by broad economic factors, such as world-wide gross domestic product and consumer spending. The semiconductor industry has experienced significant and sometimes prolonged downturns in the past. For example, the recent financial crisis and global recession resulted in a downturn in the semiconductor industry that adversely affected our business and results of operations in late 2008 and in 2009. Since our business is, and will continue to be, dependent on the requirements of semiconductor companies for subcontracted packaging and test services, any downturn in the semiconductor industry or any other industry that uses a significant number of semiconductor devices, such as consumer electronic products, telecommunication devices, or computing devices, could have a material adverse effect on our business and operating results. It is difficult to predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, which, in turn, makes it more challenging for us to forecast our operating results, make business decisions, and identify risks that may affect our business, sources and uses of cash, financial condition and results of operations. Additionally, if industry conditions deteriorate, we could suffer significant losses, as we have in the past, which could materially impact our business, liquidity, results of operations, financial condition and cash flows. Fluctuations in Operating Results and Cash Flows — Our Operating Results and Cash Flows Have Varied and May Vary Significantly as a Result of Factors That We Cannot Control. Many factors, including the impact of adverse economic conditions, could have a material adverse effect on our net sales, gross profit, operating results and cash flows, or lead to significant variability of quarterly or annual operating results. Our profitability and ability to generate cash from operations is principally dependent upon demand for semiconductors, the utilization of our capacity, semiconductor package mix, the average selling price of our services, our ability to manage our capital expenditures in response to market conditions and our ability to control our costs including labor, material, overhead and financing costs. The recent downturn in demand for 15 Table of Contents semiconductors in late 2008 and in 2009 resulted in significant declines in our operating results and cash flows as capacity utilization declined. Our operating results and cash flows have varied significantly from period to period. Our net sales, gross profit, operating income and cash flows have historically fluctuated significantly as a result of many of the following factors, over which we have little or no control and which we expect to continue to impact our business: • fluctuation in demand for semiconductors and conditions in the semiconductor industry; • changes in our capacity utilization rates; • changes in average selling prices; • changes in the mix of semiconductor packages; • evolving package and test technology; • absence of backlog and the short-term nature of our customers' commitments and the impact of these factors on the timing and volume of orders relative to our production capacity; the timing of expenditures in anticipation of future orders; • changes in costs, availability and delivery times of raw materials and components; • changes in labor costs to perform our services; • wage and commodity price inflation, including precious metals; • • changes in effective tax rates; • • • high leverage and restrictive covenants; • warranty and product liability claims and the impact of quality excursions and customer disputes and returns; • costs associated with litigation judgments, indemnification claims and settlements; • the availability and cost of financing; intellectual property transactions and disputes; international events, political instability, civil disturbances or environmental or natural events, such as earthquakes, that impact our operations; • pandemic illnesses that may impact our labor force and our ability to travel; • difficulties integrating acquisitions and the failure of our joint ventures to operate in accordance with business plans; • our ability to attract and retain qualified employees to support our global operations; • • fluctuations in foreign exchange rates; • delay, rescheduling and cancellation of large orders; and • fluctuations in our manufacturing yields. loss of key personnel or the shortage of available skilled workers; It is often difficult to predict the impact of these factors upon our results for a particular period. The downturn in the global economy and the semiconductor industry increased the risks associated with the foregoing factors as customer forecasts became more volatile, and there was less visibility regarding future demand and significantly increased uncertainty regarding the economy, credit markets, and consumer demand. These factors may have a material and adverse effect on our business, liquidity, results of operations, financial condition and cash flows, or lead to significant variability of quarterly or annual operating results. In addition, these factors may adversely affect 16 Table of Contents our credit ratings which could make it more difficult and expensive for us to raise capital and could adversely affect the price of our securities. High Fixed Costs — Due to Our High Percentage of Fixed Costs, We Will Be Unable to Maintain Our Gross Margin at Past Levels if We Are Unable to Achieve Relatively High Capacity Utilization Rates. Our operations are characterized by relatively high fixed costs. Our profitability depends in part not only on pricing levels for our packaging and test services, but also on the utilization of our human resources and packaging and test equipment. In particular, increases or decreases in our capacity utilization can significantly affect gross margins since the unit cost of packaging and test services generally decreases as fixed costs are allocated over a larger number of units. In periods of low demand, we experience relatively low capacity utilization in our operations, which lead to reduced margins during that period. For example, we experienced lower than optimum utilization in the three months ended December 31, 2008 and the first half of 2009 due to a decline in world-wide demand for our packaging and test services which impacted our gross margin. Although our capacity utilization at times has been strong, we cannot assure you that we will be able to achieve consistently high capacity utilization, and if we fail to do so, our gross margins may decrease. If our gross margins decrease, our business, liquidity, results of operations, financial condition and cash flows could be materially and adversely affected. In addition, our fixed operating costs have increased in recent years in part as a result of our efforts to expand our capacity through significant capital additions. Forecasted customer demand for which we have made capital investments may not materialize, especially if industry conditions deteriorate. As a result, our sales may not adequately cover our substantial fixed costs resulting in reduced profit levels or causing significant losses, both of which may adversely impact our liquidity, results of operations, financial condition and cash flows. Guidance — Our Failure to Meet Our Guidance or Analyst Projections Could Adversely Impact the Trading Prices of Our Securities. We periodically provide guidance to investors with respect to certain financial information for future periods. Securities analysts also periodically publish their own projections with respect to our future operating results. As discussed above under "Fluctuations in Operating Results and Cash Flows — Our Operating Results and Cash Flows Have Varied and May Vary Significantly as a Result of Factors That We Cannot Control," our operating results and cash flows vary significantly and are difficult to accurately predict. Volatility in customer forecasts and reduced visibility caused by economic uncertainty and fluctuations in global consumer demand make it particularly difficult to predict future results. To the extent we fail to meet or exceed our own guidance or the analyst projections for any reason, the trading prices of our securities may be adversely impacted. Moreover, even if we do meet or exceed that guidance or those projections, the analysts and investors may not react favorably, and the trading prices of our securities may be adversely impacted. Declining Average Selling Prices — The Semiconductor Industry Places Downward Pressure on the Prices of Our Packaging and Test Services. Prices for packaging and test services have generally declined over time. Historically, we have been able to partially offset the effect of price declines by successfully developing and marketing new packages with higher prices, such as advanced leadframe and laminate packages, by negotiating lower prices with our material vendors, recovering material cost increases from our customers, and by driving engineering and technological changes in our packaging and test processes which resulted in reduced manufacturing costs. We expect general downward pressure on average selling prices for our packaging and test services in the future. If we are unable to offset a decline in average selling prices, by developing and marketing new packages with higher prices, reducing our purchasing costs, recovering more of our material cost increases from our customers and reducing our manufacturing costs, our business, liquidity, results of operations, financial condition and cash flows could be materially adversely affected. 17 Table of Contents Decisions by Our Integrated Device Manufacturer Customers to Curtail Outsourcing May Adversely Affect Our Business. Historically, we have been dependent on the trend in outsourcing of packaging and test services by integrated device manufacturers, or IDMs. Our IDM customers continually evaluate the outsourced services against their own in-house packaging and test services. As a result, at any time and for a variety of reasons, IDMs may decide to shift some or all of their outsourced packaging and test services to internally sourced capacity. The reasons IDMs may shift their internal capacity include: • • • • their desire to realize higher utilization of their existing test and packaging capacity, especially during downturns in the semiconductor industry; their unwillingness to disclose proprietary technology; their possession of more advanced packaging and test technologies; and the guaranteed availability of their own packaging and test capacity. Furthermore, to the extent we limit capacity commitments for certain customers, these customers may begin to increase their level of in-house packaging and test capabilities, which could adversely impact our sales and profitability and make it more difficult for us to regain their business when we have available capacity. Any shift or a slowdown in this trend of outsourcing packaging and test services is likely to adversely affect our business, liquidity, results of operations, financial condition and cash flows. In a downturn in the semiconductor industry, IDMs could respond by shifting some outsourced packaging and test services to internally serviced capacity on a short term basis. If we experience a significant loss of IDM business, it could have a material adverse effect on our business, liquidity, results of operations, financial condition and cash flows especially during a prolonged industry downturn. Our Substantial Indebtedness Could Adversely Affect Our Financial Condition and Prevent Us from Fulfilling Our Obligations. We have a significant amount of indebtedness. As of December 31, 2010, our total debt balance was $1,364.3 million, of which $150.1 million was classified as a current liability. In addition, despite current debt levels, the terms of the indentures governing our indebtedness allow us or our subsidiaries to incur more debt, subject to certain limitations. If new debt is added to our consolidated debt level, the related risks that we now face could intensify. Our substantial indebtedness could: • make it more difficult for us to satisfy our obligations with respect to our indebtedness, including our obligations under our indentures to purchase notes tendered as a result of a change in control of Amkor; increase our vulnerability to general adverse economic and industry conditions; limit our ability to fund future working capital, capital expenditures, research and development and other general corporate requirements; • • • require us to dedicate a substantial portion of our cash flow from operations to service payments on our debt; • • • place us at a competitive disadvantage to any of our competitors that have less debt; and • increase the volatility of the price of our common stock; limit our flexibility to react to changes in our business and the industry in which we operate; limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds. 18 Table of Contents We May Have Difficulty Funding Liquidity Needs We operate in a capital intensive industry. Servicing our current and future customers requires that we incur significant operating expenses and continue to make significant capital expenditures, which are generally made in advance of the related revenues and without any firm customer commitments. During 2010, we had capital additions of $504.5 million and in 2011, we currently expect to make capital additions of approximately $500 million. In addition, we have a significant level of debt, with $1,364.3 million outstanding at December 31, 2010, $150.1 million of which is current. The terms of such debt require significant scheduled principal payments in the coming years, including $150.1 million due in 2011, $82.1 million due in 2012, $236.1 million due in 2013, $281.6 million due in 2014, $5.1 million due in 2015 and $609.3 million due thereafter. The interest payments required on our debt are also substantial. For example, in 2010, we paid $96.6 million of interest. The sources funding our operations, including making capital expenditures and servicing principal and interest obligations with respect to our debt, are cash flows from our operations, current cash and cash equivalents, borrowings under available debt facilities, or proceeds from any additional debt or equity financing. As of December 31, 2010, we had cash and cash equivalents of $405.0 million and availability of $99.6 million under our $100.0 million senior secured revolving credit facility which matures in April 2015. We assess our liquidity based on our current expectations regarding sales, operating expenses, capital spending and debt service requirements. Based on this assessment, we believe that our cash flow from operating activities together with existing cash and cash equivalents will be sufficient to fund our working capital, capital expenditure and debt service requirements for at least the next twelve months. Thereafter, our liquidity will continue to be affected by, among other things, the performance of our business, our capital expenditure levels and our ability to repay debt out of our operating cash flow or refinance the debt with the proceeds of debt or equity offerings at or prior to maturity. Moreover, the health of the worldwide banking system and financial markets affects the liquidity in the global economic environment. Volatility in fixed income, credit and equity markets could make it difficult for us to maintain our existing credit facilities or refinance our debt. If our performance or access to the capital markets differs materially from our expectations, our liquidity may be adversely impacted. In addition, if we fail to generate the necessary net income or operating cash flows to meet the funding needs of our business beyond the next twelve months due to a variety of factors, including the cyclical nature of the semiconductor industry and the other factors discussed in this "Risk Factors" section, our liquidity would be adversely affected. Our Ability To Draw On Our Current Loan Facilities May Be Adversely Affected by Conditions in the U.S. and International Capital Markets. If financial institutions that have extended credit commitments to us are adversely affected by the conditions of the U.S. and international capital and credit markets, they may be unable to fund borrowings under their credit commitments to us. For example, we currently have a $100.0 million revolving credit facility with three banks in the U.S. If any of these banks are adversely affected by capital and credit market conditions and are unable to make loans to us when requested, there could be a corresponding adverse impact on our financial condition and our ability to borrow additional funds, if needed, for working capital, capital expenditures, acquisitions, research and development and other corporate purposes. Restrictive Covenants in the Indentures and Agreements Governing Our Current and Future Indebtedness Could Restrict Our Operating Flexibility. The indentures and agreements governing our existing debt, and debt we may incur in the future, contain, or may contain, affirmative and negative covenants that materially limit our ability to take certain actions, including our ability to incur debt, pay dividends and repurchase stock, make certain investments and other payments, enter into certain mergers and consolidations, engage in sale leaseback transactions and encumber and dispose of assets. The $671.1 million write-off of our goodwill at December 31, 2008 reduced our ability to pay dividends and repurchase stock and subordinated securities, including our convertible notes, due to defined calculations which include net income. In addition, our future debt agreements may contain financial covenants and ratios. 19 Table of Contents The breach of any of these covenants by us or the failure by us to meet any of these financial ratios or conditions could result in a default under any or all of such indebtedness. If a default occurs under any such indebtedness, all of the outstanding obligations thereunder could become immediately due and payable, which could result in a default under our other outstanding debt and could lead to an acceleration of obligations related to other outstanding debt. The existence of such a default or event of default could also preclude us from borrowing funds under our revolving credit facilities. Our ability to comply with the provisions of the indentures, credit facilities and other agreements governing our outstanding debt and indebtedness we may incur in the future can be affected by events beyond our control and a default under any debt instrument, if not cured or waived, could have a material adverse effect on us. We Have Significant Severance Plan Obligations Associated With Our Manufacturing Operations in Korea Which Could Reduce Our Cash Flow and Negatively Impact Our Financial Condition. We sponsor an accrued severance plan for our Korean subsidiary, under which we have an accrued liability of $88.6 million as of December 31, 2010. Under the Korean plan, eligible employees are entitled to receive a lump sum payment upon termination of their service based on their length of service, seniority and rate of pay at the time of termination. Since our severance plan obligation is significant, in the event of a significant layoff or other reduction in our labor force in Korea, payments under the plan could have a material adverse effect on our liquidity, financial condition and cash flows. In addition, existing tax laws in Korea limit our ability to currently deduct severance expenses associated with the current plan. These limitations are designed to encourage companies to migrate to a defined contribution or defined benefit plan. If we adopt a new plan retrospectively, we would be required to significantly fund the existing liability, which could have a material adverse effect on our liquidity, financial condition and cash flows. If we do not adopt a new plan, we will have to pay higher taxes which could adversely affect our liquidity, financial condition and cash flows. See Note 13 to our Consolidated Financial Statements in Part II, Item 8 to this Annual Report. If We Fail to Maintain an Effective System of Internal Controls, We May Not be Able to Accurately Report Financial Results or Prevent Fraud. Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. Any inability to provide reliable financial reports or prevent fraud could harm our business. We must annually evaluate our internal procedures to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires management and our independent registered public accounting firm to assess the effectiveness of internal control over financial reporting. As previously reported, we are implementing a new enterprise resource planning ("ERP") system in a multi-year program on a world-wide basis. During 2010, we implemented several significant ERP modules and expect to implement additional ERP modules in the future. The implementation of the ERP system represents a change in our internal control over financial reporting. Although we continue to monitor and assess our internal controls in the new ERP system environment as changes are made and new modules are implemented, and have taken additional steps to modify and enhance the design and effectiveness of our internal control over financial reporting, there is a risk that deficiencies may occur that could constitute significant deficiencies or in the aggregate a material weakness. If we fail to remedy any deficiencies or maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation. In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect our operating results or financial condition. We Face Product Return and Liability Risks, the Risk of Economic Damage Claims and the Risk of Negative Publicity if Our Packages Fail. Our packages are incorporated into a number of end products, and our business is exposed to product return and liability risks, the risk of economic damage claims and the risk of negative publicity if our packages fail. 20 Table of Contents In addition, we are exposed to the product and economic liability risks and the risk of negative publicity affecting our customers. Our sales may decline if any of our customers are sued on a product liability claim. We also may suffer a decline in sales from the negative publicity associated with such a lawsuit or with adverse public perceptions in general regarding our customers' products. Further, if our packages are delivered with impurities or defects, we could incur additional development, repair or replacement costs, suffer other economic losses and our credibility and the market's acceptance of our packages could be harmed. Absence of Backlog — The Lack of Contractually Committed Customer Demand May Adversely Affect Our Sales. Our packaging and test business does not typically operate with any material backlog. Our quarterly net sales from packaging and test services are substantially dependent upon our customers' demand in that quarter. None of our customers have committed to purchase any significant amount of packaging or test services or to provide us with binding forecasts of demand for packaging and test services for any future period, in any material amount. In addition, our customers often reduce, cancel or delay their purchases of packaging and test services for a variety of reasons including industry-wide, customer-specific and Amkor-related reasons. Since a large portion of our costs is fixed and our expense levels are based in part on our expectations of future revenues, we may not be able to adjust costs in a timely manner to compensate for any sales shortfall. If we are unable to do so, it would adversely affect our margins, operating results, financial condition and cash flows. If the decline in customer demand continues, our business, liquidity, results of operations, financial condition and cash flows will be materially and adversely affected. Risks Associated With International Operations — We Depend on Our Factories and Operations in China, Japan, Korea, the Philippines and Taiwan. Many of Our Customers' and Vendors' Operations Are Also Located Outside of the U.S. We provide packaging and test services through our factories and other operations located in China, Japan, Korea, the Philippines and Taiwan. Substantially all of our property, plant and equipment is located outside of the United States. Moreover, many of our customers' and vendors' operations are located outside the U.S. The following are some of the risks we face in doing business internationally: • changes in consumer demand resulting from deteriorating conditions in local economies; • regulatory limitations imposed by foreign governments, including limitations or taxes imposed on the payment of dividends and other payments by non-U.S. subsidiaries; • fluctuations in currency exchange rates; • political, military, civil unrest and terrorist risks, particularly an increase in tensions between South Korea and North Korea; • disruptions or delays in shipments caused by customs brokers or government agencies; • changes in regulatory requirements, tariffs, customs, duties and other restrictive trade barriers or policies; • difficulties in staffing, retention and employee turnover and managing foreign operations, including foreign labor disruptions; and • potentially adverse tax consequences resulting from changes in tax laws in the foreign jurisdictions in which we operate. Changes in the U.S. Tax Law Regarding Earnings Of Our Subsidiaries Located Outside the U.S. Could Materially Affect Our Future Results. There have been proposals to change U.S. tax laws that would significantly impact how U.S. corporations are taxed on foreign earnings. We earn a substantial portion of our income in foreign countries. Although we cannot predict whether or in what form this proposed legislation will pass, if enacted it could have a material adverse impact on our liquidity, results of operations, financial condition and cash flows. 21 Table of Contents Our Management Information Systems May Prove Inadequate — We Face Risks in Connection With Our Current Project to Install a New Enterprise Resource Planning System For Our Business. We depend on our management information systems for many aspects of our business. Some of our key software has been developed by our own programmers, and this software may not be easily integrated with other software and systems. We are making a significant investment to implement a new enterprise resource planning system to replace many of our existing systems. We face risks in connection with our current project to install a new enterprise resource system for our business. These risks include: • we may face delays in the design and implementation of the system; the cost of the system may exceed our plans and expectations; and • • disruptions resulting from the implementation of the system may impact our ability to process transactions and delay shipments to customers, impact our results of operations or financial condition, or harm our control environment. Our business could be materially and adversely affected if our management information systems are disrupted or if we are unable to improve, upgrade, integrate or expand upon our systems, particularly in light of our intention to continue to implement a new enterprise resource planning system over a multi-year program on a company-wide basis. We Face Risks Trying to Attract and Retain Qualified Employees to Support Our Operations. Our success depends to a significant extent upon the continued service of our key senior management and technical personnel, any of whom may be difficult to replace. Competition for qualified employees is intense, and our business could be adversely affected by the loss of the services of any of our existing key personnel, including senior management, as a result of competition or for any other reason. We evaluate our management team and engage in long-term succession planning in order to ensure orderly replacement of key personnel. We do not have employment agreements with our key employees, including senior management or other contracts that would prevent our key employees from working for our competitors in the event they cease working for us. We cannot assure you that we will be successful in our efforts to retain key employees or in hiring and properly training sufficient numbers of qualified personnel and in effectively managing our growth. Our inability to attract, retain, motivate and train qualified new personnel could have a material adverse effect on our business. Difficulties Consolidating and Evolving Our Operational Capabilities — We Face Challenges as We Integrate Diverse Operations. We have experienced, and expect to continue to experience, change in the scope and complexity of our operations primarily through facility consolidations, strategic acquisitions, joint ventures and other partnering arrangements and may continue to engage in such transactions in the future. For example, each business we have acquired had, at the time of acquisition, multiple systems for managing its own production, sales, inventory and other operations. Migrating these businesses to our systems typically is a slow, expensive process requiring us to divert significant amounts of resources from multiple aspects of our operations. These changes have strained our managerial, financial, plant operations and other resources. Future consolidations and expansions may result in inefficiencies as we integrate operations and manage geographically diverse operations. Dependence on Materials and Equipment Suppliers — Our Business May Suffer If the Cost, Quality or Supply of Materials or Equipment Changes Adversely. We obtain from various vendors the materials and equipment required for the packaging and test services performed by our factories. We source most of our materials, including critical materials such as leadframes, laminate substrates and gold wire, from a limited group of suppliers. Furthermore, we purchase the majority of our materials on a purchase order basis. From time to time, we enter into supply agreements, generally up to one year in duration, to guarantee supply to meet projected demand. Our business may be harmed if we cannot obtain materials and other supplies from our vendors in a timely manner, in sufficient quantities, in acceptable quality or at competitive prices. 22 Table of Contents We purchase new packaging and test equipment to maintain and expand our operations. From time to time, increased demand for new equipment may cause lead times to extend beyond those normally required by equipment vendors. For example, in the past, increased demand for equipment caused some equipment suppliers to only partially satisfy our equipment orders in the normal time frame or to increase prices during market upturns for the semiconductor industry. The unavailability of equipment or failures to deliver equipment could delay or impair our ability to meet customer orders. If we are unable to meet customer orders, we could lose potential and existing customers. Generally, we do not enter into binding, long-term equipment purchase agreements and we acquire our equipment on a purchase order basis, which exposes us to substantial risks. For example, changes in foreign currency exchange rates could result in increased prices for equipment purchased by us, which could have a material adverse effect on our results of operations. We are a large buyer of gold and other commodity materials including substrates and copper. The prices of gold and other commodities used in our business fluctuate. Historically, we have been able to partially offset the effect of commodity price increases through price adjustments to some customers and changes in our product designs, such as shorter, thinner, gold wire and migration to copper wire. However, we typically do not have long-term contracts that permit us to impose a price adjustment, and market conditions may limit our ability to do so. Significant price increases may adversely impact our gross margin in future quarters to the extent we are unable to pass along past or future commodity price increases to our customers. Loss of Customers — The Loss of Certain Customers May Have a Significant Adverse Effect on Our Operations and Financial Results. The loss of a large customer or disruption of our strategic partnerships or other commercial arrangements may result in a decline in our sales and profitability. Although we have approximately 225 customers, we have derived and expect to continue to derive a large portion of our revenues from a small group of customers during any particular period due in part to the concentration of market share in the semiconductor industry. Our ten largest customers together accounted for approximately 54.2%, 53.4% and 49.8% of our net sales in the years ended December 31, 2010, 2009 and 2008, respectively. No customer accounted for greater than 10% of our sales during 2010 or 2008. A single customer accounted for more than 10% of our sales during the year ended December 31, 2009. The demand for our services from each customer is directly dependent upon that customer's level of business activity, which could vary significantly from year to year. The loss of a large customer may adversely affect our sales and profitability. Our key customers typically operate in the cyclical semiconductor business and, in the past, order levels have varied significantly from period to period based on a number of factors. Our business is likely to remain subject to this variability in order levels, and we cannot assure you that these key customers or any other customers will continue to place orders with us in the future at the same levels as in past periods. The loss of one or more of our significant customers, or reduced orders by any one of them and our inability to replace these customers or make up for such orders could reduce our profitability. For example, our facility in Iwate, Japan, is primarily dedicated to a single customer, Toshiba Corporation. We have also invested in an unconsolidated affiliate, J-Devices Corporation, for which Toshiba is the primary customer. If we were to lose Toshiba as a customer or if it were to materially reduce its business with us, it could be difficult for us to find one or more new customers to utilize the capacity, which could have a material adverse effect on our operations and financial results. In addition, we have a long term supply agreement that expires in December 2013 with International Business Machines, or IBM. If we were to lose IBM as a customer, this could have a material adverse effect on our business, liquidity, results of operations, financial condition and cash flows. Capital Additions — We Make Substantial Capital Additions To Support the Demand Of Our Customers, Which May Adversely Affect Our Business If the Demand Of Our Customers Does Not Develop As We Expect or Is Adversely Affected. We make significant capital additions in order to service the demand of our customers. The amount of capital additions depends on several factors, including the performance of our business, our assessment of future industry and customer demand, our capacity utilization levels and availability, our liquidity position and the availability of 23 Table of Contents financing. Our ongoing capital addition requirements may strain our cash and short-term asset balances, and, in periods when we are expanding our capital base, we expect that depreciation expense and factory operating expenses associated with our capital additions to increase production capacity will put downward pressure on our gross margin, at least over the near term. Furthermore, if we cannot generate or raise additional funds to pay for capital additions, particularly in some of the advanced packaging and bumping areas, as well as research and development activities, our growth prospects and future profitability may be adversely affected. Our ability to obtain external financing in the future is subject to a variety of uncertainties, including: • our future financial condition, results of operations and cash flows; • general market conditions for financing activities by semiconductor companies; • volatility in fixed income, credit and equity markets; and • economic, political and other global conditions. The lead time needed to order, install and put into service various capital additions is often significant, and, as a result, we often need to commit to capital additions in advance of our receipt of firm orders or advance deposits based on our view of anticipated future demand with only very limited visibility. Although we seek to limit our exposure in this regard, in the past we have from time to time expended significant capital for additions for which the anticipated demand did not materialize for a variety of reasons, many of which were outside of our control. To the extent this occurs in the future, our business, liquidity, results of operations, financial condition and cash flows could be materially and adversely affected. In addition, during periods where customer demand exceeds our capacity, customers may transfer some or all of their business to other suppliers who are able to support their needs. To the extent this occurs, our business, liquidity, results of operations, financial condition and cash flows could be materially and adversely affected. Impairment Charges — Any Impairment Charges Required Under U.S. GAAP May Have a Material Adverse Effect on Our Net Income. Under U.S. GAAP, we review our long-lived assets including property, plant and equipment, intellectual property, and other intangibles for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors we consider include significant under-performance relative to expected historical or projected future operating results, significant negative industry or economic trends and our market capitalization relative to net book value. We may be required in the future to record a significant charge to earnings in our financial statements during the period in which any impairment of our long-lived assets is determined. Such charges have had and could have a significant adverse impact on our results of operations and our operating flexibility under our debt covenants. Litigation Incident to Our Business Could Adversely Affect Us. We have been a party to various legal proceedings, including those described in Note 15 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, and may be a party to litigation in the future. If an unfavorable ruling or outcome were to occur in this or future litigation, there could be a material adverse impact on our business, liquidity, results of operations, financial condition, cash flows and the trading price of our securities. We Could Suffer Adverse Tax and Other Financial Consequences if Taxing Authorities Do Not Agree with Our Interpretation of Applicable Tax Laws. Our corporate structure and operations are based, in part, on interpretations of various tax laws, including withholding tax, compliance with tax holiday requirements, application of changes in tax law to our operations and other relevant laws of applicable taxing jurisdictions. From time to time, the taxing authorities of the relevant jurisdictions may conduct examinations of our income tax returns and other regulatory filings. We cannot assure you that the taxing authorities will agree with our interpretations. To the extent they do not agree, we may seek to enter into settlements with the taxing authorities which require significant payments or otherwise adversely affect 24 Table of Contents our results of operations or financial condition. We may also appeal the taxing authorities' determinations to the appropriate governmental authorities, but we cannot be sure we will prevail. If we do not prevail, we may have to make significant payments or otherwise record charges (or reduce tax assets) that adversely affect our results of operations, financial condition and cash flows. Intellectual Property — Our Business Will Suffer if We Are Not Able to Develop New Proprietary Technology, Protect Our Proprietary Technology and Operate Without Infringing the Proprietary Rights of Others. The complexity and breadth of semiconductor packaging and test services are rapidly increasing. As a result, we expect that we will need to develop, acquire and implement new manufacturing processes and package design technologies and tools in order to respond to competitive industry conditions and customer requirements. Technological advances also typically lead to rapid and significant price erosion and may make our existing packages less competitive or our existing inventories obsolete. If we cannot achieve advances in package design or obtain access to advanced package designs developed by others, our business could suffer. The need to develop and maintain advanced packaging capabilities and equipment could require significant research and development and capital expenditures and acquisitions in future years. In addition, converting to new package designs or process methodologies could result in delays in producing new package types, which could adversely affect our ability to meet customer orders and adversely impact our business. We maintain an active program to protect and derive value from our investment in technology and the associated intellectual property rights. Intellectual property rights that apply to our various packages and services include patents, copyrights, trade secrets and trademarks. We have filed for and have obtained a number of patents in the U.S. and abroad the duration of which varies depending on the jurisdiction in which the patent was filed. While our patents are an important element of our intellectual property strategy, as a whole, we are not materially dependent on any one patent or any one technology. The process of seeking patent protection takes a long time and is expensive. There can be no assurance that patents will issue from pending or future applications or that, if patents are issued, the rights granted under the patents will provide us with meaningful protection or any commercial advantage. Any patents we do obtain may be challenged, invalidated or circumvented and may not provide meaningful protection or other commercial advantage to us. Some of our technologies are not covered by any patent or patent application. The confidentiality agreements on which we rely to protect these technologies may be breached and may not be adequate to protect our proprietary technologies. There can be no assurance that other countries in which we market our services will protect our intellectual property rights to the same extent as the U.S. Our competitors may develop, patent or gain access to know-how and technology similar to our own. In addition, many of our patents are subject to cross licenses, several of which are with our competitors. The semiconductor industry is characterized by frequent claims regarding patent and other intellectual property rights. If any third party makes an enforceable infringement claim against us or our customers, we could be required to: • discontinue the use of certain processes; • cease to provide the services at issue; • pay substantial damages; • develop non-infringing technologies; or • acquire licenses to the technology we had allegedly infringed. We may need to enforce our patents or other intellectual property rights, including our rights under patent and intellectual property licenses with third parties, or defend ourselves against claimed infringement of the rights of others through litigation, which could result in substantial cost and diversion of our resources. Furthermore, if we fail to obtain necessary licenses, our business could suffer. We have been involved in legal proceedings involving the acquisition and license of intellectual property rights, the enforcement of our existing intellectual property rights 25 Table of Contents or the enforcement of the intellectual property rights of others, including the arbitration proceeding filed against Tessera, Inc. and complaint filed and ongoing proceeding against Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd, and Carsem Inc., or collectively "Carsem", both of which are described in more detail in Note 15 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report. Unfavorable outcomes in any litigation matters involving intellectual property could result in significant liabilities and could have a material adverse effect on our business, liquidity, results of operations, financial condition and cash flows. The potential impact from the legal proceedings referred to in this Annual Report on our results of operations, financial condition and cash flows could change in the future. Packaging and Test — Packaging and Test Processes Are Complex and Our Production Yields and Customer Relationships May Suffer from Defects in the Services We Provide. Semiconductor packaging and test services are complex processes that require significant technological and process expertise. The packaging process is complex and involves a number of precise steps. Defective packages primarily result from: • contaminants in the manufacturing environment; • human error; • equipment malfunction; • changing processes to address environmental requirements; • defective raw materials; or • defective plating services. Testing is also complex and involves sophisticated equipment and software. Similar to most software programs, these software programs are complex and may contain programming errors or "bugs." The testing equipment is also subject to malfunction. In addition, the testing process is subject to operator error. These and other factors have, from time to time, contributed to lower production yields. They may also do so in the future, particularly as we adjust our capacity or change our processing steps. In addition, we must continue to expand our offering of packages to be competitive. Our production yields on new packages typically are significantly lower than our production yields on our more established packages. Our failure to maintain high standards or acceptable production yields, if significant and prolonged, could result in loss of customers, increased costs of production, delays, substantial amounts of returned goods and claims by customers relating thereto. Any of these problems could have a material adverse effect on our business, liquidity, results of operations, financial condition and cash flows. In addition, in line with industry practice, new customers usually require us to pass a lengthy and rigorous qualification process that may take several months. If we fail to qualify packages with potential customers or customers, our business, results of operations, financial condition and cash flows could be adversely affected. Competition — We Compete Against Established Competitors in the Packaging and Test Business as Well as Internal Customer Capabilities. The subcontracted semiconductor packaging and test market is very competitive. We face substantial competition from established packaging and test service providers primarily located in Asia, including companies with significant processing capacity, financial resources, research and development operations, marketing and other capabilities. These companies also have established relationships with many large semiconductor companies that are our current or potential customers. We also face competition from the internal capabilities and capacity of many of our current and potential IDM customers. In addition, we may in the future have to compete with companies (including semiconductor foundries) that may enter the market or offer new or emerging technologies that compete with our packages and services. 26 Table of Contents We cannot assure you that we will be able to compete successfully in the future against our existing or potential competitors or that our customers will not rely on internal sources for packaging and test services, or that our business, liquidity, results of operations, financial condition and cash flows will not be adversely affected by such increased competition. Environmental Regulations — Future Environmental Regulations Could Place Additional Burdens on Our Manufacturing Operations. The semiconductor packaging process uses chemicals, materials and gases and generates by products that are subject to extensive governmental regulations. For example, at our foreign facilities we produce liquid waste when semiconductor wafers are diced into chips with the aid of diamond saws, then cooled with running water. In addition, semiconductor packages have historically utilized metallic alloys containing lead (Pb) within the interconnect terminals typically referred to as leads, pins or balls. Federal, state and local laws and regulations in the U.S., as well as environmental laws and regulations in foreign jurisdictions, impose various controls on the storage, handling, discharge and disposal of chemicals used in our production processes and on the factories we occupy and are increasingly imposing restrictions on the materials contained in semiconductor products. We may become liable under environmental laws for the cost of cleanup of any disposal or release of hazardous materials arising out of our former or current operations, or otherwise as a result of the existence of hazardous materials on our properties. In such an event, we could be held liable for damages, including fines, penalties and the cost of investigations and remedial actions, and could also be subject to revocation of permits negatively affecting our operations. Public attention has focused on the environmental impact of semiconductor operations and the risk to neighbors of chemical releases from such operations and to the materials contained in semiconductor products. For example, the European Union's Restriction of Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive imposes strict restrictions on the use of lead and other hazardous substances in electrical and electronic equipment. In response to this directive, and similar laws and developing legislation in countries like China, Japan and Korea, we have implemented changes in a number of our manufacturing processes in an effort to achieve compliance across all of our package types. Complying with existing and possible future environmental laws and regulations, including laws and regulations relating to climate change, may impose upon us the need for additional capital equipment or other process requirements, restrict our ability to expand our operations, disrupt our operations, increase costs, subject us to liability or cause us to curtail our operations. Fire, Flood or Other Calamity — With Our Operations Conducted in a Limited Number of Facilities, a Fire, Flood or Other Calamity at one of Our Facilities Could Adversely Affect Us. We conduct our packaging and test operations at a limited number of facilities. Significant damage or other impediments to any of these facilities, whether as a result of fire, weather, the outbreak of infectious diseases (such as SARs or flu), civil strife, industrial strikes, breakdowns of equipment, difficulties or delays in obtaining materials and equipment, natural disasters, terrorist incidents, industrial accidents or other causes could temporarily disrupt or even shut down our operations, which would have a material adverse effect on our business, financial condition and results of operations. In the event of such a disruption or shutdown, we may be unable to reallocate production to other facilities in a timely or cost-effective manner (if at all) and may not have sufficient capacity to service customer demands in our other facilities. For example, our operations in Asia are vulnerable to regional typhoons that can bring with them destructive winds and torrential rains, which could in turn cause plant closures and transportation interruptions. In addition, some of the processes that we utilize in our operations place us at risk of fire and other damage. For example, highly flammable gases are used in the preparation of wafers holding semiconductor devices for flip chip packaging. While we maintain insurance policies for various types of property, casualty and other risks, we do not carry insurance for all the above referred risks and with regard to the insurance we do maintain, we cannot assure you that it would be sufficient to cover all of our potential losses. 27 Table of Contents Continued Control By Existing Stockholders — Mr. James J. Kim and Members of His Family Can Substantially Control The Outcome of All Matters Requiring Stockholder Approval. As of February 24, 2011, Mr. James J. Kim, our Executive Chairman of the Board of Directors, members of Mr. Kim's immediate family and affiliates owned approximately 87,899,000 shares, or approximately 44%, of our outstanding common stock. Approximately 13,351,000 of these shares (the "2013 Convert Shares") were acquired upon the conversion in January 2011 of all $100.0 million of our 6.25% Convertible Subordinated Notes due 2013. The Kim family also has options to acquire approximately 903,000 shares and owns $150.0 million of our 6.0% Convertible Senior Subordinated Notes due 2014 (the "2014 Notes") that are convertible into approximately 49,595,000 shares of common stock (the "2014 Convert Shares") at a conversion price of approximately $3.02 per share. If the options are exercised and the 2014 Notes are converted, the Kim family would own an aggregate of approximately 138,397,000 shares, or approximately 56%, of our outstanding common stock. The 2013 Convert Shares and the 2014 Convert Shares are each subject to separate voting agreements that require the Kim family to vote these respective shares in a "neutral manner" on all matters submitted to Amkor stockholders for a vote, so that such 2013 Convert Shares and 2014 Convert Shares are voted in the same proportion as all of the other outstanding securities (excluding the other shares owned by the Kim family) that are actually voted on a proposal submitted to Amkor's stockholders for approval. The Kim family is not required to vote in a "neutral manner" any 2013 Convert Shares or 2014 Convert Shares that, when aggregated with all other voting shares held by the Kim family, represent 41.6% or less of the total then-outstanding voting shares of Amkor common stock. The voting agreement for the 2013 Convert Shares terminates upon the earliest of (i) December 1, 2013, (ii) at such time as no principal amount of the 2013 Notes or any 2013 Convert Shares remain outstanding, (iii) a change of control transaction (as defined in the voting agreement), or (iv) the mutual agreement of the Kim family and Amkor. The voting agreement for the 2014 Convert Shares terminates upon the earliest of (i) such time as no principal amount of the 2014 Notes remains outstanding and the Kim family no longer beneficially own any of the 2014 Convert Shares, (ii) consummation of a change of control (as defined in the voting agreement), or (iii) the mutual agreement of the Kim family and Amkor. Subject to the requirements imposed by the voting agreements that the Kim family vote in a neutral manner any shares issued upon conversion of their convertible notes, Mr. James J. Kim and his family and affiliates, acting together, have the ability to effectively determine matters (other than interested party transactions) submitted for approval by our stockholders by voting their shares, including the election of all of the members of our Board of Directors. There is also the potential, through the election of members of our Board of Directors, that Mr. Kim's family could substantially influence matters decided upon by the Board of Directors. This concentration of ownership may also have the effect of impeding a merger, consolidation, takeover or other business consolidation involving us, or discouraging a potential acquirer from making a tender offer for our shares, and could also negatively affect our stock's market price or decrease any premium over market price that an acquirer might otherwise pay. Item 1B. Unresolved Staff Comments None. 28 Table of Contents Item 2. Properties We provide packaging and test services through our factories in China, Japan, Korea, the Philippines, Taiwan and the U.S. The size, location and manufacturing services provided by each of our factories are set forth in the table below. Location Korea Seoul, Korea(1) Pupyong, Korea(1) Gwangju, Korea(1) Philippines Muntinlupa, Philippines(2) Province of Laguna, Philippines(2) Taiwan Lung Tan, Taiwan(1) Hsinchu, Taiwan(1) China Shanghai, China(3) Japan Kitakami, Japan(4) United States Chandler, AZ(5) Approximate Factory Size (Square Feet) Services 698,000 404,000 1,007,000 Packaging services; package and process development Packaging and test services Packaging and test services; wafer bump services 749,000 625,000 Packaging and test services; package and process development Packaging and test services 417,500 426,000 Packaging and test services; wafer bump services Packaging and test services; wafer bump services 953,000 Packaging and test services; wafer bump services 211,000 Packaging and test services 5,000 Test process development; package and process development (1) Owned facility and land. (2) As a result of foreign ownership restrictions in the Philippines, the land associated with our Philippine factories is leased from realty companies in which we own a 40% interest. We own buildings comprising 1,223,000 square feet and lease the remaining 151,000 square feet from one of the aforementioned realty companies. (3) We own buildings comprising 953,000 square feet, of which approximately 530,000 square feet were facilitized with a clean room manufacturing environment and equipment as of December 31, 2010. All land is leased. During 2010, we consolidated our China packaging and test services into one facility and terminated the lease of our other facility. See Note 18 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report. (4) Leased facility. (5) Of the 5,000 square feet in the U.S., 2,000 square feet is owned facility and land, and 3,000 square feet is leased. We believe that our existing properties are in good condition and suitable for the conduct of our business and that the productive capacity of such properties is substantially being utilized or we have plans to utilize it. Our principal executive office and operational headquarters is located in Chandler, Arizona. In addition to executive staff, the Chandler, Arizona campus houses sales and customer service for the southwest region, product management, finance, information systems, planning and marketing. Our marketing and sales office locations include sites in the U.S. (Chandler, Arizona; Irvine, San Diego and Santa Clara, California; Boston, Massachusetts; Greensboro, North Carolina; and Dallas, Texas), China, France, Japan, Korea, the Philippines, Singapore and Taiwan. We also own a 165,000 square foot facility in Singapore (land is leased) that is held for sale following the relocation of operations to other locations in 2010. See Note 18 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report. Item 3. Legal Proceedings From time to time, we are involved in various disputes and litigation matters that arise in the ordinary course of our business. These include disputes and lawsuits related to intellectual property, acquisitions, licensing, contracts, tax, regulatory, employee relations and other matters. For a discussion of "Legal Proceedings," see Note 15 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report. 29 Table of Contents Item 4. Submission of Matters to a Vote of Security Holders None. PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities LISTING ON THE NASDAQ GLOBAL SELECT MARKET Our common stock is traded on the NASDAQ Global Select Market under the symbol "AMKR." The following table sets forth, for the periods indicated, the high and low sale prices per share of our common stock as quoted on the NASDAQ Global Select Market. 2010 First Quarter Second Quarter Third Quarter Fourth Quarter 2009 First Quarter Second Quarter Third Quarter Fourth Quarter High Low $ $ $ $ 7.55 8.81 6.80 7.78 3.23 5.02 7.57 7.70 5.47 5.45 5.05 6.06 1.60 2.55 4.12 5.33 There were approximately 331 holders of record of our common stock as of January 31, 2011. DIVIDEND POLICY Since our public offering in 1998, we have never paid a dividend to our stockholders and we do not have any present plans for doing so. In addition, our secured bank debt agreements and the indentures governing our senior and senior subordinated notes restrict our ability to pay dividends. Refer to the Liquidity and Capital Resources Section in Item 7 "Management's Discussion and Analysis." RECENT SALES OF UNREGISTERED SECURITIES None. EQUITY COMPENSATION PLANS The information required by this item regarding equity compensation plans is set forth in Part III, Item 12 "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" of this Annual Report on Form 10-K. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS None. 30 Table of Contents PERFORMANCE GRAPH(1) COMPARISON OF 5 YEAR Among Amkor Technology, Inc., The S&P 500 Index And The PHLX Semiconductor Index CUMULATIVE TOTAL RETURN* * $100 invested on 12/31/05 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright © 2011 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved. (1) The preceding Stock Performance Graph is not deemed filed with the Securities and Exchange Commission and shall not be incorporated by reference in any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 31 Table of Contents Item 6. Selected Consolidated Financial Data The following selected consolidated financial data as of December 31, 2010 and 2009 and for the years ended December 31, 2010, 2009 and 2008 have been derived from our audited Consolidated Financial Statements included in this Annual Report. The following selected consolidated financial data for the years ended December, 31, 2007 and 2006, and as of December 31, 2008, 2007 and 2006, have been derived from audited financial statements not included herein and, where applicable, such data was recast for the retrospective application of new accounting guidance for noncontrolling interests in a consolidated subsidiary, which we became subject to beginning January 1, 2009. You should read the selected consolidated financial data in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements, both of which are included in this Annual Report. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA 2010 2009 For the Year Ended December 31, 2008 (In thousands, except per share data) 2007 2006 Statement of Operations Data: Net sales Cost of sales(a) Gross profit Operating expenses: Selling, general and administrative Research and development Goodwill impairment(b) Gain on sale of real estate and specialty test operations(c) Total operating expenses Operating income (loss) Other expense: Interest expense Interest expense, related party Interest income Foreign currency loss (gain)(d) Loss (gain) on debt retirement, net(e) Equity in earnings of unconsolidated affiliates(f) Other (income) expense, net Total other expense, net Income (loss) before income taxes Income tax expense (benefit)(g) Net income (loss) Net (income) loss attributable to noncontrolling interests Net income (loss) attributable to Amkor Net income (loss) attributable to Amkor per common share: Basic Diluted Shares used in computing per common share amounts: Basic Diluted Other Financial Data: Depreciation and amortization Purchases of property, plant and equipment Cash dividends declared $ 2,939,483 $ 2,179,109 $ 2,658,602 $ 2,739,445 $ 2,728,560 2,053,600 674,960 1,698,713 480,396 2,057,572 681,873 2,275,727 663,756 2,096,864 561,738 242,424 47,534 — — 289,958 373,798 85,595 15,250 (2,950) 13,756 18,042 (6,435) (619) 122,639 251,159 19,012 232,147 (176) 231,971 $ 210,907 44,453 — (281) 255,079 225,317 102,396 13,000 (2,367) 3,339 (15,088) (2,373) (113) 98,794 126,523 (29,760) 156,283 (303) 155,980 $ 251,756 56,227 671,117 (9,856) 969,244 (407,506) 118,729 6,250 (8,749) (61,057) (35,987) — (1,004) 18,182 (425,688) 31,788 (457,476) 781 (456,695) $ 254,365 41,650 — (4,833) 291,182 390,691 133,896 6,250 (9,797) 8,961 15,876 — 668 155,854 234,837 12,597 222,240 (2,376) 219,864 $ 251,142 38,735 — — 289,877 385,083 161,682 6,477 (6,875) 13,255 27,389 — 661 202,589 182,494 11,208 171,286 (1,202) 170,084 1.26 $ 0.91 $ 0.85 $ 0.67 $ (2.50) $ (2.50) $ 1.22 $ 1.11 $ 0.96 0.90 183,312 282,602 183,067 263,379 182,734 182,734 180,597 208,767 323,608 $ 445,669 — 305,510 $ 173,496 — 309,920 $ 386,239 — 283,267 $ 236,240 — 177,682 199,556 273,845 315,873 — $ $ $ $ 32 Table of Contents 2010 2009 Year Ended December 31, 2008 (In thousands) 2007 2006 Balance Sheet Data: Cash and cash equivalents Working capital Total assets Total long-term debt Total debt, including short-term borrowings and current portion of long-term debt Additional paid-in capital Accumulated deficit Total Amkor stockholders' equity 244,694 $ 404,998 $ 289,859 215,095 2,736,822 2,432,909 2,383,993 3,192,606 3,041,264 1,214,219 1,345,241 1,438,751 1,611,570 1,819,901 424,316 $ 410,070 $ 306,174 310,341 395,406 $ 327,088 1,364,300 1,434,185 1,493,360 1,764,059 2,005,315 1,504,927 1,500,246 1,496,976 1,482,186 1,441,194 (890,270) (1,122,241) (1,278,221) (821,526) (1,041,390) 393,920 630,013 237,139 654,619 383,209 (a) During 2008, we recorded a charge of $61.4 million for unpaid royalties relating to the resolution of a patent license dispute, of which $49.0 million related to royalties for periods prior to 2008. (b) At December 31, 2008, we recorded a non-cash charge of $671.1 million to write off our remaining goodwill. (c) During 2009, we sold land and dormitory buildings in Korea and recorded a gain of $0.3 million. During 2008, we sold land and a warehouse in Korea and recorded a gain of $9.9 million. In 2007, we recorded a gain of $3.1 million in connection with the sale of real property in Korea used for administrative purposes. During 2007, we recognized a gain of $1.7 million related to an earn-out provision on the sale of our Wichita, Kansas specialty test operation. (d) We recognize foreign currency losses (gains) due to the remeasurement of certain of our foreign currency denominated monetary assets and liabilities. During 2008, the net foreign currency gain of $61.1 million is primarily attributable to the significant depreciation of the Korean won and the impact on the remeasurement of our Korean severance obligation. (e) During 2010, we recorded a net loss of $18.0 million related to several debt transactions. We recorded a net loss of $17.7 million related to the tender offer to purchase $125.7 million principal amount of our 9.25% Senior Notes due 2016 and the repurchase of an aggregate $411.8 million principal amount of our 7.125% Senior Notes due in 2011 and our 7.75% Senior Notes due in 2013. During 2009, we recorded a net gain of $15.1 million related to the repurchase of an aggregate $289.3 million principal amount of our 7.125% Senior Notes and 2.5% Convertible Senior Subordinated Notes due in 2011 and our 7.75% Senior Notes due in 2013. During 2008, we recorded a gain of $36.0 million related to the repurchase of an aggregate $118.3 million principal amount of our 7.125% senior notes and 2.5% convertible senior subordinated notes due 2011. In 2007, we recorded a loss of $15.9 million related to the refinancing of a second lien term loan. During 2006, we recorded a loss of $27.4 million related to the tender offer to purchase $352.3 million principal amount of our 9.25% senior notes due February 2008 and the repurchase of $178.1 million of our 10.5% senior subordinated notes due May 2009. (f) During 2009, we made a 30% equity investment in J-Devices Corporation, which was accounted for using the equity method. We recognized equity in earnings of $6.4 million and $2.4 million during 2010 and 2009, respectively. (g) Generally, our effective tax rate is substantially below the U.S. federal tax rate of 35% because we have experienced taxable losses in the U.S. and our income is taxed in foreign jurisdictions where we benefit from tax holidays or tax rates lower than the U.S. statutory rate. In 2009, a $25.6 million benefit for the release of a valuation allowance in Korea is included in the income tax benefit. In 2008, the $671.1 million goodwill impairment charge did not have a significant income tax benefit. Also, the 2008 income tax provision included a charge of $8.3 million for the establishment of a valuation allowance in Japan. 33 Table of Contents Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This report contains forward-looking statements within the meaning of the federal securities laws, including but not limited to statements regarding: (1) the amount and timing of our expected capital investments and focus on customer requirements, investments in technology advancements and cost reduction programs, (2) our ability to fund our operating activities for the next twelve months, (3) the effect of capacity utilization rates on our gross margin, (4) the expiration of tax holidays in jurisdictions in which we operate and expectations regarding our effective tax rate, (5) the release of valuation allowances related to taxes in the future, (6) the expected use of future cash flows, if any, for the expansion of our business, capital expenditures and the repayment of debt, (7) our repurchase or repayment of outstanding debt in the future, (8) payment of dividends, (9) compliance with our covenants, (10) expected contributions to defined benefit pension plans, (11) liability for unrecognized tax benefits, (12) expectations regarding inventory levels and recovery of related costs, (13) the effect of foreign currency exchange rate exposure on our financial results, (14) the volatility of the trading price of our common stock, (15) changes to our internal controls related to implementation of a new enterprise resource planning system, and (16) other statements that are not historical facts. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," "intend" or the negative of these terms or other comparable terminology. Because such statements include risks and uncertainties, actual results may differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those set forth in the following discussion as well as in Part I, Item 1A "Risk Factors" of this Annual Report. The following discussion provides information and analysis of our results of operations for the three years ended December 31, 2010 and our liquidity and capital resources. You should read the following discussion in conjunction with Item 8, "Financial Statements and Supplementary Data" in this Annual Report as well as other reports we file with the Securities and Exchange Commission ("SEC"). Overview Amkor is one of the world's leading providers of outsourced semiconductor packaging and test services. Packaging and test are integral steps in the process of manufacturing semiconductor devices. The semiconductor manufacturing process begins with the fabrication of tiny transistor elements into complex patterns of electronic circuitry on silicon wafers, thereby creating large numbers of individual semiconductor devices or integrated circuits on each wafer (generally referred to as "chips" or "die"). Each device on the wafer is tested and the wafer is cut into pieces called chips. The chips are attached through wire bonding to a substrate or leadframe, or to a substrate in the case of flip chip interconnect, and then encased in a protective material. For a wafer-level package, the electrical interconnections are created directly on the surface of the wafer without a substrate or leadframe. The packages are then tested using sophisticated equipment to ensure that each packaged chip meets its design and performance specifications. Our packages are designed based on application and chip specific requirements including the type of interconnection technology employed, size, thickness, and electrical, mechanical and thermal performance. We are able to provide turnkey packaging and test solutions including semiconductor wafer bump, wafer probe, wafer backgrind, package design, assembly, test and drop shipment services. Our customers include, among others: Altera Corporation; Broadcom Corporation; Infineon Technologies, AG; International Business Machines Corporation ("IBM"); LSI Corporation; Qualcomm Incorporated; Sony Corporation; ST Microelectronics, Pte.; Texas Instruments, Inc. and Toshiba Corporation. The outsourced semiconductor packaging and test market is very competitive. We also compete with the internal semiconductor packaging and test capabilities of many of our customers. Since the second half of 2009, the semiconductor industry has experienced increased consumer spending principally driven by the recovery from the global economic downturn. Our net sales increased $760.4 million or 34.9% to $2,939.5 million in 2010 from $2,179.1 million in 2009. The growth was driven by strong demand across all of our package families and end markets, particularly in our core markets for wireless communications, gaming and other consumer electronics. Our unit demand increased to 9.8 billion units in 2010 compared to 7.7 billion units in 2009, principally driven by the strength of leadframe and chip scale packaging services. 34 Table of Contents Gross margin for 2010 increased to 22.6% from 22.0% in 2009. The increase in gross margin was primarily due to higher levels of utilization and efficiencies driven by increased customer demand for all of our packaging services and the corresponding increase in net sales. Partially offsetting this increase were negative impacts from an increase in manufacturing costs, unfavorable foreign currency movements and higher gold prices. In addition, during 2010 we recorded charges of $4.1 million in cost of sales relating to workforce reduction programs and other restructuring activity compared to $16.9 million during 2009. Net income for 2010 was $232.0 million, or $0.91 per diluted share, compared with net income in 2009 of $156.0 million, or $0.67 per share. The increase was primarily attributable to increased revenues and gross profit in 2010, and was partially offset by increased income tax expense and a loss on debt retirement. In 2010, our capital additions totaled $504.5 million or 17% of net sales compared to $197.7 million or 9% of net sales in 2009. We expect our 2011 capital additions to be approximately $500 million. Capital additions are generally focused on specific customer requirements, technology advancements and infrastructure projects. In 2010, 63% of our capital additions spending went toward our packaging capabilities, 19% for test, and 18% for research and development and infrastructure projects. We generated $96.9 million of free cash flow in the year ended December 31, 2010, an increase of $8.7 million from the prior year. Cash provided by operating activities was $542.6 million for the year ended December 31, 2010, compared with $261.7 million for the year ended December 31, 2009. The increase is primarily attributable to higher levels of demand and gross profit in 2010 as well as payments of $160.8 million in the 2009 period for employee benefit and separation payments and the resolution of a patent license dispute. The increase in operating cash flow was partially offset by higher purchases of property, plant and equipment in 2010. We define free cash flow as net cash provided by operating activities less investing activities related to the acquisition of property, plant and equipment. Free cash flow is not defined by U.S. generally accepted accounting principles ("U.S. GAAP") and a reconciliation of free cash flow to net cash provided by operating activities is set forth under the caption "Cash Flows" below. Please see "Liquidity and Capital Resources" and "Cash Flows" below for a further analysis of the change in our balance sheet and cash flows during the year ended December 31, 2010. We believe our financial position and liquidity are sufficient to fund our operating activities for at least the next twelve months. At December 31, 2010, our cash and cash equivalents totaled approximately $405.0 million, with an aggregate of $150.1 million of debt maturities due through the end of 2011. In May 2010, we issued $345.0 million of our 7.375% Senior Notes due 2018. We used the net proceeds of that note issuance, together with existing cash, to redeem in full the $53.5 million outstanding principal amount of our 7.125% Senior Notes due 2011 and the $358.3 million principal amount of our 7.75% Senior Notes due 2013, and to pay related fees and expenses during the three months ended June 30, 2010. In May 2010, we entered into a $180.0 million, three-year secured term loan in Korea, the proceeds of which were used to purchase $125.7 million of our 9.25% Senior Notes due 2016. In July 2010, we repaid $47.0 million of the Korean term loan. In September 2010, we amended our $100.0 million senior secured revolving credit facility and extended its term by two years to April 2015. In December 2010, we announced a call for redemption of the entire $100.0 million aggregate principal amount of our 6.25% Convertible Subordinated Notes due December 2013 (the "December 2013 Notes"). Holders of all $100.0 million of the outstanding December 2013 Notes converted their notes into an aggregate of 13,351,131 shares of our common stock in January 2011. 35 Table of Contents Results of Operations The following table sets forth certain operating data as a percentage of net sales for the periods indicated: Net sales Gross margin Depreciation and amortization Operating income (loss) Income (loss) before income taxes Net income (loss) attributable to Amkor Net Sales 2010 100.0% 22.6% 11.0% 12.7% 8.5% 7.9% Year Ended December 31, 2009 100.0% 22.0% 14.0% 10.3% 5.8% 7.2% 2008 100.0% 21.1% 11.7% (15.3)% (16.0)% (17.2)% Net sales $ 2,939,483 $ 2,179,109 $ 2,658,602 $ 760,374 34.9% $ (479,493) (18.0)% 2010 2009 2008 2010 over 2009 (In thousands, except percentages) Change 2009 over 2008 Packaging net sales Test net sales 2,650,257 288,871 1,933,600 245,237 2,343,514 314,299 716,657 37.1% 43,634 17.8% (409,914) (69,062) (17.5)% (22.0)% Net Sales. Net sales in 2010 increased compared to 2009 primarily driven by the recovery of the semiconductor industry and improved consumer spending across all of our end markets, resulting in an increase in demand for substantially all product lines in our packaging and test services. Chip scale packages increased due to demand for flip chip and 3-D stacking technologies that support wireless data and smart phones. Ball grid array packages increased as demand for gaming, HDTVs, other consumer electronics and networking applications increased. Net sales in 2009 decreased compared to 2008 due to the general decline in demand and inventory management efforts by our customers as a result of the global economic recession and weakness in consumer spending. As a result, we experienced a broad-based decline in demand across our packaging and test business. Packaging Net Sales. Packaging net sales in 2010 increased compared to 2009. Packaging unit volume increased 2.1 billion units in 2010 to 9.8 billion units, compared to 7.7 billion units in 2009, primarily attributable to increased demand for our leadframe and chip scale packaging services. The increase in demand is due to the recovery of the semiconductor industry and improved consumer spending following the recent global economic downturn. Growth in ball grid array and chip scale packaging solutions with higher average sales prices per unit also contributed to the overall growth in net sales from 2009. Packaging net sales in 2009 decreased compared to 2008 because of the broad-based decline in demand across our package offerings. Packaging unit volume decreased 0.9 billion units in 2009 to 7.7 billion units, compared to 8.6 billion units in 2008 due to the same broad-based decline in demand. Test Net Sales. Test net sales in 2010 increased compared to 2009, while test net sales in 2009 decreased compared to 2008. The financial crisis and global recession that began in 2008 caused a significant decrease in demand for our services, including test, during the second half of 2008 through the first half of 2009. Subsequently, in the second half of 2009 and in 2010, demand increased due to the recovery of the semiconductor industry and improved consumer spending following the recent global economic downturn. Cost of Sales Cost of sales $ 2,275,727 $ 1,698,713 $ 2,096,864 $ 577,014 34.0% $ (398,151) (19.0)% 2010 2009 2008 2010 over 2009 2009 over 2008 (In thousands, except percentages) Change 36 Table of Contents Our cost of sales consists principally of materials, labor, depreciation and manufacturing overhead. Since a substantial portion of the costs at our factories is fixed, relatively modest increases or decreases in capacity utilization rates can have a significant effect on our gross margin. Material costs as a percentage of net sales increased to 42.6% in 2010 from 39.7% in 2009 primarily due to a higher mix of ball grid array packages with higher material content as a percentage of net sales and the increased cost of gold used in many of our wirebond packages. Material costs as a percentage of net sales increased to 39.7% in 2009 from 38.0% in 2008 due to change in mix to packages with higher material content as a percentage of net sales. As a percentage of net sales, labor costs decreased to 12.7% in 2010 from 13.5% in 2009. The decrease in labor costs as a percentage of net sales was due primarily to higher levels of utilization and efficiencies driven by increased customer demand and the corresponding increase in net sales. Labor costs in absolute dollars increased in 2010 partially due to an increase in our global labor headcount to approximately 19,900 employees at December 31, 2010 compared to 18,200 employees at December 31, 2009, the restoration in 2010 of the compensation cost reductions from 2009 and the expiration of other temporary cost reduction initiatives, such as foreign subsidy programs, which were available and utilized in 2009. As substantially all of our manufacturing operations workforce is paid in local currencies, labor costs were also negatively impacted by foreign currency exchange rate movements in 2010 compared to 2009. Labor costs in 2010 included a charge of $3.7 million related to workforce reduction programs associated with the wind-down and exit of manufacturing operations in Singapore and special termination benefits related to a voluntary early retirement program in Korea compared to a $10.1 million charge in 2009 for workforce reduction programs. As a percentage of net sales, labor costs decreased to 13.5% in 2009 from 15.3% in 2008. The decrease in labor costs was due primarily to savings from our workforce reduction activities and other cost savings initiatives implemented during 2008 and 2009. We also had a favorable foreign currency effect on labor costs resulting from the depreciation of the Korean won and other currencies against the U.S. dollar in 2008. In addition, labor costs in 2009 included a charge of $10.1 million related to workforce reduction programs and the wind-down and exit of manufacturing operations in Singapore compared to $12.2 million in 2008 for workforce reduction programs. As a percentage of net sales, other manufacturing costs decreased to 22.1% in 2010 from 24.7% in 2009 due to higher levels of utilization and efficiencies driven by increased customer demand and the corresponding increase in net sales. The increase in other manufacturing costs in absolute dollars was primarily attributable to higher levels of production in our factories, resulting in increased costs for repairs and maintenance, supplies, facilities, and utilities, and to increased depreciation as a result of the higher level of capital spending during 2010. The increase was partially offset by a decrease in charges related to the wind-down and exit of manufacturing operations in Singapore from $6.8 million in 2009 to $0.3 million in 2010, as well as a decrease in asset impairment charges from $6.0 million in 2009 to $1.4 million in 2010. As a percentage of net sales, other manufacturing costs decreased to 24.7% in 2009 from 25.6% in 2008. In 2009, we had reductions in other manufacturing costs due to cost savings initiatives and lower volumes such as a decrease in factory supplies and repair and maintenance expenses. Included in other manufacturing costs for 2008 is a charge of $61.4 million for royalties related to the resolution of a patent license dispute. Asset impairment charges included in 2009 were $6.0 million compared to $12.1 million in 2008. In 2009, other manufacturing costs also include a charge of $6.8 million related to the wind-down and exit of manufacturing operations in Singapore. Gross Profit Gross profit Gross margin $ 663,756 $ 22.6% 480,396 (In thousands, except percentages) 561,738 $ $ 22.0% 21.1% 183,360 $ 0.6% (81,342) 0.9% 2010 2009 2008 2010 over 2009 2009 over 2008 Change Gross profit and gross margin in 2010 increased compared to 2009. The increase was primarily due to higher levels of utilization and efficiencies driven by increased customer demand for all of our packaging and test services and the corresponding increase in net sales. Several factors partially offset the increase from customer demand. Our 37 Table of Contents material costs were impacted by a higher mix of ball grid array packaging services with higher material content and the increased cost of gold used in many of our wirebond packages. We experienced increased labor costs to meet our customer demands, including additional headcount and restoration of compensation costs and other temporary cost reduction initiatives implemented in 2009. Other manufacturing costs increased in support of higher customer demand, including increased depreciation expense resulting from increased investment and capital spending activities. In addition, gross profit and gross margin were negatively impacted by foreign currency exchange rate movements in 2010. Gross profit in 2009 decreased compared to 2008. Gross margin in 2009 increased from 2008. Included in cost of sales for 2008 are $61.4 million for royalties related to the resolution of a patent license dispute. Gross profit in 2009 included $16.9 million related to workforce reduction programs and the wind-down and exit of manufacturing operations in Singapore compared to $12.2 million in 2008 for workforce reduction programs. The decrease in gross profit due to lower volumes was partially mitigated by cost controls and the favorable foreign currency effect on labor costs due to the depreciation of the Korean won. 2010 2009 2008 2010 over 2009 2009 over 2008 Change Packaging gross profit Packaging gross margin $ 584,190 $ 429,295 (In thousands, except percentages) 472,986 $ $ 22.0% 22.2% 20.2% 154,895 $ (0.2) % (43,691) 2.0% Packaging Gross Profit. Gross profit for packaging in 2010 increased compared to 2009. Gross margin for packaging in 2010 remained consistent with 2009. The increase in gross profit was primarily attributable to increased customer demand resulting from the recovery of the semiconductor industry. Gross profit for packaging in 2009 decreased compared to 2008. Packaging gross margin in 2009 increased compared to 2008. Included in cost of sales for 2008 is $61.4 million for royalties related to the resolution of a patent license dispute. The packaging gross profit decrease in 2009 was due to the broad-based decline in product demand across our package offerings partially offset by cost control and a favorable foreign currency effect on labor costs due to the depreciation of the Korean won. 2010 2009 2008 2010 over 2009 2009 over 2008 (In thousands, except percentages) Change Test gross profit Test gross margin $ 79,621 $ 27.6% 57,652 $ 23.5% 88,645 28.2% $ 21,969 $ 4.1% (30,993) (4.7) % Test Gross Profit. Gross profit and gross margin for test in 2010 increased compared to 2009. The increase is attributable to increased customer demand and higher utilization of our test assets. Costs of sales for test are primarily fixed, with low material requirements. As utilization rates increase, we benefit from a higher degree of operating leverage. Gross profit and gross margin for test in 2009 decreased compared to 2008. The decrease was due to lower net sales due to reduced demand partially offset by labor savings from our workforce reduction activities and cost control initiatives. Selling, General and Administrative Expenses 2010 2009 2008 2010 over 2009 (In thousands, except percentages) Change 2009 over 2008 Selling, general and administrative $ 242,424 $ 210,907 $ 251,756 $ 31,517 14.9% $ (40,849) (16.2)% Selling, general and administrative expenses in 2010 increased compared to 2009. The increase was primarily driven by the reinstatement of employee compensation and benefit costs that had been reduced in 2009 as part of our cost reduction initiatives during the global economic downturn, as well as an increase in depreciation expense associated with the implementation of our global enterprise resource planning information system. Selling, general and administrative expenses in 2009 decreased compared to 2008. The decrease was primarily caused by lower salaries and benefits in both our factories and corporate offices and other cost reduction initiatives. 38 Table of Contents Research and Development 2010 2009 2008 (In thousands, except percentages) 2010 over 2009 Change 2009 over 2008 Research and development $ 47,534 $ 44,453 $ 56,227 $ 3,081 6.9% $ (11,774) (20.9)% Research and development activities are currently focused on developing new package interconnect solutions and test services and improving the efficiency and capabilities of our existing production processes. Our key areas for research and development initiatives are focused on 3D packaging, advanced flip chip packaging, advanced micro-electromechanical system packaging and testing, fine pitch copper pillar bumping and packaging, laminate and leadframe packaging, Through Mold Via and Through Silicon Via technologies, wafer level fan out technology, wafer level processing, and other manufacturing cost reduction initiatives. Research and development expenses in 2010 increased compared to 2009. As a percentage of net sales, research and development expenses decreased to 1.6% in 2010 compared to 2.0% in 2009. Increased research and development expenses were due to increased activity and reinstatement of employee compensation and benefit costs. During 2009 we recorded an impairment charge of $2.6 million related to certain research and development equipment, which did not recur in 2010. Despite the global economic recession, we continued to invest in research and development activities focused on advanced laminate, flip chip and wafer level packaging services. Research and development expenses in 2009 decreased compared to 2008. As a percentage of net sales, research and development expenses decreased to 2.0% in 2009 compared to 2.1% in 2008. The decrease was primarily due to lower salaries and benefits partially offset by a $2.6 million impairment charge in 2009 related to certain research and development equipment. Goodwill Impairment 2010 2009 2008 2010 over 2009 2009 over 2008 (In thousands, except percentages) Change Goodwill impairment $ — $ — $ 671,117 $ — 0.0% $ (671,117) (100.0)% We recorded a goodwill impairment charge in the amount of $671.1 million in 2008 to write off the entire carrying value of our goodwill. This non-cash charge had no impact on liquidity or cash flows from operations. Gain on Sale of Real Estate 2010 2009 2008 2010 over 2009 2009 over 2008 Change Gain on sale of real estate $ — $ (281) $ (In thousands, except percentages) (281) (9,856) $ (100.0)% $ (9,575) (97.1)% During 2009, we sold land and dormitory buildings in Korea for $0.8 million in proceeds and reported a gain of $0.3 million, with no net tax effect. During 2008, we sold land and a warehouse in Korea for $14.3 million in cash and recorded a gain of $9.9 million, with no net tax effect. Other Expense, Net Other expense, net $ 122,639 $ 98,794 $ 2010 2009 2008 (In thousands, except percentages) 18,182 $ 23,845 2010 over 2009 Change 2009 over 2008 24.1% $ 80,612 443.4% Other expense, net in 2010 increased compared to 2009. This increase was driven by an increase in debt retirement costs. During 2010, we recorded $18.0 million of debt retirement costs related to the debt transactions described in the Overview. During 2009, we recorded a net gain of $15.1 million related to the repurchase of an aggregate $289.3 million principal amount of our 7.125% Senior Notes due 2011, our 2.5% Convertible Senior Subordinated Notes due 2011 and our 7.75% Senior Notes due in 2013. Also during 2010, we recorded a $13.8 million foreign currency loss from the remeasurement of certain subsidiaries' balance sheet items compared to a $3.3 million foreign currency loss in 2009. Partially offsetting the increase is a reduction in net interest expense 39 Table of Contents of $15.1 million during 2010 compared with the prior year resulting from our recent financing activities. In addition, during 2010 we recorded $6.4 million in earnings from an unconsolidated affiliate, J-Devices Corporation, compared to $2.4 million during 2009. Our investment in the unconsolidated affiliate was made in October 2009. Other expense, net in 2009 increased compared to 2008. This increase was primarily the result of a $3.3 million foreign currency loss recorded in 2009 compared to a $61.1 million foreign currency gain recorded in 2008. In addition, in 2009, we recognized a gain of $15.1 million related to the repurchase of debt, compared to a gain of $36.0 million on debt repurchases in 2008. The $9.6 million reduction in interest expense in 2009, including related party interest expense, is due to reduced debt and the refinancing of certain debt with lower rate instruments. Interest expense in 2008 also included $3.3 million of interest related to the resolution of a patent license dispute that did not recur in 2009. Income Tax Expense (Benefit) 2010 2009 2008 2010 over 2009 2009 over 2008 Change Income tax expense (benefit) $ 19,012 $ (29,760) $ (In thousands, except percentages) 31,788 $ 48,772 163.9% $ (61,548) (193.6)% Generally, our effective tax rate is substantially below the U.S. federal tax rate of 35% because we have experienced taxable losses in the U.S. and our income is taxed in foreign jurisdictions where we benefit from tax holidays or tax rates lower than the U.S. statutory rate. Income tax expense in 2010 is attributable to profits in certain of our taxable foreign jurisdictions, $5.4 million of net additions to estimates of our uncertain tax positions, foreign withholding taxes and minimum taxes partially offset by a $3.0 million income tax benefit from the release of a valuation allowance related to certain deferred tax assets in Taiwan. The income tax benefit for 2009 included a $25.6 million income tax benefit for the release of a valuation allowance on the net deferred tax assets of our Korean subsidiary, $9.4 million of income tax credits, and an income tax benefit of $3.0 million related to changes in estimates of our uncertain tax positions. These benefits were partially offset by $6.2 million of income tax expense attributable to income taxes in certain profitable foreign jurisdictions, foreign withholding taxes and minimum taxes. Income tax expense in 2008 is attributable to profits in certain of our taxable foreign jurisdictions and changes in estimates of our uncertain tax positions, as well as a charge of $8.3 million for the establishment of a valuation allowance related to certain deferred tax assets in Japan. During 2010, our subsidiaries in China, Korea, the Philippines, Singapore and Taiwan operated under tax holidays which will expire in whole or in part at various dates through 2015. We expect our effective tax rate to increase as the tax holidays expire and income from these jurisdictions is subject to higher statutory income tax rates. See Note 4 to our Consolidated Financial Statements included in Item 8 of this Annual Report for a further discussion of income tax holidays. At December 31, 2010, we had U.S. net operating loss carryforwards totaling $386.0 million which expire at various times through 2030. Additionally, at December 31, 2010, we had $81.3 million of non-U.S. net operating loss carryforwards, which expire at various times through 2020. We maintain a valuation allowance on all of our U.S. net deferred tax assets, including our net operating loss carryforwards, and on deferred tax assets in certain foreign jurisdictions. We will release such valuation allowances as the related tax benefits are realized on our tax returns or when sufficient positive evidence exists to conclude that it is more likely than not that the deferred tax assets will be realized. Quarterly Results The following table sets forth our unaudited consolidated financial data for the last eight quarters ended December 31, 2010. Our results of operations have varied and may continue to vary from quarter to quarter and are not necessarily indicative of the results of any future period. The financial crisis and global recession that began in 2008 caused a significant decrease in demand for our services during the first half of 2009. Since the second half of 40 Table of Contents 2009, the semiconductor industry has experienced increased consumer spending principally driven by the recovery from the global economic downturn. We believe that we have included all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of our selected quarterly data. You should read our selected quarterly data in conjunction with our Consolidated Financial Statements and the related notes, included in Item 8 "Financial Statements and Supplementary Data" of this Annual Report. Our net sales, gross profit and operating income are generally lower in the first quarter of the year as compared to the fourth quarter of the preceding year primarily due to the effect of consumer buying patterns in the U.S., Europe and Asia. Semiconductor companies in the U.S. generally reduce their production during the holidays at the end of December which results in a decrease in units for packaging and test services during the first two weeks of January. The calculation of basic and diluted per share amounts for each quarter is based on the weighted average shares outstanding for that period; consequently, the sum of the quarters may not necessarily be equal to the full year basic and diluted net income per share. Dec. 31, 2010 Sept. 30, 2010 June 30, 2010 March 31, 2010 Dec. 31, 2009 Sept. 30, 2009 June 30, 2009 March 31, 2009 For the Quarter Ended Net sales Cost of sales Gross profit Operating expenses: Selling, general and administrative Research and development Total operating expenses Operating income (loss) Other expense, net Income (loss) before income taxes Income tax expense (benefit) Net income (loss) Net (income) loss attributable to noncontrolling interests Net income (loss) attributable to Amkor Net income (loss) attributable to Amkor per common share: Basic Diluted $ $ Liquidity and Capital Resources $ 750,609 $ 591,266 159,343 793,971 $ 605,713 188,258 (In thousands, except per share data) 667,612 $ 492,258 175,354 645,738 $ 508,782 136,956 749,165 $ 569,966 179,199 616,205 $ 461,589 154,616 506,516 $ 404,129 102,387 62,037 11,097 73,134 86,209 25,390 60,819 10,058 50,761 (157) 50,604 $ 57,735 12,669 70,404 117,854 29,163 88,691 10,321 78,370 (350) 78,020 $ 66,356 12,095 78,451 100,748 43,005 57,743 (1,200) 58,943 107 59,050 $ 56,296 11,673 67,969 68,987 25,081 43,906 (167) 44,073 224 44,297 $ 54,640 10,907 65,547 109,807 25,745 84,062 (3,820) 87,882 104 87,986 $ 53,473 13,364 66,837 87,779 37,637 50,142 (30,854) 80,996 (133) 80,863 $ 52,445 10,035 62,480 39,907 28,710 11,197 1,833 9,364 (141) 9,223 $ 388,776 340,737 48,039 50,068 10,147 60,215 (12,176) 6,702 (18,878) 3,081 (21,959) (133) (22,092) 0.28 $ 0.20 0.42 $ 0.30 0.32 $ 0.23 0.24 $ 0.18 0.48 $ 0.33 0.44 $ 0.31 0.05 $ 0.05 (0.12) (0.12) We assess our liquidity based on our current expectations regarding sales, operating expenses, capital spending and debt service requirements. Based on this assessment, we believe that our cash flow from operating activities together with existing cash and cash equivalents and availability under our revolving credit facility will be sufficient to fund our working capital, capital expenditure and debt service requirements for at least the next twelve months. Thereafter, our liquidity will continue to be affected by, among other things, volatility in the global economy and credit markets, the performance of our business, our capital expenditure levels and our ability to either repay debt out of operating cash flow or refinance at or prior to maturity with the proceeds of debt or equity offerings. There is no assurance that we will generate the necessary net income or operating cash flows to meet the funding needs of our 41 Table of Contents business beyond the next twelve months due to a variety of factors, including the cyclical nature of the semiconductor industry and other factors discussed in Part I, Item 1A "Risk Factors." Our primary source of cash and the source of funds for our operations are cash flows from our operations, current cash and cash equivalents, borrowings under available debt facilities, or proceeds from any additional debt or equity financings. As of December 31, 2010, we had cash and cash equivalents of $405.0 million and availability of $99.6 million under our $100.0 million first lien senior secured revolving credit facility. Cash provided by operating activities was $542.6 million for the year ended December 31, 2010 compared to $261.7 million for the year ended December 31, 2009. We expect cash flows to be used in the operation and expansion of our business, making capital expenditures, paying principal and interest on our debt and for other corporate purposes. We operate in a capital intensive industry. Servicing our current and future customers requires that we incur significant operating expenses and make significant capital expenditures, which are generally made in advance of the related revenues and without any firm customer commitments. We have a significant amount of indebtedness. Total debt decreased to $1,364.3 million at December 31, 2010 from $1,434.2 million at December 31, 2009. Our indebtedness requires us to dedicate a substantial portion of our cash flow from operations to pay our debt. The interest payments required on our debt are substantial. During 2009, we implemented cost reduction measures including lowering executive and other employee compensation, reducing employee and contractor headcount, and shortening work weeks. As capacity utilization increased in the second half of 2009 and into 2010, labor and other overhead costs increased. During 2010, executive and other employee compensation has been restored from reduced levels in 2009 and we have reversed other temporary cost reduction initiatives. We sponsor an accrued severance plan for our Korean subsidiary which, under recently enacted tax laws in Korea, limits our ability to currently deduct related severance expenses accrued under that plan. The purpose of these limitations is to encourage companies to migrate to a defined contribution or defined benefit retirement plan. If we decide to adopt a new plan, we would be required to fund a substantial portion of the existing liability. Our Korean severance liability was $88.6 million as of December 31, 2010. Debt Instruments and Related Covenants In order to reduce leverage and future cash interest payments, we may from time to time repurchase or call our outstanding notes for cash or exchange shares of our common stock for our outstanding notes. Any such transaction may be made in the open market, through privately negotiated transactions or pursuant to the terms of the indentures, and these transactions, are subject to the terms of our indentures and other debt agreements, market conditions, and other factors. In March 2010, we entered into two term loans totaling 3.5 billion yen (approximately $39 million at inception) with two Japanese banks. The proceeds of the term loans were used to repay two revolving lines of credit in Japan and for general corporate purposes. In April 2010, we entered into a 1.5 billion Taiwan dollar (approximately $47 million at inception) term loan with a Taiwanese bank primarily to fund capital expenditures. In May 2010, we issued $345.0 million of our 7.375% Senior Notes due 2018. We used the proceeds of that note issuance, together with existing cash, to redeem in full the $53.5 million outstanding principal amount of our 7.125% Senior Notes due 2011 and the $358.3 million principal amount of our 7.75% Senior Notes due 2013, and to pay related fees and expenses during the three months ended June 30, 2010. In May 2010, we entered into a $180.0 million, three-year secured term loan in Korea, the proceeds of which were used to purchase $125.7 million of our 9.25% Senior Notes due 2016. In July 2010, we repaid $47.0 million of the Korean term loan. In September 2010, we amended our $100.0 million senior secured revolving credit facility and extended its term by two years to April 2015. 42 Table of Contents Our December 2013 Notes became callable in December 2010. In December, 2010, we announced a call for redemption of the entire $100.0 million aggregate principal amount of the December 2013 Notes. Holders of all $100.0 million of the outstanding December 2013 Notes converted their notes into an aggregate of 13,351,131 shares of our common stock in January 2011. Our 9.25% Senior Notes due 2016 will become callable in June 2011. The interest payments required on our debt are substantial. For example, we paid $96.6 million of interest in 2010. We refer you to "Contractual Obligations" below for a summary of principal and interest payments. Certain debt agreements have restrictions on dividend payments and the repurchase of stock and subordinated securities, including our convertible notes. These restrictions are determined by defined calculations which include net income. The $671.1 million write-off of our goodwill at December 31, 2008 impacted these restrictions, which has reduced our ability to pay dividends and repurchase stock and subordinated securities, including our convertible notes. We have never paid a dividend to our stockholders, and we do not have any present plans for doing so. Amkor Technology, Inc. also guarantees certain debt of our subsidiaries. We were in compliance with all debt covenants at December 31, 2010 and expect to remain in compliance with these covenants for at least the next twelve months. Additional information about our debt is available in Note 12 to our Consolidated Financial Statements included in Item 8 of this Annual Report. Capital Additions In 2010, our capital additions totaled $504.5 million or approximately 17% of net sales. Of this total, approximately 63% of our spending went toward our packaging capabilities, 19% for test, and 18% for research and development and infrastructure projects. We expect that our 2011 capital additions will be approximately $500 million. Ultimately, the amount of our 2011 capital additions will depend on several factors including, among others, the performance of our business, the need for additional capacity to service anticipated customer demand and the availability of cash flow from operations or financing. The following table reconciles our activity related to property, plant and equipment purchases as presented on the Consolidated Statement of Cash Flows to property, plant and equipment additions as reflected in the Consolidated Balance Sheets: Property, plant and equipment additions Net change in related accounts payable and deposits Purchases of property, plant and equipment Cash Flows 2010 For the Year Ended December 31, 2009 (In thousands) 2008 $ 504,463 $ (58,794) 445,669 197,742 $ (24,246) 173,496 341,734 44,505 386,239 Cash provided by operating activities was $542.6 million for the year ended December 31, 2010 compared to $261.7 million for the year ended December 31, 2009. Free cash flow (which we define as net cash provided by operating activities less purchases of property, plant and equipment) increased by $8.7 million to $96.9 million for the year ended December 31, 2010 compared to $88.2 million for the year ended December 31, 2009. Our free cash flow for the years ended December 31, 2010 and 2009 was predominantly used to reduce debt. Free cash flow is not a U.S. GAAP measure. See below for a further discussion of free cash flow and a reconciliation to U.S. GAAP. 43 Table of Contents Net cash provided by (used in) operating, investing and financing activities for each of the three years ended December 31, 2010 was as follows: Operating activities Investing activities Financing activities 2010 $ For the Year Ended December 31, 2009 (In thousands) 2008 542,595 $ (444,921) (89,857) 261,725 $ (240,878) (49,651) 605,818 (371,380) (223,625) Operating activities: Our cash flow from operating activities in 2010 increased by $280.9 million compared to 2009. Operating income for the year ended December 31, 2010 adjusted for depreciation and amortization, other operating activities and non-cash items increased $195.7 million from 2009, largely as a result of increased net sales. Interest expense, including related party interest expense, for the year ended December 31, 2010 decreased by $14.6 million as compared with the year ended December 31, 2009 as a result of reduced debt levels in 2010 and debt refinanced with lower interest rate instruments. Operating cash flows in 2010 were reduced by $7.5 million for prepayment fees in connection with debt repurchases. Changes in assets and liabilities reduced operating cash flows during 2010 by $35.2 million principally due to an increase in accounts receivable, inventories, accounts payable and accrued expenses reflecting an increase in customer demand and increased business activity. Payments of $160.8 million for employee benefit separation payments and the resolution of a patent license dispute reduced 2009 operating cash flows. Investing activities: Our cash flows used in investing activities in 2010 increased by $204.0 million. This increase was primarily due to a $272.2 million increase in purchases of property, plant and equipment from $173.5 million in 2009 to $445.7 million in 2010. Our capital additions were primarily focused on incremental capacity for advanced packaging services including chip scale, ball grid array and bumping, specific customer requirements and other technology advancements. In 2009, we invested $16.7 million in an unconsolidated affiliate, J-Devices Corporation, and purchased $44.7 million of equipment which we leased to them. Financing activities: Our net cash used in financing activities in 2010 increased by $40.2 million. Cash used in financing activities during 2010 consisted principally of the repurchase of an aggregate $537.5 million principal amount of our senior notes and $99.9 million in repayments of our Korean term loans. Financing cash flows in 2010 also included $6.7 million of debt retirement costs for transactions classified as financing activities. We also incurred $7.5 million in debt issuance costs in 2010, primarily associated with the issuance of our 7.375% Senior Notes due 2018. Cash provided by financing activities during 2010 included the issuance of $345.0 million of our 7.375% Senior Notes due 2018 and proceeds from a $180.0 million Korean term loan and a Taiwanese term loan of approximately $47.0 million. Cash provided by financing activities during 2009 included the issuance of the $250.0 million convertible senior subordinated notes due April 2014, $15.0 million received from our working capital facility in China, and $31.2 million net borrowings drawn on our revolver facilities in Japan. We used $271.9 million in cash to repurchase senior and convertible senior subordinated notes. With respect to our foreign subsidiaries, we paid $65.8 million in amortizing debt and other debt payments during 2009. During 2009 we also incurred $8.5 million in debt issuance costs related to the issuance of convertible notes and the amendment and extension of our first lien revolving credit facility. We provide the following supplemental data to assist our investors and analysts in understanding our liquidity and capital resources. Free cash flow represents net cash provided by operating activities less investing activities related to the acquisition of property, plant and equipment. Free cash flow is not defined by U.S. GAAP and our definition of free cash flow may not be comparable to similar companies and should not be considered a substitute 44 Table of Contents for cash flow measures in accordance with GAAP. We believe free cash flow provides our investors and analysts useful information to analyze our liquidity and capital resources. Net cash provided by operating activities Less purchases of property, plant and equipment Free cash flow Contractual Obligations 2010 For the Year Ended December 31, 2009 (In thousands) 2008 $ $ 542,595 $ 445,669 96,926 $ 261,725 $ 173,496 88,229 $ 605,818 386,239 219,579 The following table summarizes our contractual obligations at December 31, 2010, and the effect such obligations are expected to have on our liquidity and cash flow in future periods. Total debt(1) Scheduled interest payment obligations(2) Purchase obligations(3) Operating lease obligations Severance obligations(4) Total contractual obligations Total 2011 2012 2013 2014 2015 Thereafter Payments Due for Year Ending December 31, (In thousands) $ $ 1,364,300 $ 423,026 115,151 36,714 88,899 2,028,090 $ 150,081 $ 83,874 115,151 5,905 6,131 361,142 $ 82,132 $ 80,208 — 6,624 5,707 174,671 $ 236,065 $ 75,193 — 6,907 5,312 323,477 $ 281,636 $ 57,996 — 6,900 4,944 5,103 $ 49,922 — 5,593 4,605 351,476 $ 65,223 $ 609,283 75,833 — 4,785 62,200 752,101 (1) Total debt decreased $69.9 million from December 31, 2009. In April 2010, we entered into an approximately $47.0 million term loan in Taiwan. In May 2010, we issued $345.0 million of our 7.375% Senior Notes due 2018 and we entered into a $180.0 million, three-year secured term loan in Korea, $47.0 million of which was repaid in July 2010. Also in May 2010, we repurchased an aggregate $537.5 million principal amount of our 7.125% Senior Notes due 2011, 7.75% Senior Notes due 2013, and 9.25% Senior Notes due 2016. We repaid $52.9 million of annual amortizing debt during 2010. Included in 2013 is $100.0 million of our 6.25% Convertible Subordinated Notes due December 2013, which was converted into common stock in January 2011, as discussed in Note 12 to our Consolidated Financial Statements included in Item 8 of this Annual Report. (2) Scheduled interest payment obligations were calculated using stated coupon rates for fixed rate debt and interest rates applicable at December 31, 2010 for variable rate debt. The table above is inclusive of $6.3 million in annual interest payment obligations in 2011, 2012, and 2013 related to our 6.25% Convertible Subordinated Notes due December 2013. Due to the conversion of the debt in January 2011, as discussed in Note 12, no further interest will be paid to holders of the notes. (3) Represents capital-related purchase obligations in addition to accounts payable outstanding at December 31, 2010 for 2010 capital additions. (4) Represents estimated benefit payments for our Korean subsidiary severance plan. In addition to the obligations identified in the table above, other non-current liabilities recorded in our Consolidated Balance Sheet at December 31, 2010 include: • $21.0 million of foreign pension plan obligations for which the timing and actual amount of funding required is uncertain. We expect to contribute $3.5 million to the plans during 2011. • $4.5 million net liability associated with unrecognized tax benefits. Due to the high degree of uncertainty regarding the amount and the timing of any future cash outflows associated with our unrecognized tax benefits, we are unable to reasonably estimate the amount and period of ultimate settlement, if any, with the various taxing authorities. 45 Table of Contents Off-Balance Sheet Arrangements As of December 31, 2010, we had no off-balance sheet guarantees or other off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K, other than our operating leases. Operating lease commitments are included in the contractual obligations table above. Other Contingencies We refer you to Note 15 to our Consolidated Financial Statements in Item 8 of this Annual Report for a discussion of our contingencies related to litigation and other legal matters. If an unfavorable ruling were to occur in these matters, there exists the possibility of a material adverse impact on our business, liquidity, results of operations, financial position and cash flows in the period in which the ruling occurs. The potential impact from the legal proceedings, on our business, liquidity, results of operations, financial position and cash flows, could change in the future. Critical Accounting Policies and Use of Estimates We have identified the policies below as critical to our business operations and the understanding of our results of operations. A summary of our significant accounting policies used in the preparation of our Consolidated Financial Statements appears in Note 1 to our Consolidated Financial Statements included in Item 8 of this Annual Report. Our preparation of this Annual Report on Form 10-K requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. We believe the following critical accounting policies, which have been reviewed with the Audit Committee of our board of directors, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Revenue Recognition. We recognize revenue from our packaging and test services when there is evidence of a fixed arrangement, delivery has occurred or services have been rendered, fees are fixed or determinable and collectibility is reasonably assured. Generally these criteria are met and revenue is recognized upon shipment. If the revenue recognition criteria are not met, we defer the revenue. Deferred revenue generally results from two types of transactions; customer advances and invoicing at interim points prior to shipping. Customer advances represent supply agreements with customers where we commit capacity in exchange for customer prepayment of services. These prepayments are deferred and recorded as customer advances within accrued expenses and other non-current liabilities. Deferred revenue also relates to contractual invoicing at interim points prior to the shipment of the finished product. The invoicing that is completed in advance of our revenue recognition criteria being met is recorded as deferred revenue. We do not take ownership of customer-supplied semiconductor wafers. Title and risk of loss remain with the customer for these materials. Accordingly, the cost of the customer-supplied materials is not included in the Consolidated Financial Statements. An allowance for sales credits is recorded as a reduction to sales and accounts receivable during the period of sale such that accounts receivable is reported at its estimated net realizable value. The allowance for sales credits is an estimate of the future credits we will issue for billing adjustments primarily for invoicing corrections and miscellaneous customer claims and is estimated based upon recent credit issuance, historical experience, as well as specific identification of known or expected sales credits at the end of the reporting period. Additionally, provisions are made for doubtful accounts when there is doubt as to the collectibility of accounts receivable. The allowance for doubtful accounts is recorded as bad debt expense, classified as selling, general and administrative expense. The allowance for doubtful accounts is based upon specification of doubtful accounts considering the age of the receivable balance, the customer's historical payment history and current credit worthiness as well as specific identification of any known or expected collectability issues. Income Taxes. We operate in and file income tax returns in various U.S. and non-U.S. jurisdictions which are subject to examination by tax authorities. The tax returns for open years in all jurisdictions in which we do business 46 Table of Contents are subject to change upon examination. We believe that we have estimated and provided adequate accruals for potential additional taxes and related interest expense that may ultimately result from such examinations. We believe that any additional taxes or related interest over the amounts accrued will not have a material effect on our financial condition, results of operations or cash flows. However, resolution of these matters involves uncertainties and there are no assurances that the outcomes will be favorable. In addition, changes in the mix of income from our foreign subsidiaries, expiration of tax holidays and changes in tax laws or regulations could result in increased effective tax rates in the future. Additionally, we record valuation allowances for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. U.S. GAAP requires companies to weigh both positive and negative evidence in determining the need for a valuation allowance for deferred tax assets. As a result of net losses experienced in recent years in certain jurisdictions, we have determined that a valuation allowance is required for certain deferred tax assets including those related to all of our net operating loss carryforwards in the U.S. We will release such valuation allowances as the related deferred tax benefits are realized on our tax returns or when sufficient net positive evidence exists to conclude it is more likely than not that the deferred tax assets will be realized. Valuation of Inventory. We order raw materials based on customers' forecasted demand. If our customers change their forecasted requirements and we are unable to cancel our raw materials order or if our vendors require that we order a minimum quantity that exceeds the current forecasted demand, we will experience a build-up in raw material inventory. We will either seek to recover the cost of the materials from our customers or utilize the inventory in production. However, we may not be successful in recovering the cost from our customers or be able to use the inventory in production and, accordingly, if we believe that it is probable that we will not be able to recover such costs we reduce the carrying value of our inventory. Additionally, we reduce the carrying value of our inventories for the cost of inventory we estimate is excess and obsolete based on the age of our inventories. When a determination is made that the inventory will not be utilized in production or is not saleable, it is written-off. Inventories are stated at the lower of cost or market (net realizable value). Cost is principally determined by standard cost (on a first-in, first- out basis for raw materials and purchased components and an average cost basis for work-in-process) or by the weighted moving average method (for commodities), both which approximate actual cost. We review and set our standards as needed, but at a minimum on an annual basis. Long-lived Assets. Property, plant and equipment are stated at cost. Depreciation is calculated by the straight-line method over the estimated useful lives of depreciable assets. Depreciable lives are as follows: Land use rights Buildings and improvements Machinery and equipment Software and computer equipment Furniture, fixtures and other equipment 50 years 10 to 25 years 3 to 7 years 3 to 5 years 3 to 10 years Cost and accumulated depreciation for property retired or disposed of are removed from the accounts and any resulting gain or loss is included in earnings. Expenditures for maintenance and repairs are charged to expense as incurred. We review long-lived assets, including property, plant and equipment and finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Recoverability of a long-lived asset group held and used in operations is measured by a comparison of the carrying amount to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. If such asset group is considered to be impaired, the impairment loss is measured as the amount by which the carrying amount of the asset group exceeds its fair value. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Long-lived assets to be disposed of are carried at the lower of cost or fair value less the costs of disposal. Legal Contingencies. We are subject to certain legal proceedings, lawsuits and other claims. We assess the likelihood of any adverse judgment or outcome related to these matters, as well as potential ranges of probable 47 Table of Contents losses. Our determination of the amount of reserves required, if any, for these contingencies is based on an analysis of each individual issue, often with the assistance of outside legal counsel. We record provisions in our Consolidated Financial Statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. Our assessment of required reserves may change in the future due to new developments in each matter. The present legislative and litigation environment is substantially uncertain, and it is possible that our liquidity, results of operations, financial position and cash flows could be materially and adversely affected by an unfavorable outcome or settlement of our pending litigation and other claims. Recently Adopted and Recently Issued Standards For information regarding recently adopted and recently issued accounting standards, see Note 2 to our Consolidated Financial Statements included in Item 8 of this Annual Report. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market Risk Sensitivity We are exposed to market risks, primarily related to foreign currency and interest rate fluctuations. In the normal course of business, we employ established policies and procedures to manage the exposure to fluctuations in foreign currency values and changes in interest rates. Our use of derivative instruments, including forward exchange contracts, has historically been insignificant; however, we continue to evaluate the use of hedging instruments to manage market risk. We have not entered into any derivative transactions during the year ended December 31, 2010 and have no outstanding contracts as of December 31, 2010. Foreign Currency Risks We currently do not have forward contracts or other instruments to reduce our exposure to foreign currency gains and losses, although we do use natural hedging techniques to reduce foreign currency rate risks. The U.S. dollar is our reporting currency and the functional currency for the majority of our foreign subsidiaries including our largest subsidiaries in Korea and the Philippines and also our subsidiaries in China, Singapore and Taiwan. For our subsidiaries and affiliate in Japan, the local currency is the functional currency. We have foreign currency exchange rate risk associated with the remeasurement of monetary assets and monetary liabilities on our Consolidated Balance Sheet that are denominated in currencies other than the functional currency. We performed a sensitivity analysis of our foreign currency exposure as of December 31, 2010, to assess the potential impact of fluctuations in exchange rates for all foreign denominated assets and liabilities. Assuming a 10% adverse movement for all currencies against the U.S. dollar as of December 31, 2010, our income before income taxes for 2010 would have been approximately $26 million lower. In addition, we have foreign currency exchange rate exposure on our results of operations. For the year ended December 31, 2010, approximately 89% of our net sales were denominated in U.S. dollars. Our remaining net sales were principally denominated in Japanese yen and Korean won for local country sales. For the year ended December 31, 2010, approximately 58% of our cost of sales and operating expenses were denominated in U.S. dollars and were largely for raw materials and factory supplies. The remaining portion of our cost of sales and operating expenses was principally denominated in the Asian currency where our production facilities are located and largely consisted of labor and utilities. To the extent that the U.S. dollar weakens against these Asian-based currencies, similar foreign currency denominated transactions in the future will result in higher sales and higher operating expenses, with operating expenses having the greater impact on our financial results. Similarly, our sales and operating expenses will decrease if the U.S. dollar strengthens against these foreign currencies. We performed a sensitivity analysis of our foreign currency exposure as of December 31, 2010 to assess the potential impact of fluctuations in exchange rates for all foreign denominated sales and expenses. Assuming a 10% adverse movement from the year ended December 31, 2010 exchange rates of the U.S. dollar compared to all of these Asian-based currencies as of December 31, 2010, our operating income for 2010 would have been approximately $77 million lower. 48 Table of Contents There are inherent limitations in the sensitivity analysis presented, primarily due to the assumption that foreign exchange rate movements across multiple jurisdictions are similar and would be linear and instantaneous. As a result, the analysis is unable to reflect the potential effects of more complex market or other changes that could arise which may positively or negatively affect our results of operations. We have foreign currency exchange rate exposure on our stockholders' equity as a result of the translation of our subsidiaries where the Japanese yen is the functional currency. To the extent the U.S. dollar strengthens against the Japanese yen, the translation of these foreign currency denominated transactions will result in reduced sales, operating expenses, assets and liabilities. Similarly, our sales, operating expenses, assets and liabilities will increase if the U.S. dollar weakens against the Japanese yen. The effect of foreign exchange rate translation on our Consolidated Balance Sheet for the years ended December 31, 2010 and 2009 was a net foreign translation gain of $8.2 million and a loss of $0.5 million, respectively, and was recognized as an adjustment to equity through other comprehensive income. Interest Rate Risks We have interest rate risk with respect to our long-term debt. As of December 31, 2010, we had a total of $1,364.3 million of debt of which 73.4% was fixed rate debt and 26.6% was variable rate debt. Our variable rate debt is principally related to our foreign borrowings and any amounts outstanding under our $100.0 million revolving line of credit, under which no amounts were drawn as of December 31, 2010. The fixed rate debt consisted of senior notes; senior subordinated notes and subordinated notes. As of December 31, 2009, we had a total of $1,434.2 million of debt of which 83.3% was fixed rate debt and 16.7% was variable rate debt. Changes in interest rates have different impacts on the fixed and variable rate portions of our debt portfolio. A change in interest rates on the fixed portion of the debt portfolio impacts the fair value of the instrument but has no impact on interest expense or cash flows. A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows but does not generally impact the fair value of the instrument. The fair value of the convertible notes is also impacted by changes in the market price of our common stock. The table below presents the interest rates, maturities and fair value of our fixed and variable rate debt as of December 31, 2010. 2011 2012 2013(1) 2014 2015 Thereafter Total Fair Value Long term debt: Fixed rate debt (In thousands) Average interest rate Variable rate debt (In thousands) Average interest rate $ $ 42,579 2.5% 107,502 $ — — $ 82,132 $ $ 100,000 $ 250,000 6.3% 6.0% 136,065 $ 31,636 $ — — $ 5,103 $ $ 3.3% 3.6% 4.4% 3.3% 2.4% 609,283 $ 1,001,862 $ 1,431,057 8.2% — — $ 7.2% 362,438 $ 375,174 3.8% (1) Included in 2013 is $100.0 million of our 6.25% Convertible Subordinated Notes due December 2013, which was converted into common stock in January 2011, as discussed in Note 12 to our Consolidated Financial Statements included in Item 8 of this Annual Report. See Note 14 to our Consolidated Financial Statements included in Item 8 of this Annual Report for a discussion on the fair valuation of our debt instruments. Equity Price Risks We have convertible notes that are convertible into our common stock. If investors were to decide to convert their notes to common stock, our future earnings would benefit from a reduction in interest expense and our common stock outstanding would be increased. If we paid a premium to induce such conversion, our earnings could include an additional charge. Further, the trading price of our common stock has been and is likely to continue to be highly volatile and could be subject to wide fluctuations. Such fluctuations could impact our decision or ability to utilize the equity markets as a potential source of our funding needs in the future. 49 Table of Contents Item 8. Financial Statements and Supplementary Data We present the information required by Item 8 of Form 10-K here in the following order: Page 51 Report of Independent Registered Public Accounting Firm 52 Consolidated Statements of Operations — Years ended December 31, 2010, 2009 and 2008 53 Consolidated Balance Sheets — December 31, 2010 and 2009 Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) — Years ended December 31, 2010, 2009 and 2008 54 55 Consolidated Statements of Cash Flows — Years ended December 31, 2010, 2009 and 2008 56 Notes to Consolidated Financial Statements 95 Schedule II — Valuation and Qualifying Accounts 50 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Amkor Technology, Inc.: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Amkor Technology, Inc. and its subsidiaries at December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ PricewaterhouseCoopers LLP Phoenix, Arizona February 24, 2011 51 Table of Contents AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Net sales Cost of sales Gross profit Operating expenses: Selling, general and administrative Research and development Goodwill impairment Gain on sale of real estate Total operating expenses Operating income (loss) Other (income) expense: Interest expense Interest expense, related party Interest income Foreign currency loss (gain) Loss (gain) on debt retirement, net Equity in earnings of unconsolidated affiliate Other income, net Total other expense, net Income (loss) before income taxes Income tax expense (benefit) Net income (loss) Net (income) loss attributable to noncontrolling interests Net income (loss) attributable to Amkor Net income (loss) attributable to Amkor per common share: Basic Diluted Shares used in computing per common share amounts: Basic Diluted 2010 For the Year Ended December 31, 2009 (In thousands, except per share data) 2008 $ 2,939,483 $ 2,275,727 663,756 2,179,109 $ 1,698,713 480,396 2,658,602 2,096,864 561,738 242,424 47,534 — — 289,958 373,798 85,595 15,250 (2,950) 13,756 18,042 (6,435) (619) 122,639 251,159 19,012 232,147 (176) 231,971 $ 1.26 $ 0.91 $ 210,907 44,453 — (281) 255,079 225,317 102,396 13,000 (2,367) 3,339 (15,088) (2,373) (113) 98,794 126,523 (29,760) 156,283 (303) 155,980 $ 0.85 $ 0.67 $ 251,756 56,227 671,117 (9,856) 969,244 (407,506) 118,729 6,250 (8,749) (61,057) (35,987) — (1,004) 18,182 (425,688) 31,788 (457,476) 781 (456,695) (2.50) (2.50) 183,312 282,602 183,067 263,379 182,734 182,734 $ $ $ The accompanying notes are an integral part of these statements. 52 Table of Contents Current assets: Cash and cash equivalents Restricted cash Accounts receivable: Trade, net of allowances Other Inventories Other current assets Total current assets Property, plant and equipment, net Intangibles, net Investments Restricted cash Other assets Total assets Current liabilities: AMKOR TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS ASSETS LIABILITIES AND EQUITY Short-term borrowings and current portion of long-term debt Trade accounts payable Accrued expenses Total current liabilities Long-term debt Long-term debt, related party Pension and severance obligations Other non-current liabilities Total liabilities Commitments and contingencies (see Note 15) Equity: Amkor stockholders' equity: December 31, 2010 (In thousands, 2009 except per share data) $ 404,998 $ 17,782 395,406 2,679 328,252 392,327 18,666 17,970 155,185 191,072 32,737 37,918 1,062,067 932,925 1,537,226 1,364,630 9,975 19,108 6,795 99,476 $2,736,822 $ 2,432,909 13,524 28,215 1,945 93,845 $ 150,081 $ 88,944 443,333 361,263 178,794 155,630 605,837 772,208 964,219 1,095,241 250,000 250,000 83,067 103,543 9,063 10,171 2,100,141 2,043,208 Preferred stock, $0.001 par value, 10,000 shares authorized, designated Series A, none issued Common stock, $0.001 par value, 500,000 shares authorized, 183,467 and 183,171 shares issued, and 183,420 and — — 183,171 shares outstanding, in 2010 and 2009, respectively Additional paid-in capital Accumulated deficit Accumulated other comprehensive income Treasury stock, at cost, 47 shares in 2010 Total Amkor stockholders' equity: Noncontrolling interests in subsidiaries Total equity Total liabilities and equity The accompanying notes are an integral part of these statements. 53 183 183 1,504,927 1,500,246 (890,270) (1,122,241) 5,021 — 383,209 6,492 389,701 $2,736,822 $ 2,432,909 15,457 (284) 630,013 6,668 636,681 Table of Contents AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS) Common Stock Additional Paid- In Capital Shares Par Value Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Amkor Treasury Stock Stockholders' Equity Shares Cost Noncontrolling Interest in Subsidiaries Total Equity (In thousands) 181,799 $ — 182 $ — 1,482,186 $ — (821,526) $ (456,695) (6,223) — $ — $ — — — 654,619 $ (456,695) 7,022 $ 661,641 (781) (457,476) Balance at December 31, 2007 Net income (loss) Unrealized loss on available for sale investments, net of tax Reclassification adjustment for losses included in income, net of tax Pension liablility adjustment, net of tax Cumulative translation adjustment Comprehensive loss Issuance of stock through employee stock purchase plan and stock options Stock compensation expense Balance at December 31, 2008 Net income Pension liablility adjustment, net of tax Cumulative translation adjustment Comprehensive income Issuance of stock through stock options Stock compensation expense Balance at December 31, 2009 Net income Pension liablility adjustment, net of tax Cumulative translation adjustment Comprehensive income Treasury stock acquired through surrender of shares for tax withholdings or forfeitures Issuance of stock through employee stock — — — — 1,236 — 183,035 $ — — — 136 — 183,171 $ — — — — — — — 1 183 $ — — — — — 183 $ — — — — — — — — — 10,202 4,588 1,496,976 $ — — — 693 2,577 1,500,246 $ — — — — — — — — — — (1,278,221) $ 155,980 — — — — (1,122,241) $ 231,971 — — (80) — — (80) — (80) 80 — — 20,623 — — 3,801 — — — — — — — — 18,201 — $ — $ — — — (12,632) — — (548) — — — — — — — — 5,021 — $ — $ — — — 2,270 — — 8,166 — — 80 20,623 3,801 (432,271) 10,203 4,588 237,139 $ 155,980 (12,632) (548) 142,800 693 2,577 383,209 $ 231,971 2,270 8,166 242,407 80 — 20,623 — (217) 3,584 (998) (433,269) — — 10,203 4,588 6,024 $ 243,163 303 156,283 (12,632) — 165 (383) 468 143,268 693 — 2,577 — 6,492 $ 389,701 176 232,147 2,270 — — 8,166 176 242,583 — — (47) (284) (284) — (284) compensation plans Stock compensation expense Balance at December 31, 2010 296 — 183,467 $ — — 183 $ 1,166 3,515 1,504,927 $ — — (890,270) $ — — — — — — (47) $ (284) $ 15,457 1,166 3,515 630,013 $ — — 1,166 3,515 6,668 $ 636,681 The accompanying notes are an integral part of these statements. 54 Table of Contents AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS 2010 For the Year Ended December 31, 2009 (In thousands) 2008 Cash flows from operating activities: Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization Goodwill impairment Amortization of deferred debt issuance costs and discounts Provision for accounts receivable Deferred income taxes Equity in earnings of unconsolidated affiliate Loss (gain) on debt retirement, net Loss on disposal of fixed assets, net Stock-based compensation Other, net Changes in assets and liabilities: Accounts receivable Other receivables Inventories Other current assets Other assets Trade accounts payable Accrued expenses Other non-current liabilities Net cash provided by operating activities Cash flows from investing activities: Purchases of property, plant and equipment Proceeds from the sale of property, plant and equipment Investment in unconsolidated affiliate Purchase of equipment leased to unconsolidated affiliate Financing lease payment from unconsolidated affiliate Change in restricted cash Proceeds from sale of securities Other investing activities Net cash used in investing activities Cash flows from financing activities: Borrowings under revolving credit facilities Payments under revolving credit facilities Proceeds from issuance of short-term working capital facility Payments of short-term working capital facility Proceeds from issuance of long-term debt Proceeds from issuance of long-term debt, related party Payments of long-term debt, net of redemption premiums and discounts Payments for debt issuance costs Proceeds from issuance of stock through stock compensation plans Net cash used in financing activities Effect of exchange rate fluctuations on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period Supplemental disclosures of cash flow information: Cash paid during the period for: Interest Income taxes Noncash investing activities: Receivable for equipment leased to unconsolidated affiliate $ 232,147 $ 156,283 $ (457,476) 323,608 — 4,458 508 4,736 (6,435) 10,562 423 3,515 4,317 (58,225) 203 (34,882) 6,876 (1,365) 18,379 18,019 15,751 542,595 (445,669) 3,125 — — 13,384 (10,253) — (5,508) (444,921) 3,261 (34,253) 15,000 (15,000) 611,007 — (663,433) (7,487) 1,048 (89,857) 1,775 9,592 395,406 404,998 $ 305,510 — 4,780 (80) (30,599) (2,373) (15,088) 7,262 2,577 838 (68,912) (4,338) (20,991) 5,173 (1,214) 96,854 (108,712) (65,245) 261,725 (173,496) 3,116 (16,735) (44,681) — (2,898) — (6,184) (240,878) 41,410 (10,171) 15,000 — 100,000 150,000 (338,104) (8,479) 693 (49,651) (106) (28,910) 424,316 395,406 $ 309,920 671,117 4,717 265 8,811 — (35,987) 2,887 4,588 1,243 144,942 (9,070) 16,696 6,155 2,922 (81,598) 92,115 (76,429) 605,818 (386,239) 15,480 — — — (2,242) 2,460 (839) (371,380) 619 (633) — — — — (233,814) — 10,203 (223,625) 3,433 14,246 410,070 424,316 96,642 $ 5,906 116,223 $ 11,991 121,297 21,997 — 44,681 — $ $ The accompanying notes are an integral part of these statements. 55 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies Description of Business Amkor is one of the world's leading providers of outsourced semiconductor packaging (sometimes referred to as assembly) and test services. Amkor pioneered the outsourcing of semiconductor packaging and test services through a predecessor corporation in 1968 and over the years we have built a leading position by: • Designing and developing new package and test technologies; • Offering a broad portfolio of packaging and test technologies and services; • Cultivating long-standing relationships with our customers, which include many of the world's leading semiconductor companies, and collaborating with original equipment manufacturers ("OEMs"); • Developing expertise in high-volume manufacturing processes; and • Having a diversified operational scope, with research and development, engineering and production capabilities in China, Japan, Korea, the Philippines, Taiwan and the United States ("U.S."). Basis of Presentation The Consolidated Financial Statements include the accounts of Amkor Technology, Inc. and our subsidiaries ("Amkor"). The Consolidated Financial Statements reflect the elimination of all significant inter-company accounts and transactions. Our investments in variable interest entities in which we are the primary beneficiary are consolidated. We reflect the remaining portion of variable interest entities and foreign subsidiaries that are not wholly owned as noncontrolling interests. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Consolidation of Variable Interest Entities We have variable interests in certain Philippine realty corporations in which we have a 40% ownership and from whom we lease land and buildings in the Philippines, for which we are the primary beneficiary. As of December 31, 2010, the combined book value of the assets and the liabilities associated with these Philippine realty corporations included in our Consolidated Balance Sheet was $18.1 million and $0.5 million, respectively. The impact of consolidating these variable interest entities on our Consolidated Statements of Operations was not significant and other than our lease payments, we have not provided any significant assistance or other financial support to these variable interest entities for the years ended December 31, 2010, 2009 or 2008. The creditors of the Philippine realty corporations have no recourse to our general credit. Foreign Currency Translation The U.S. dollar is the functional currency of our subsidiaries in China, Korea, the Philippines, Singapore, and Taiwan, and the foreign currency asset and liability amounts at these subsidiaries are remeasured into U.S. dollars at end-of-period exchange rates, except for nonmonetary items which are remeasured at historical rates. Foreign currency income and expenses are remeasured at average exchange rates in effect during the period, except for expenses related to balance sheet amounts which are remeasured at historical exchange rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in other income (expense) in the period in which they occur. The local currency is the functional currency of our subsidiaries in Japan and was the functional currency of our subsidiaries in Taiwan prior to July 1, 2009. The asset and liability amounts of these subsidiaries are translated 56 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) into U.S. dollars at end-of-period exchange rates. Income and expenses are translated into U.S. dollars at average exchange rates in effect during the period. The resulting asset and liability translation adjustments are reported as a component of accumulated other comprehensive income in the stockholders' equity section of the balance sheet. Assets and liabilities denominated in a currency other than the functional currency are remeasured into the functional currency prior to translation into U.S. dollars and the resulting exchange gains or losses are included in other income (expense) in the period in which they occur. Concentrations and Credit Risk Financial instruments, for which we are subject to credit risk, consist principally of accounts receivable and cash and cash equivalents. With respect to accounts receivable, we mitigate our credit risk by selling primarily to well established companies, performing ongoing credit evaluations and making frequent contact with customers. We have historically mitigated our credit risk with respect to cash and cash equivalents through diversification of our holdings into various high quality mutual funds and bank deposit accounts. At December 31, 2010, our cash and cash equivalents were invested in U.S. money market funds and various U.S. and foreign bank operating and time deposit accounts. Risks and Uncertainties Our future results of operations involve a number of risks and uncertainties. Factors that could affect our business or future results and cause actual results to vary materially from historical results include, but are not limited to, dependence on the highly cyclical nature of the semiconductor industry, fluctuations in operating results, high fixed costs, our failure to meet guidance, declines in average selling prices, decisions by our integrated device manufacturer customers to curtail outsourcing, our substantial indebtedness, our ability to fund liquidity needs, our ability to draw on our current loan facilities, our restrictive covenants contained in the agreements governing our indebtedness, significant severance plan obligations, failure to maintain an effective system of internal controls, product return and liability risks, the absence of significant backlog in our business, our dependence on international operations and sales, proposed changes to U.S. tax laws, our management information systems may prove inadequate, attracting and retaining qualified employees, difficulties consolidating and evolving our operational capabilities, our dependence on materials and equipment suppliers, loss of customers, our need for significant capital expenditures, impairment charges, litigation incident to our business, adverse tax consequences, the development of new proprietary technology and the enforcement of intellectual property rights by or against us, complexity of packaging and test processes, competition, our need to comply with existing and future environmental regulations, fire, flood or other calamity and continued control by existing stockholders. We believe that our cash flow from operating activities together with existing cash and cash equivalents will be sufficient to fund our working capital, capital expenditure and debt service requirements for at least the next twelve months. Thereafter, our liquidity will continue to be affected by, among other things, volatility in the global economy and credit markets, the performance of our business, our capital expenditure levels and our ability to either repay debt out of operating cash flow or refinance debt at or prior to maturity with the proceeds of debt or equity offerings. We are subject to certain legal proceedings, lawsuits and other claims, as discussed in Note 15. We assess the likelihood of any adverse judgment or outcome related to these matters, as well as potential ranges of probable losses. Our determination of the amount of reserves required, if any, for these contingencies is based on an analysis of each individual issue, often with the assistance of outside legal counsel. We record provisions in our Consolidated Financial Statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. 57 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Cash and Cash Equivalents We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Our cash and cash equivalents consist of amounts invested in U.S. money market funds and various U.S. and foreign bank operating and time deposit accounts. Restricted Cash Restricted cash, current, consists of short-term cash equivalents used to collateralize our daily banking services, an amount in escrow related to an arbitration proceeding (see Note 15) and foreign trade compliance requirements. Restricted cash, non-current, consists of collateral for foreign tax obligations. Inventories Inventories are stated at the lower of cost or market (net realizable value). Cost is principally determined by standard cost (on a first-in, first- out basis for raw materials and purchased components and an average cost basis for work-in-process) or by the weighted moving average method (for commodities), both which approximate actual cost. We review and set our standards as needed, but at a minimum on an annual basis. We reduce the carrying value of our inventories for the cost of inventory we estimate is excess and obsolete based on the age of our inventories. When a determination is made that the inventory will not be utilized in production or is not saleable, it is written-off. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is calculated by the straight-line method over the estimated useful lives of depreciable assets which are as follows: Land use rights Buildings and improvements Machinery and equipment Software and computer equipment Furniture, fixtures and other equipment 50 years 10 to 25 years 3 to 7 years 3 to 5 years 3 to 10 years Cost and accumulated depreciation for property retired or disposed of are removed from the accounts and any resulting gain or loss is included in earnings. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation expense was $317.7 million, $298.5 million and $299.8 million for 2010, 2009 and 2008, respectively. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of a long-lived asset group to be held and used in operations is measured by a comparison of the carrying amount to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. If such asset group is considered to be impaired, 58 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) the impairment loss is measured as the amount by which the carrying amount of the asset group exceeds its fair value. Long-lived assets to be disposed of are carried at the lower of cost or fair value less the costs of disposal. Intangibles and Goodwill Finite-lived intangible assets include customer relationship and supply agreements as well as patents and technology rights and are amortized on a straight-line basis over their estimated useful lives, generally for periods ranging from 5 to 10 years. We continually evaluate the reasonableness of the useful lives of these assets. Finite-lived intangibles are tested for recoverability whenever events or changes in circumstances indicate the carrying amount may not be recoverable. An impairment loss, if any, would be measured as the excess of the carrying value over the fair value determined by discounted future cash flows. Amortization of finite-lived assets was $5.9 million, $7.0 million and $10.1 million for 2010, 2009 and 2008, respectively. We previously had goodwill which was fully impaired and written off in 2008. Investments On October 30, 2009, we acquired a 30% interest in an assembly and test services business in Japan, J-Devices Corporation ("J-Devices"). See Note 10 for additional information. Our investment is accounted for as an equity method investment. We evaluate the investment for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. To the extent the book value of the investment exceeds its assessed fair value, we will record an appropriate impairment charge. Other Non-current Assets Other non-current assets consist principally of deferred income tax assets, financing lease receivables (see Note 10), deferred debt issuance costs, refundable security deposits and prepaid pension assets. Other Non-current Liabilities Other non-current liabilities consist primarily of customer advance payments, deferred revenue and liabilities associated with uncertain income tax positions. See Note 4 for more information. Accumulated Other Comprehensive Income The components of accumulated other comprehensive income consist of the following: Unrealized foreign currency translation gains Unrecognized pension costs Total accumulated other comprehensive income 2010 December 31, (In thousands) 2009 $ $ 20,167 $ (4,710) 15,457 $ 12,001 (6,980) 5,021 The unrecognized pension costs are net of deferred income tax benefits of $1.0 million and $0.8 million at December 31, 2010 and 2009, respectively. No income taxes are provided on foreign currency translation gains as foreign earnings are considered permanently invested. Treasury Stock Treasury stock is acquired by us when certain restricted share awards vest or are forfeited. At the vesting or retirement eligibility date, a participant has a tax liability and, pursuant to the recipient's award agreement, we 59 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) withhold restricted shares to satisfy statutory minimum tax withholding obligations. The withheld or forfeited restricted shares are accounted for as treasury stock and carried at cost. See Note 3 for more information. Fair Value Measurements We apply fair value accounting for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring or nonrecurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. See Note 14 for further discussion of fair value measurements. Revenue Recognition We recognize revenue from our packaging and test services when there is evidence of a fixed arrangement, delivery has occurred or services have been rendered, fees are fixed or determinable and collectibility is reasonably assured. Generally these criteria are met and revenue is recognized upon shipment. If the revenue recognition criteria are not met, we defer the revenue. Deferred revenue generally results from two types of transactions: customer advances and invoicing at interim points prior to shipment. Customer advances represent supply agreements with customers where we commit capacity in exchange for customer prepayment of services. These prepayments are deferred and recorded as customer advances within accrued expenses and other non-current liabilities. Deferred revenue also relates to contractual invoicing at interim points prior to the shipment of the finished product. The invoicing that is completed in advance of our revenue recognition criteria being met is recorded as deferred revenue. We generally do not take ownership of customer supplied semiconductor wafers. Title and risk of loss remains with the customer for these materials at all times. Accordingly, the cost of the customer supplied materials is not included in the Consolidated Financial Statements. An allowance for sales credits is recorded as a reduction to sales and accounts receivable during the period of sale such that accounts receivable is reported at its estimated net realizable value. The allowance for sales credits is an estimate of the future credits we will issue for billing adjustments primarily for invoicing corrections and miscellaneous customer claims and is estimated based upon recent credit issuance, historical experience, as well as specific identification of known or expected sales credits at the end of the reporting period. Additionally, provisions are made for doubtful accounts when there is doubt as to the collectibility of accounts receivable. The allowance for doubtful accounts is recorded as bad debt expense and is classified as selling, general and administrative expense. The allowance for doubtful accounts is based upon specification of doubtful accounts considering the age of the receivable balance, the customer's historical payment history and current credit worthiness as well as specific identification of any known or expected collectability issues. Shipping and Handling Fees and Costs Amounts billed to customers for shipping and handling are presented in net sales. Costs incurred for shipping and handling are included in cost of sales. Research and Development Costs Research and development expenses include costs attributable to the conduct of research and development programs primarily related to the development of new package designs and improving the efficiency and capabilities of our existing production processes. Such costs include salaries, payroll taxes, employee benefit costs, materials, supplies, depreciation and maintenance of research equipment, services provided by outside contractors and the allocable portions of facility costs such as rent, utilities, insurance, repairs and maintenance, depreciation and general support services. All costs associated with research and development are expensed as incurred. 60 Table of Contents Income Taxes AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Income taxes are accounted for using the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis as well as net operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for those deferred tax assets for which it is more likely than not that the related benefits will not be realized. In determining the amount of the valuation allowance, we consider all available evidence of realization, as well as feasible tax planning strategies, in each taxing jurisdiction. If all or a portion of the remaining deferred tax assets will not be realized, the valuation allowance will be increased with a charge to income tax expense. Conversely, if we will ultimately be able to utilize all or a portion of the deferred tax assets for which a valuation allowance has been provided, the related portion of the valuation allowance will be released to income as a credit to income tax expense. We monitor on an ongoing basis our ability to utilize our deferred tax assets and the continuing need for a related valuation allowance. We recognize in our Consolidated Financial Statements the impact of an income tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. See Note 4 for more information regarding unrecognized income tax benefits. 2. New Accounting Standards Recently Adopted Standards In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair Value Measurements ("ASU 2010-06"). ASU 2010-06 amended ASC 820 to clarify certain existing fair value disclosures and require a number of additional disclosures. The guidance in ASU 2010-06 clarified that disclosures should be presented separately for each "class" of assets and liabilities measured at fair value and provided guidance on how to determine the appropriate classes of assets and liabilities to be presented. ASU 2010-06 also clarified the requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. In addition, ASU 2010-06 introduced new requirements to disclose the amounts (on a gross basis) and reasons for any significant transfers between Levels 1, 2, and 3 of the fair value hierarchy and present information regarding the purchases, sales, issuances, and settlements of Level 3 assets and liabilities on a gross basis. With the exception of the requirement to present changes in Level 3 measurements on a gross basis, which is delayed until 2011, the guidance in ASU 2010-06 became effective for reporting periods beginning after December 15, 2009. Our adoption of ASU 2010-06 on January 1, 2010, did not have a material impact on our financial statements. We are currently assessing the impact the new disclosure guidance may have on our consolidated financial statements upon adoption in 2011. In December 2009, the FASB issued ASU No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities ("ASU 2009-17"). This ASU codified consolidation guidance previously issued in June 2009 which applies to variable interest entities and will affect the overall consolidation analysis under FASB Interpretation No. 46(R). This standard was effective for fiscal years beginning after November 15, 2009. Our adoption of ASU 2009-17 on January 1, 2010, did not have a material impact on our financial statements. In December 2009, the FASB issued ASU 2009-16, Accounting for Transfers of Financial Assets ("ASU 2009-16"). This ASU codified guidance previously issued in June 2009 which amends existing derecognition guidance, eliminates the exemption from consolidation for qualifying special-purpose entities, and requires additional disclosures about a transferor's continuing involvement in transferred financial assets. This standard 61 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) was effective for fiscal years beginning after November 15, 2009, and applies to financial asset transfers occurring on or after the effective date. Our adoption of ASU 2009-16 on January 1, 2010, did not have a material impact on our financial statements. 3. Share-Based Compensation Plans Beginning in 2006, all of our share-based compensation, including grants of employee stock options, is measured at fair value and expensed over the service period (generally the vesting period). For all grants, the amount of compensation expense to be recognized is adjusted for an estimated forfeiture rate which is based on historical data. The following table presents share-based compensation expense attributable to stock options and restricted shares. Stock options Restricted shares Total share-based compensation expense 2010 For the Year Ended December 31, 2009 (In thousands) 2008 $ $ 2,473 1,042 3,515 $ $ 2,577 — 2,577 $ $ 4,588 — 4,588 The following table presents share-based compensation expense included in the Consolidated Statements of Operations: Cost of sales Selling, general, and administrative Research and development Total share-based compensation expense Equity Incentive Plans 2010 For the Year Ended December 31, 2009 (In thousands) 2008 $ $ 27 3,053 435 3,515 $ $ 81 2,097 399 2,577 $ $ 823 3,087 678 4,588 2007 Equity Incentive Plan. On August 6, 2007, our shareholders approved the 2007 Equity Incentive Plan, (the "2007 Plan") that provides for the grant of the following types of incentive awards: (i) stock options, (ii) restricted stock, (iii) restricted stock units, (iv) stock appreciation rights, (v) performance units and performance shares and (vi) other stock or cash awards. Those eligible for awards include employees, directors and consultants who provide services to Amkor and its subsidiaries. The effective date of this plan was January 1, 2008, and there were originally 17,000,000 shares of our common stock reserved for issuance under the 2007 Equity Incentive Plan. 2003 Nonstatutory Inducement Grant Stock Plan. On September 9, 2003, we initiated the 2003 Nonstatutory Inducement Grant Stock Plan (the "2003 Plan"). The 2003 Plan generally provides for the grant to employees, directors and consultants of stock options and stock purchase rights and is generally used as an inducement benefit for the purpose of retaining new employees. There is a provision for an annual replenishment to bring the number of shares of common stock reserved for issuance under the plan up to 300,000 as of each January 1. 1998 Director Option Plan. The Director Plan terminated in January 2008. The options granted under the Director Plan were automatic and non-discretionary. Each option granted to a non-employee director vests over a three year period. 62 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) 1998 Stock Plan. The 1998 Stock Plan terminated in January 2008. The 1998 Stock Plan generally provided for grants to employees, directors and consultants of stock options and stock purchase rights. The options granted vest over a two to five year period. A summary of the stock plans, the respective plan termination dates and shares available for grant as of December 31, 2010 is shown below. Stock Plans Contractual life (years) Plan termination date Shares available for grant at December 31, 2010 (in thousands) Stock options 2007 Equity Incentive Plan 10 Board of Directors Discretion 15,823 2003 Inducement Plan 10 Board of Directors Discretion 436 Stock options are generally granted with an exercise price equal to the market price of the stock at the date of grant. Substantially all of the options granted are exercisable pursuant to a two to five year vesting schedule and the term of the options granted is no longer than ten years. In order to calculate the fair value of stock options at the date of grant, we use the Black-Scholes option pricing model. Expected volatilities are based on historical performance of our stock. We also use historical data to estimate the timing and amount of option exercises and forfeitures within the valuation model. The expected term of the options is based on evaluations of historical and expected future employee exercise behavior and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following is a summary of all option activity for the year ended December 31, 2010: Options Number of Shares (In thousands) Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (Years) (In thousands) Outstanding at December 31, 2009 Granted Exercised Forfeited or expired Outstanding at December 31, 2010 Fully vested and expected to vest at December 31, 2010 Exercisable at December 31, 2010 8,302 $ 120 (196) (383) 7,843 $ 7,787 $ 7,108 $ 63 10.35 7.71 5.34 14.01 10.26 10.27 10.40 3.31 $ 3.28 $ 2.87 $ 3,288 3,273 3,021 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following assumptions were used to calculate weighted average fair values of the options granted: Expected life (in years) Risk-free interest rate Volatility Dividend yield Weighted average grant date fair value per option granted For the Year Ended December 31, 2009 2010 6.0 3.0% 71% — 5.00 $ 5.9 2.3% 76% — 2.70 $ 2008 6.0 3.3% 77% — 7.85 $ The intrinsic value of options exercised for the years ended December 31, 2010, 2009 and 2008 was $0.3 million, $0.2 million and $4.1 million, respectively. For the years ended December 31, 2010, 2009 and 2008, cash received under all share-based payment arrangements was $1.0 million, $0.7 million and $10.2 million, respectively. There was no tax benefit realized. The related cash receipts are included in financing activities in the accompanying Consolidated Statements of Cash Flows. Total unrecognized compensation expense from stock options, including any forfeiture estimate, was $3.2 million as of December 31, 2010, which is expected to be recognized over a weighted-average period of 1.6 years beginning January 1, 2011. To the extent that the actual forfeiture rate is different than what we have anticipated, the share-based compensation expense related to these awards will be different from our expectations. Restricted Shares In February 2010, we granted 472,000 restricted shares to employees under the 2007 Equity Incentive Plan. The restricted shares vest ratably over four years, with 25% of the shares vesting at the end of the first year, and 1/48th each month thereafter, such that 100% of the shares will become vested on the fourth anniversary of the award date, subject to the recipient's continued employment with us on the applicable vesting dates. In addition, provided that the restricted shares have not been forfeited earlier, the restricted shares will vest upon the recipient's death, disability or retirement, or upon a change in control of Amkor. Although ownership of the restricted shares does not transfer to the recipients until the shares have vested, recipients have voting and dividend rights on these shares from the date of grant. The value of the restricted shares is determined based on the fair market value of the underlying shares on the date of the grant and is recognized ratably over the vesting period or to the date on which the recipient becomes retirement eligible, if shorter. Upon option exercise or the vesting of restricted stock awards, we issue new shares of common stock. The Equity Incentive Plan provides that when a recipient's age plus years of service equals or exceeds 75, the recipient will be eligible to voluntarily retire and become fully vested in their restricted shares upon retirement. Consequently, under federal tax law, when a recipient becomes retirement eligible, the employee is immediately taxable on 100% of their restricted shares whether or not the recipient actually retires. Upon the earlier of retirement eligibility or vesting of the restricted shares, the recipient has a tax liability and pursuant to the recipient's award agreement, a portion of the restricted shares are withheld to satisfy the recipient's statutory minimum tax withholding obligations. The shares withheld are accounted for as treasury stock at cost, which is determined by the closing stock price per share on the applicable date of vesting or retirement eligibility. 64 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following table summarizes our restricted share activity for the year ended December 31, 2010: Restricted Shares Nonvested at December 31, 2009 Awards granted Awards vested Awards forfeited Nonvested at December 31, 2010 Number of Shares (In thousands) Weighted Average Grant Date Fair Value — $ 472 (81) (19) 372 $ — 5.96 5.96 5.96 5.96 Awards vested include 81,000 shares for retirement eligible recipients whose restricted shares are treated for accounting and tax purposes as if vested when they meet the retirement eligible date. The fair value of these shares upon vesting during 2010 was $0.5 million. Of those 81,000 shares, 27,806 shares were withheld to satisfy tax withholding obligations and are treated as treasury stock, at a cost of $0.2 million. The unrecognized compensation cost, including a forfeiture estimate, was $1.5 million as of December 31, 2010, which is expected to be recognized over a weighted average period of approximately 2.9 years beginning January 1, 2011. To the extent that the actual forfeiture rate is different than what we have anticipated, the share-based compensation expense related to these awards will be different from our expectations. In February 2011, we granted 805,000 restricted shares to employees under the 2007 Equity Incentive Plan. The restricted shares vest over a four-year period and their valuation is determined based on the fair market value of the underlying shares on the date of grant. 4. Income Taxes Geographic sources of income (loss) before income taxes are as follows: United States Foreign Total income (loss) before income taxes 2010 For the Year Ended December 31, 2009 (In thousands) 2008 $ $ (15,604) $ 266,763 251,159 $ (45,512) $ 172,035 126,523 $ (19,141) (406,547) (425,688) The provision for income taxes includes federal, state and foreign taxes currently payable and those deferred because of temporary differences between the financial statement and the tax bases of assets and liabilities. 65 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The components of the provision (benefit) for income taxes are as follows: Current Federal State Foreign Deferred Federal State Foreign Total provision (benefit) 2010 For the Year Ended December 31, 2009 (In thousands) 2008 $ $ 10 — 14,266 14,276 2,098 300 2,338 4,736 19,012 $ $ (1,882) 316 2,405 839 2,286 119 (33,004) (30,599) (29,760) $ $ 272 — 22,705 22,977 — — 8,811 8,811 31,788 The reconciliation between the U.S. federal statutory income tax rate of 35% and our income tax provision (benefit) is as follows: U.S. federal tax at 35% State taxes, net of federal benefit Foreign (loss) income taxed at different rates Foreign exchange loss (gain) Goodwill impairment Expiration of capital loss carryforward Change in valuation allowance Adjustments related to prior years Income tax credits generated Repatriation of foreign earnings and profits Other Total 2010 For the Year Ended December 31, 2009 (In thousands) 2008 $ $ 87,929 $ 523 (80,461) 3,176 — — 15,004 (4,281) (2,765) 122 (235) 19,012 $ 44,257 $ 884 (56,301) 4,926 — 22,714 (53,722) 12,198 (9,377) 4,846 (185) (29,760) $ (148,951) 843 10,503 (54,238) 231,185 34,518 (29,165) (12,555) (3,312) — 2,960 31,788 In 2008, we recorded a $671.1 million goodwill impairment charge which did not have a significant income tax benefit. 66 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following is a summary of the components of our deferred tax assets and liabilities: Deferred tax assets: Net operating loss carryforwards Capital loss carryforwards Income tax credits Property, plant and equipment Accrued liabilities Unrealized foreign exchange loss Other Total deferred tax assets Valuation allowance Total deferred tax assets net of valuation allowance Deferred tax liabilities: Property, plant and equipment Deferred gain Other Total deferred tax liabilities Net deferred tax assets Recognized as: Other current assets Other assets Other current liabilities Other non-current liabilities Total 2010 December 31, (In thousands) 2009 $ $ $ $ 163,661 $ 18,221 22,366 20,065 35,805 6,486 17,522 284,126 (223,612) 60,514 3,460 6,899 7,478 17,837 42,677 $ 8,438 $ 42,750 (5,683) (2,828) 42,677 $ 154,351 18,221 24,582 18,253 24,502 8,355 22,530 270,794 (208,925) 61,869 4,484 6,941 5,642 17,067 44,802 9,677 41,841 (6,094) (622) 44,802 In 2010, the valuation allowance on our deferred tax assets increased by $14.7 million primarily as a result of an increase associated with losses incurred in the U.S. and certain foreign jurisdictions offset by a $3.0 million decrease associated with the release of a valuation allowance on certain net deferred tax assets in Taiwan. We released the valuation allowance in Taiwan during the three months ended June 30, 2010 because we believed that sufficient positive evidence existed to support the conclusion that it is more likely than not that we will realize the benefits of these deferred tax assets. The positive evidence we considered was: (i) the consistent profitability of these operations over a two year period, which included the recent downturn in the semiconductor industry in late 2008 and 2009; (ii) the increase in profitability experienced in the second quarter of 2010 based on demand for the products from these operations; and (iii) our expectation that we will realize substantially all of the deferred tax assets over the next three years for these operations. In 2009, the valuation allowance on our deferred tax assets decreased by $52.7 million primarily as a result of a $25.6 million decrease associated with the release of a valuation allowance on net deferred tax assets of our subsidiary in Korea and a $22.7 million decrease associated with the expiration of U.S. capital loss carryforwards. 67 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) In 2008, the valuation allowance on our deferred tax assets decreased by $29.4 million primarily as a result of a $34.5 million decrease associated with the expiration of U.S. capital loss carryforwards, partially offset by an increase of $8.3 million for a valuation allowance established against certain Japanese deferred tax assets. At December 31, 2010, the valuation allowance included amounts relating to tax benefits of tax deductions associated with employee stock options. If these benefits are subsequently realized, they will be recorded to contributed capital in the amount of $7.0 million. As a result of net operating loss carryforwards, we were not able to recognize the excess tax benefits of stock option deductions in 2010 because the deductions did not reduce income tax payable. As a result of certain capital investments, export commitments and employment levels, income from operations in Korea, the Philippines, China, Singapore and Taiwan is subject to reduced income tax rates, and in some cases is exempt from income taxes. Korea In Korea, we have tax holidays resulting from our investment in the Gwangju, Seoul and Pupyong facilities. The Gwangju tax holiday provides a 100% tax exemption through 2010, followed by a 50% exemption through 2013. The Seoul and Pupyong tax holiday provides a 100% tax exemption through 2011, followed by a 50% exemption through 2014. After the holidays expire we will be subject to the Korean statutory rate which is currently 24% for 2010 and 2011 and 22% after 2011. As a result of net operating losses we did not realize any benefits related to these tax holidays in 2009 and 2008. In 2010 we recognized $25.4 million in tax benefits as a result of the tax holidays on qualifying operations in Korea. Philippines In the Philippines, we operate in economic zones and benefit from tax holidays on qualified products, as a result of certain capital investments we have made. For 2006 through 2010, qualifying Philippine operations benefited from a full tax holiday, expiring at various times through 2013, while the remaining operations benefited from a perpetual reduced tax rate of 5%. In 2010, 2009 and 2008, our Philippines operations recognized $5.9 million, $3.4 million and $2.6 million, respectively, in tax benefits as a result of the tax holiday on certain qualifying operations in the Philippines. China In China, commencing on January 1, 2008, we have a 100% tax holiday for two years and then a 50% tax holiday for an additional three years. As a result of net operating losses, we did not realize any benefits relating to such tax holidays in 2010, 2009 or 2008 in China. Our statutory tax rate in China is currently 22% for 2010, 24% for 2011 and 25% after 2011. Singapore In October 2006, we were granted a ten year pioneer incentive award in Singapore. The 100% tax holiday on Singapore operations commenced on January 1, 2007. As a result of net operating losses we did not realize any benefits relating to such tax holidays in 2010, 2009 or 2008. In 2010, we decided to wind-down and exit our manufacturing operations in Singapore. See Note 18 for more information. Taiwan We were granted a five year tax holiday on certain product lines in Taiwan beginning January 1, 2007 and an additional tax holiday on certain product lines beginning January 1, 2010. We did not realize any benefits relating to such tax holidays in 2010. In 2009 and 2008 we recognized less than $0.1 and $0.2 million, respectively, in tax 68 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) benefits as a result of the tax holiday on certain qualifying operations in Taiwan. Effective January 1, 2010, our statutory tax rate in Taiwan is 17%. Our net operating loss carryforwards ("NOL's") are as follows: U.S. Federal NOL's U.S. State NOL's Foreign NOL's 2010 $ For the Year Ended December 31, (In thousands) $ 386,029 251,127 81,334 2009 Expiration 365,485 258,725 53,095 2019-2030 2011-2030 2012-2020 The deferred tax assets associated with approximately $54.0 million of the foreign losses have been reserved with a valuation allowance. We also have U.S. capital loss carryforwards of $45.6 million which will expire in 2013. U.S. capital loss carryforwards of $56.8 million expired as of December 31, 2009. The deferred tax assets associated with our U.S. and state net operating losses and capital losses available for carryforward have been fully reserved with a valuation allowance at December 31, 2010 and 2009. Also, our ability to utilize our U.S. net operating and capital loss carryforwards may be limited in the future if we experience an ownership change as defined by the Internal Revenue Code. At December 31, 2010, we have various tax credits available to be carried forward including U.S foreign income tax credits totaling $8.1 million, expiring in 2016, Taiwanese income tax credits totaling $4.2 million expiring in varying amounts through 2014 and Korean income tax credits totaling $7.1 million expiring in varying amounts through 2015. The deferred tax assets associated with the U.S. foreign income tax credits have been reserved with a valuation allowance. Income tax credits generated by certain of our foreign subsidiaries in 2010, 2009 and 2008 have been recognized in our income tax provision (benefit). Income taxes have not been provided on substantially all of the undistributed earnings of our foreign subsidiaries (approximately $547.5 million at December 31, 2010) over which we have sufficient influence to control the distribution of such earnings and have determined that substantially all such earnings have been reinvested indefinitely. These earnings could become subject to either or both federal income tax and foreign withholding tax if they are remitted as dividends, if foreign earnings are loaned to any of our domestic subsidiaries, or if we sell our investment in such subsidiaries. We estimate that repatriation of these foreign earnings would generate additional foreign withholding taxes of approximately $23.7 million and U.S. federal income tax of approximately $9.3 million not offset by foreign tax credits. In 2009, we provided U.S. income tax on approximately $13.8 million of foreign earnings from two subsidiaries where we made the decision to not reinvest indefinitely based on changed facts and circumstances. The U.S. income tax of $4.8 million on these foreign dividends was fully offset by the benefit of our U.S. net operating losses. We operate in and file income tax returns in various U.S. and foreign jurisdictions which are subject to examination by tax authorities. In 2010, the Internal Revenue Service notified us of their intention to examine the United States income tax return for the 2009 tax year. Initial fieldwork started in 2011. The Bureau of Internal Revenue has started examination of our 2007 to 2009 Philippines income tax returns. In 2009, the tax authorities in Korea examined income tax returns of our subsidiary covering the periods from 2004 to 2008. The examination did 69 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) not result in significant additional income tax payments. Our tax returns for open years in all jurisdictions are subject to changes upon examination. Summarized below are the years subject to examination for our largest subsidiaries. Jurisdiction United States Korea Philippines Japan China Singapore Taiwan Years 2007-2010 2009-2010 2007-2010 2006-2010 2005-2010 2004-2010 2004-2010 A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows: Balance at January 1 Additions based on tax positions related to the current year Additions for tax positions of prior years Reductions for tax positions of prior years Reductions related to settlements with tax authorities Reductions from lapse of statutes of limitations Balance at December 31 2010 For the Year Ended December 31, 2009 (In thousands) 2008 $ $ 5,091 $ 4,933 2,055 (557) — (1,019) 10,503 $ 20,920 $ 1,332 1,243 (17,456) (281) (667) 5,091 $ 17,663 5,341 1,673 (3,341) — (416) 20,920 Our unrecognized tax benefits increased from $5.1 million at December 31, 2009 to $10.5 million as of December 31, 2010 primarily because of $4.7 million of current year additions related to revenue attribution and $1.9 million of additions for contested prior year deductions in a foreign jurisdiction, partially offset by reductions for expired statutes of limitations. Substantially all of the $5.4 million of net additions of unrecognized tax benefits increased our income tax expense in 2010. At December 31, 2010, substantially all of our gross unrecognized tax benefits would reduce our effective tax rate, if recognized. The liability related to our unrecognized tax benefits is $4.5 million as of December 31, 2010 and is reported as a component of other non- current liabilities. The unrecognized tax benefits in the table above include the reduction of deferred tax assets, which are not included in the liability reported as a component of other non-current liabilities. It is reasonably possible that the total amount of unrecognized tax benefits will decrease by up to $7.8 million within 12 months due to the expiration of statutes of limitations related to revenue attribution, an anticipated ruling related to revenue attribution and eligibility for certain tax incentives. We have recognized $0.1 million of interest and penalties in the Consolidated Statement of Operations for the year ended December 31, 2010 in connection with our unrecognized tax benefits. Interest and penalties are classified as income taxes in the financial statements. The total amount of interest and penalties included in other non-current liabilities in connection with our unrecognized tax benefits is $0.5 million as of December 31, 2010. Our unrecognized tax benefits are subject to change as examinations of specific tax years are completed in the respective jurisdictions. We believe that any taxes, or related interest and penalties, over the amounts accrued, will not have a material effect on our financial condition, results of operations or cash flows, nor do we expect that examinations to be completed in the near term would have a material favorable impact. However, tax return examinations involve uncertainties and there can be no assurances that the outcome of examinations will be favorable. 70 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) 5. Earnings Per Share Basic earnings per share ("EPS") is computed by dividing net income (loss) attributable to Amkor common shareholders by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding includes restricted shares held by retirement eligible recipients and a reduction for treasury stock acquired. Under accounting guidance for calculating earnings per share, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are considered to be participating securities and should be included in the computation of earnings per share pursuant to the two-class method. As discussed in Note 3, we granted restricted shares which entitle recipients to voting and nonforfeitable dividend rights from the date of grant. As a result, we have applied the two- class method to determine earnings per share. Diluted EPS is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period. Dilutive potential common shares include outstanding stock options, unvested restricted shares and convertible debt. The basic and diluted EPS amounts are the same for the year ended December 31, 2008 as a result of the potentially dilutive securities being antidilutive due to a net loss. The following table summarizes the computation of basic and diluted EPS: 2010 For the Year Ended December 31, 2009 (In thousands, except per share data) 2008 Net income attributable to Amkor Income allocated to participating securities Net income available to Amkor common shareholders Adjustment for dilutive securities on net income: Net income allocated to participating securities in basic calculation Interest on 2.5% convertible notes due 2011, net of tax Interest on 6.25% convertible notes due 2013, net of tax Interest on 6.0% convertible notes due 2014, net of tax Net income (loss) attributable to Amkor — diluted Weighted average shares outstanding — basic Effect of dilutive securities: Stock options Unvested restricted shares 2.5% convertible notes due 2011 6.25% convertible notes due 2013 6.0% convertible notes due 2014 Weighted average shares outstanding — diluted Net income (loss) attributable to Amkor per common share: Basic Diluted 71 $ $ 231,971 $ (470) 231,501 470 1,318 6,370 16,103 255,762 $ 183,312 299 64 2,918 13,351 82,658 282,602 155,980 $ — 155,980 — 2,084 6,370 12,086 176,520 $ 183,067 61 — 4,530 13,351 62,370 263,379 (456,695) — (456,695) — — — — (456,695) 182,734 — — — — — 182,734 $ 1.26 $ 0.91 0.85 $ 0.67 (2.50) (2.50) Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following table summarizes the potential shares of common stock that were excluded from diluted EPS, because the effect of including these potential shares was antidilutive: Stock options 2.5% convertible notes due 2011 6.25% convertible notes due 2013 Total potentially dilutive shares Stock options excluded from diluted EPS because the exercise price was greater than the average market price of the common shares For the Year Ended December 31, 2010 2009 2008 (In thousands) 6,585 7,982 9,281 — — 12,238 — — 13,351 6,585 7,982 34,870 6,585 7,982 7,230 6. Accounts Receivable, Trade Accounts receivable, trade consist of the following: Accounts receivable Allowance for sales credits Allowance for doubtful accounts Total accounts receivable trade, net of allowances 7. Inventories Inventories consist of the following: Raw materials and purchased components Work-in-process Total inventories 72 2010 December 31, (In thousands) 2009 396,870 $ (3,919) (624) 392,327 $ 331,590 (2,877) (461) 328,252 $ $ 2010 December 31, (In thousands) 2009 $ $ 145,043 $ 46,029 191,072 $ 119,393 35,792 155,185 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) 8. Property, Plant and Equipment Property, plant and equipment consist of the following: Land Land use rights Buildings and improvements Machinery and equipment Software and computer equipment Furniture, fixtures and other equipment Construction in progress Less accumulated depreciation and amortization Total property, plant and equipment, net 2010 December 31, (In thousands) 2009 106,338 $ 19,945 838,237 2,749,445 176,376 20,611 50,610 3,961,562 (2,424,336) 1,537,226 $ 106,395 19,945 832,782 2,382,220 151,208 27,030 57,775 3,577,355 (2,212,725) 1,364,630 $ $ The following table reconciles our activity related to property, plant and equipment purchases as presented on the Consolidated Statement of Cash Flows to property, plant and equipment additions reflected on the Consolidated Balance Sheets: Property, plant and equipment additions Net change in related accounts payable and deposits Purchases of property, plant and equipment 9. Intangible Assets Intangibles as of December 31, 2010 consist of the following: 2010 For the Year Ended December 31, 2009 (In thousands) 2008 $ $ 504,463 $ (58,794) 445,669 $ 197,742 $ (24,246) 173,496 $ 341,734 44,505 386,239 Patents and technology rights Customer relationships Total intangibles Gross $ $ 52,587 $ 16,940 69,527 $ Accumulated Amortization (In thousands) (47,864) $ (8,139) (56,003) $ Net 4,723 8,801 13,524 In May 2010, we executed supply and technology development agreements with a customer which require us to make approximately $9.5 million of cash payments of which $5.4 million was paid as of December 31, 2010, and the balance of $4.1 million was recorded as a liability at December 31, 2010. Approximately $8.0 million was recorded as a customer relationship intangible asset, and $1.5 million was recorded as technology rights. 73 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Intangibles as of December 31, 2009 consist of the following: Patents and technology rights Customer relationships Total intangibles Gross $ $ 53,059 $ 14,483 67,542 $ Accumulated Amortization (In thousands) (48,214) $ (9,353) (57,567) $ Net 4,845 5,130 9,975 Amortization of identifiable intangible assets was $5.9 million, $7.0 million and $10.1 million in 2010, 2009 and 2008, respectively. Based on the amortizing assets recognized in our balance sheet at December 31, 2010, amortization for each of the next five years is estimated as follows: 2011 2012 2013 2014 2015 Thereafter Total amortization 10. Investments $ $ (In thousands) 5,269 3,713 3,348 636 334 224 13,524 Investments consist of the following: Investment in unconsolidated affiliate Total investments $ $ 28,215 28,215 (In thousands) 30.0% $ $ 19,108 19,108 30.0% 2010 2009 Carrying Value Ownership Percentage Carrying Value Ownership Percentage December 31, J-Devices Corporation On October 30, 2009, Amkor and Toshiba Corporation ("Toshiba") invested in Nakaya Microdevices Corporation ("NMD") and formed a joint venture to provide semiconductor assembly and final testing services in Japan. As a result of the transaction, NMD is now owned 60% by the existing shareholders of NMD, 30% by Amkor and 10% by Toshiba and has changed its name to J-Devices. J-Devices purchased an assembly and test business from Toshiba. J-Devices has also entered into various other agreements with Toshiba including a supply agreement, license agreement, support services agreements and employee secondment agreements. We invested 1.5 billion Japanese yen (approximately $16.7 million at inception) for our 30% equity interest and call options to acquire additional equity interest. The call options were valued at $1.7 million, and, at our discretion, permit us to subscribe to new or existing J-Devices' shares until our maximum ownership ratio is 60%, 66% and 80% beginning in 2012, 2014 and 2015, respectively. In 2014 and beyond, Toshiba has at its discretion, a put option which allows Toshiba to sell shares to us if we have exercised any of our call options. The exercise price 74 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) for all options is determined using a contractual pricing formula based primarily upon the financial position of J-Devices at the time of exercise. J-Devices is a separate business and is not integrated with our existing Japan-based businesses. We account for our investment in J-Devices using the equity method of accounting. J-Devices is a variable interest entity, but we are not the primary beneficiary as of December 31, 2010. Under the equity method of accounting, we recognize our 30% share of J-Devices' net income or loss during each accounting period. J- Devices' financial information is converted to U.S. GAAP and translated into U.S. dollars using the Japanese yen as the functional currency. In addition to our proportionate share of J-Devices' income or loss, we record equity method adjustments for the amortization of a $1.9 million difference as our carrying value exceeded our equity in the net assets of J-Devices at the date of investment and other adjustments required by the equity method. As of December 31, 2010 and 2009, our equity earnings in J-Devices were $6.4 million and $2.4 million, respectively, net of J- Devices' income taxes in Japan. In conjunction with entering into the joint venture, one of our existing subsidiaries in Japan purchased assembly and test equipment from Toshiba for 4.0 billion Japanese yen (approximately $44.7 million at inception) and leased the equipment to J-Devices under an agreement which is accounted for as a direct financing lease. The equipment lease expires in October 2012. In 2010, we received lease payments of 1.2 billion Japanese yen (approximately $14.1 million), which includes imputed interest. As of December 31, 2010, the total minimum lease payments to be received are 2.0 billion Japanese yen (approximately $24.0 million). The unearned interest income is 98.0 million Japanese yen (approximately $1.2 million). The future minimum lease payments to be received are 1.1 billion Japanese yen (approximately $13.1 million) and 0.9 billion Japanese yen (approximately $10.9 million) in 2011 and 2012, respectively. At the end of the primary lease term, J-Devices has an option to purchase the equipment for 1.0 billion Japanese yen (approximately $12.3 million). For the years ended December 31, 2010 and 2009, we recognized $1.1 million and $0.2 million in interest income, respectively. Our lease receivables consist of the following: Current (Other accounts receivable) Non-current (Other assets) Total lease receivable 11. Accrued Expenses Accrued expenses consist of the following: Payroll and benefits Customer advances and deferred revenue Accrued interest Income taxes payable Accrued severance plan obligations (Note 13) Other accrued expenses Total accrued expenses December 31, 2010 December 31, 2009 (In thousands) 13,122 $ 23,201 36,323 $ 2010 December 31, (In thousands) 2009 $ $ 69,903 $ 34,164 12,332 10,422 6,131 45,842 178,794 $ 13,581 32,225 45,806 42,228 49,136 13,832 2,947 4,466 43,021 155,630 $ $ 75 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) 12. Debt Following is a summary of short-term borrowings and long-term debt: Debt of Amkor Technology, Inc. Senior secured credit facilities: $100 million revolving credit facility, LIBOR + 2.25%-2.75%, due April 2015 $ — $ — December 31, 2010 2009 (In thousands) Senior notes: 7.125% Senior notes due March 2011 7.75% Senior notes due May 2013 9.25% Senior notes due June 2016 7.375% Senior notes due May 2018 Senior subordinated notes: 2.5% Convertible senior subordinated notes due May 2011 6.0% Convertible senior subordinated notes due April 2014, $150 million related party Subordinated notes: 6.25% Convertible subordinated notes due December 2013, related party Debt of subsidiaries: Working capital facility, LIBOR + 1.7%, due January 2011 Term loan TIBOR + 0.65%, due July 2011 Term loan TIBOR + 0.8%, due September 2012 Term loan, bank funding rate-linked base rate + 1.99% due Term loan, bank base rate + 0.5% due April 2014 Term loan, 90-day primary commercial paper rate + 0.835% due Revolving credit facilities Secured equipment and property financing May 2013 April 2015 Less: Short-term borrowings and current portion of long-term debt Long-term debt (including related party) Debt of Amkor Technology Inc. Senior Secured Credit Facilities — — 264,283 345,000 42,579 250,000 53,503 358,291 390,000 — 42,579 250,000 100,000 100,000 15,000 2,680 19,848 123,000 149,996 51,042 — 872 1,364,300 (150,081) 1,214,219 $ 15,000 — — — 192,852 — 30,435 1,525 1,434,185 (88,944) 1,345,241 $ In September 2010, we amended our $100.0 million senior secured revolving credit facility and extended its term by two years to April 2015. The facility has a letter of credit sub-limit of $25.0 million. The amendment reduces the interest rate on borrowings under the facility by 100 basis points on base rate loans and 125 basis points on LIBOR rate loans. As amended, interest is charged under the credit facility at a floating rate based on the base rate in effect from time to time plus the applicable margins which range from 1.0% to 1.5% for base rate revolving 76 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) loans, or LIBOR plus 2.25% to 2.75% for LIBOR revolving loans. The LIBOR-based interest rate at December 31, 2010 was 2.51%. In connection with amending and extending our $100.0 million facility, we capitalized $0.3 million of deferred debt issuance costs for the year ended December 31, 2010. There have been no borrowings under this credit facility as of December 31, 2010; however, we have utilized $0.4 million of the available letter of credit sub-facility of $25.0 million. The borrowing base for the revolving credit facility is based on the amount of our eligible accounts receivable, which exceeded $100.0 million as of December 31, 2010. Senior Notes In March 2004, we issued $250.0 million of 7.125% Senior Notes due March 2011 (the "2011 Notes"). The 2011 Notes were priced at 99.321%, yielding an effective interest rate of 7.25%. The 2011 Notes were redeemable by us at any time provided we pay the holders a "make- whole" premium. In June 2010, we redeemed all of the outstanding 2011 Notes using proceeds from the issuance of our 2018 Notes as described below. In connection with the redemption, we recorded a loss on extinguishment of $2.7 million in June 2010, which included $2.6 million in prepayment fees and a $0.1 million write-off of the associated unamortized deferred debt issuance costs and unamortized debt discount. Both charges are included in debt retirement costs, net in our Consolidated Statement of Operations for the year ended December 31, 2010. In 2009, we repurchased in open market transactions an aggregate principal amount of $156.6 million of these notes. We recorded a gain on extinguishment of $8.3 million which was partially offset by the write-off of a proportionate amount of deferred debt issuance costs of $0.9 million. In 2008, we repurchased in open market transactions an aggregate principal amount of $39.8 million of these notes. We recorded a gain on extinguishment of $10.5 million which was partially offset by the write-off of a proportionate amount of deferred debt issuance costs of $0.3 million. In May 2003, we issued $425.0 million of 7.75% Senior Notes due May 2013 (the "2013 Notes"). The 2013 Notes were not redeemable at our option until May 2008, whereupon the notes become redeemable at specified prices. In June 2010, we redeemed all of the outstanding 2013 Notes. In connection with the redemption, we recorded a loss on extinguishment of $6.7 million in June 2010, which included $4.6 million in prepayment fees and a $2.1 million write-off of the associated unamortized deferred debt issuance costs. Both charges are included in debt retirement costs, net in our Consolidated Statement of Operations for the year ended December 31, 2010. In 2009, we repurchased in open market transactions an aggregate principal amount of $63.7 million of these notes. We recorded a loss on extinguishment of $0.4 million and the write-off of a proportionate amount of our deferred debt issuance costs of $0.5 million. In November 2007, we repurchased in an open market transaction $3.0 million of these notes. We recorded a gain on extinguishment of $0.2 million which was partially offset by the write-off of a proportionate amount of our deferred debt issuance costs of less than $0.1 million. In May 2006, we issued $400.0 million of 9.25% Senior Notes due June 2016 (the "2016 Notes"). The Notes are redeemable by us prior to June 1, 2011 provided we pay the holders a "make-whole" premium. After June 1, 2011, the 2016 Notes are redeemable at specified prices. In May 2010, we announced a tender offer for up to $175.0 million of our outstanding 2016 Notes. We used proceeds from the lower interest rate ATK Loan (described below) to purchase $125.7 million in 2016 Notes tendered. We recorded a $6.7 million loss on extinguishment related to premiums and fees paid for the tender of the 2016 Notes and a $1.6 million charge for the write-off of the associated unamortized deferred debt issuance costs. Both charges are included in debt retirement costs, net in our Consolidated Statement of Operations for the year ended December 31, 2010. In November 2007, we repurchased in an open market transaction $10.0 million of these notes. At December 31, 2010, Mr. James J. Kim, our Executive Chairman of the Board of Directors, and certain Kim family members owned $35.6 million principal amount of our outstanding 2016 Notes, which were acquired in open market purchases during 2008 and 2009. In May 2010, we issued $345.0 million of our 7.375% Senior Notes due 2018 (the "2018 Notes"). The 2018 Notes were issued at par and are senior unsecured obligations. Interest is payable semi-annually on May 1 and November 1 of each year, commencing on November 1, 2010. As a result of an agreement we entered into with the 77 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) initial purchasers of the 2018 Notes, we filed a registration statement in September 2010, which became effective in October 2010, to exchange the notes for freely tradable notes issued by us. We incurred $7.1 million of debt issuance costs associated with the 2018 Notes in the year ended December 31, 2010. We used the net proceeds together with existing cash to redeem in full the $53.5 million outstanding principal amount of the 2011 Notes and the $358.3 million outstanding principal amount of the 2013 Notes and to pay related fees and expenses. The senior notes contain a number of affirmative and negative covenants which could restrict our operations. Convertible Senior Subordinated and Subordinated Notes In May 2006, we issued $190.0 million of our 2.5% Convertible Senior Subordinated Notes due May 2011 (the "May 2011 Notes"). The May 2011 Notes are convertible at any time, prior to the maturity date, into our common stock at a price of approximately $14.59 per share, subject to adjustment. The May 2011 Notes are subordinate to the prior payment in full of all of our senior debt. In 2009, we repurchased in open market transactions $69.0 million principal amount of these notes. We recorded a gain on extinguishment of $9.5 million which was partially offset by the write-off of a proportionate amount of deferred debt issuance costs of $0.9 million. In 2008, we repurchased in open market transactions $78.5 million principal amount of these notes. We recorded a gain on extinguishment of $27.1 million which was partially offset by the write-off of a proportionate amount of deferred debt issuance costs of $1.3 million. In April 2009, we issued $250.0 million of our 6.0% Convertible Senior Subordinated Notes due April 2014 (the "2014 Notes"). The 2014 Notes are convertible at any time prior to the maturity date into our common stock at a price of approximately $3.02 per share, subject to adjustment. The 2014 Notes are subordinated to the prior payment in full of all of our senior debt. The 2014 Notes were purchased by certain qualified institutional buyers and Mr. James J. Kim, our Executive Chairman of the Board of Directors, and an entity controlled by Mr. Kim. Mr. Kim and his affiliate purchased $150.0 million of the 2014 Notes. The $244.5 million of net proceeds received were used to reduce debt. In connection with the issuance of the 2014 Notes, we incurred $5.5 million of debt issuance costs in 2009. In November 2005, we issued $100.0 million of our 6.25% Convertible Subordinated Notes due December 2013 (the "December 2013 Notes") in a private placement to Mr. James J. Kim, our Executive Chairman of the Board of Directors, and certain Kim family members. The December 2013 Notes are presented as long-term debt, related party on the Consolidated Balance Sheets. The December 2013 Notes are convertible at any time prior to the maturity date into our common stock at a price of approximately $7.49 per share (the market price of our common stock on the date of issuance of the December 2013 Notes was $6.20 per share). The December 2013 Notes are subordinate to the prior payment in full of all of our senior and senior subordinated debt. The proceeds from the sale of the December 2013 Notes were used to purchase a portion of existing debt. When they became callable in December 2010, we announced a call for redemption of the entire $100.0 million aggregate principal amount of the December 2013 Notes. Holders of all $100.0 million of the outstanding December 2013 Notes converted their notes into an aggregate of 13,351,131 shares of our common stock in January 2011. There was no gain or loss recorded as a result of the conversion. Forfeited accrued interest of $0.9 million and unamortized deferred debt costs of $0.4 million were included in the net carrying amount of the debt recorded to our capital accounts upon conversion in 2011. The convertible senior subordinated and subordinated notes contain a number of affirmative and negative covenants which could restrict our operations. Debt of Subsidiaries In January 2009, Amkor Assembly & Test (Shanghai) Co, Ltd. ("AATS"), a Chinese subsidiary, entered into a $50.0 million U.S. dollar denominated working capital facility agreement with a Chinese bank maturing in January 2011. The facility was collateralized with certain real property and buildings in China. Principal amounts borrowed 78 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) were required to be repaid within twelve months of the drawdown date and could be prepaid at any time without penalty. As of January 2010, no additional borrowings could be made according to the terms of the agreement. The working capital facility bore interest at LIBOR plus 1.7% (2.43% as of December 31, 2010) and was payable in semi-annual payments. In January 2011, the outstanding balance of $15.0 million was repaid at maturity. In January 2011, AATS entered into a new $50.0 million U.S. dollar denominated working capital facility agreement with the same Chinese bank maturing in January 2013. The new facility bears interest at LIBOR plus 2.8% (3.25% as of January 27, 2011). All other terms and conditions are consistent with the prior facility. In January 2011, $15.0 million was drawn on the facility. The working capital facility contains certain affirmative and negative covenants, which could restrict our operations. If we were to default on our obligations under any of these facilities, we would not be permitted to draw additional amounts, and the lenders could accelerate our obligation to pay all outstanding amounts. In March 2010, Amkor Iwate Corporation, a Japanese subsidiary ("AIC") entered into a 1.0 billion Japanese yen (approximately $11 million at inception) term loan with a Japanese bank originally due October 2012. In May 2010, we prepaid $5.3 million of the outstanding loan balance, which changed the maturity date to July 2011. Principal amounts borrowed are to be repaid in equal monthly payments and may be prepaid at any time without penalty. The term loan accrues interest monthly at the Tokyo Interbank Offering Rate ("TIBOR") plus 0.65% (0.83% as of December 31, 2010). The term loan is collateralized with certain equipment located at our AIC facilities. The proceeds of the term loan were used to repay AIC's then existing revolving line of credit balance of 300.0 million Japanese yen due in June 2010 and the remaining proceeds were used for general corporate purposes. The line of credit accrued interest at TIBOR plus 0.5% (0.77% as of December 31, 2009). In March 2010, AIC entered into a 2.5 billion Japanese yen (approximately $28 million at inception) term loan with a Japanese bank due September 2012. Principal amounts borrowed are to be repaid in equal quarterly payments and may be prepaid at any time without penalty. The term loan accrues interest monthly at TIBOR plus 0.8% (1.4% as of December 31, 2010). The proceeds of the term loan were used to repay the 2.5 billion Japanese yen revolving line of credit with the same bank due in September 2010, which accrued interest at TIBOR plus 0.6% (0.91% as of December 31, 2009). In May 2010, Amkor Technology Korea, Inc., a Korean subsidiary ("ATK") entered into a $180.0 million, three-year secured term loan with a Korean bank (the "ATK Loan"), of which $47.0 million was repaid in July 2010 upon conclusion of the tender offer for the 2016 Notes described above. The ATK Loan is guaranteed on an unsecured basis by Amkor and is secured by substantially all the land, factories, and equipment located at our ATK facilities. The ATK Loan bears interest at the bank's funding rate-linked base rate plus 1.99% (4.99% as of December 31, 2010) and amortizes in nine remaining equal quarterly installments of $5 million per installment, with the remaining balance of $78.0 million due in May 2013. Interest is payable quarterly in January, April, July, and October of each year. In April 2007, ATK entered into a $300.0 million, seven-year secured term loan ("Term Loan") with a Korean bank. The Term Loan is guaranteed on an unsecured basis by Amkor. The Term Loan is secured by substantially all the land, factories and equipment located at our ATK facilities. The Term Loan bears interest at the Korean bank's base rate plus 50 basis points (3.79% and 4.45% as of December 31, 2010 and December 31, 2009, respectively) and amortizes in 28 equal quarterly payments through April 2014. The proceeds of the Term Loan were used to refinance our then existing second lien term loan. In April 2010, Amkor Technology Taiwan, Inc., a Taiwanese subsidiary, entered into a 1.5 billion Taiwan dollar (approximately $47 million at inception) term loan with a Taiwanese bank due April 2015 primarily to fund capital expenditures. The loan is guaranteed on an unsecured basis by Amkor and is collateralized with certain land, buildings, and equipment in Taiwan. Principal payments are due annually in the first year and semiannually thereafter, and interest payments are due monthly. The term loan accrues interest at the 90-day primary commercial paper rate plus 0.835% (2.36% as of December 31, 2010). 79 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Secured Equipment and Property Financing Our secured equipment and property financing consists of loans secured with specific assets at our Chinese subsidiary. In May 2004, our Chinese subsidiary entered into a $5.5 million credit facility secured with buildings at one of our Chinese production facilities that is payable ratably through January 2012. The interest rate for the Chinese financing at December 31, 2010 and December 31, 2009, was 5.84%. Our Chinese subsidiary's financing agreement contains affirmative and negative covenants, which could restrict our operations, and, if we were to default on our obligations, the lender could accelerate our obligation to repay amounts borrowed under such facilities. Compliance with Debt Covenants Our secured bank debt agreements and the indentures governing our senior and senior subordinated notes restrict our ability to pay dividends. We were in compliance with all of our covenants as of December 31, 2010, 2009 and 2008. Maturities Payments due for the year ending December 31, 2011 2012 2013(1) 2014 2015 Thereafter Total debt Total Debt (In thousands) 150,081 82,132 236,065 281,636 5,103 609,283 1,364,300 $ $ (1) 2013 includes $100.0 million of our December 2013 Notes, which were converted into common stock in January 2011 as discussed above. 13. Pension and Severance Plans U.S. Defined Contribution Plan We have a defined contribution plan covering substantially all U.S. employees. Eligible employees can contribute up to 60% of their salary, subject to annual Internal Revenue Service limitations. We match in cash 75% of the employee's contributions up to a defined maximum as determined on an annual basis. The expense for this plan was $1.9 million, $0.9 million and $1.8 million in 2010, 2009 and 2008, respectively. Taiwan Defined Contribution Plan We have a defined contribution plan under the Taiwanese Labor Pension Act in Taiwan whereby employees can contribute up to 6% of salary. We contribute no less than 6% of the employees' salaries up to a defined maximum into their individual accounts. The expense for this plan was $2.0 million in 2010 and $1.4 million in 2009 and 2008. 80 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Korean Severance Plans Our Korean subsidiary participates in an accrued severance plan that covers employees and directors with at least one year of service. Eligible employees are entitled to receive a lump-sum payment upon termination of employment, based on their length of service, seniority and average monthly wages at the time of termination. Accrued severance benefits are estimated assuming all eligible employees were to terminate their employment at the balance sheet date. Our contributions to the National Pension Plan of the Republic of Korea are deducted from accrued severance benefit liabilities. During 2009, we made a total of $83.5 million in voluntary interim severance payments to eligible employees that have elected to receive benefits prior to terminating their employment. The changes to the balance of our Korean severance accrual are as follows: Balance at the beginning of year Provision of severance benefits Severance payments Loss (gain) on foreign currency Payments remaining with the Korean National Pension Fund Total severance obligation balance at the end of year Less current portion of accrued severance obligation (Note 11) Non-current portion of severance obligation 2010 For the Year Ended December 31, 2009 (In thousands) 2008 $ $ 69,120 $ 23,792 (6,846) 2,833 88,899 (257) 88,642 6,131 82,511 $ 132,138 $ 18,472 (91,413) 9,923 69,120 (260) 68,860 4,466 64,394 $ 172,325 17,213 (12,672) (44,728) 132,138 (961) 131,177 31,584 99,593 In addition to the voluntary severance payments, we completed early voluntary retirement programs at our Korean subsidiary in 2010 and 2008 (see Note 18). Foreign Defined Benefit Pension Plans Our Philippine, Taiwanese and Japanese subsidiaries sponsor defined benefit plans (the "Plans") that cover substantially all of their respective employees who are not covered by statutory plans. Charges to expense are based upon costs computed by independent actuaries. 81 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following table sets forth the Plans' benefit obligations, fair value of the Plans' assets and the funded status of the Plans at December 31, 2010 and 2009. Change in projected benefit obligation: Projected benefit obligation at beginning of year Service cost Interest cost Benefits paid Actuarial (gains) losses Plan amendments Effects of curtailment Settlement Foreign exchange loss Projected benefit obligation at end of year Change in plan assets: Fair value of plan assets at beginning of year Actual gain on plan assets Employer contributions Settlement Benefits paid Foreign exchange gain Fair value of plan assets at end of year Funded status of the Plans at end of year Amounts recognized in the Consolidated Balance Sheets consist of: Prepaid benefit cost (included in non-current assets) Accrued benefit liability (included in pension and severance obligations) Net amount recognized at year end $ $ For the Year Ended December 31, 2010 2009 (In thousands) $ 58,994 5,934 3,736 (849) (160) — — — 5,023 72,678 40,763 4,111 7,856 — (849) 2,856 54,737 (17,941) $ 46,977 4,381 2,959 (1,147) 8,815 2,700 2,788 (9,566) 1,087 58,994 31,005 3,880 15,487 (9,566) (1,147) 1,104 40,763 (18,231) December 31, 2010 2009 (In thousands) $ $ 3,092 $ (21,033) (17,941) $ 444 (18,675) (18,231) The accumulated benefit obligation as of December 31, 2010 and 2009 was $48.0 million and $35.9 million, respectively. 82 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following table sets forth, by component, the change in accumulated other comprehensive income (loss) related to our Plans: Initial Net Obligation Prior Service Cost Actuarial Net (Loss) Gain Total Balance at December 31, 2008, net of tax ($0.1 million) Amortization included in net periodic pension cost, net of tax (less than $0.1 million) Net loss arising during period, net of tax ($0.7 million) Pension liability adjustments included in other comprehensive income, net of tax ($0.8 million) Balance at December 31, 2009, net of tax ($0.8 million) Amortization included in net periodic pension cost, net of tax (less than $0.1 million) Net gain arising during period, net of tax ($0.2 million) Pension liability adjustments included in other comprehensive income, net of tax ($0.2 million) Balance at December 31, 2010, net of tax ($1.0 million) Estimated amortization of cost to be included in 2011 net periodic pension cost $ $ $ $ (142) $ 64 — 64 (78) $ 13 — 13 (65) $ 7 $ (In thousands) (636) $ 80 — 80 (556) $ 295 — 295 (261) $ 320 $ 6,430 $ 5,652 127 (12,759) (12,759) (17) (12,776) (12,632) (6,346) $ (6,980) 335 1,935 27 1,935 1,962 2,270 (4,384) $ (4,710) 418 91 $ The $12.8 million, net, unrealized loss included in other comprehensive income for 2009 is primarily a result of a decrease in the discount rate related to our Philippines plan. The decrease in the discount rate is due to decreases in the yield of high quality fixed income instruments in the Philippines. Information for pension plans with benefit obligations in excess of plan assets are as follows: Plans with underfunded or non-funded projected benefit obligation: Aggregate projected benefit obligation Aggregate fair value of plan assets Plans with underfunded or non-funded accumulated benefit obligation: Aggregate accumulated benefit obligation Aggregate fair value of plan assets 83 December 31, 2010 2009 (In thousands) $ 28,863 $ 7,830 18,067 — 53,051 34,376 14,185 328 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following table sets forth the net periodic pension costs for each of the three years ended December 31, 2010: 2010 For the Year Ended December 31, 2009 (In thousands) 2008 Components of net periodic pension cost and total pension expense: Service cost Interest cost Expected return on plan assets Amortization of transitional obligation Amortization of prior service cost Recognized actuarial loss (gain) Net periodic pension cost Curtailments Settlements Total pension expense $ $ 5,934 $ 3,736 (2,336) 13 295 27 7,669 — — 7,669 $ 4,381 $ 2,959 (1,350) 64 80 (17) 6,117 (528) (586) 5,003 $ 7,064 4,339 (2,655) 73 66 539 9,426 1,552 — 10,978 The following table sets forth the weighted-average assumptions used in computing the net periodic pension cost and projected benefit obligation at year end: Discount rate for determining net periodic pension cost Discount rate for determining benefit obligations at year end Rate of compensation increase for determining net periodic pension cost Rate of compensation increase for determining benefit obligations at year end Expected rate of return on plan assets for determining net periodic pension cost For the Year Ended December 31, 2008 2009 2010 6.2% 7.9% 6.4% 7.9% 6.4% 5.2% 7.1% 5.7% 5.7% 6.1% 5.9% 4.6% 5.6% 5.7% 5.4% The measurement date for determining the Plans' assets and benefit obligations was December 31, each year. Discount rates were generally derived from yield curves constructed from foreign government bonds for which the timing and amount of cash outflows approximate the estimated payouts. The expected rate of return assumption is based on weighted-average expected returns for each asset class. Expected returns reflect a combination of historical performance analysis and the forward-looking views of the financial markets and include input from our actuaries. We have no control over the direction of our investments in our Taiwanese defined benefit plans as the local Labor Standards Law Fund mandates such contributions into a cash account balance at the Central Trust of China. The Japanese defined benefit pension plans are non-funded plans, and as such, no assets exist related to these plans. Our investment strategy for our Philippine defined benefit plan is based on long-term, sustained asset growth through low to medium risk investments. The current rate of return assumption targets are based on an asset allocation strategy for our Philippine plan assets of 20% to 75% debt (primarily domestic), 10% to 25% international equities (primarily U.S. and Europe) and 0% to 5% international fixed-income securities. The remainder of the portfolio will contain other investments such as cash, short-term investments and common stock. At December 31, 2010, 2009 and 2008, Philippine plan assets included $0.7 million, $0.7 million and $0.2 million, respectively, of Amkor common stock. 84 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The fair value of our pension plan assets at December 31, 2010, by asset category utilizing the fair value hierarchy as discussed in Note 14, is as follows: Cash and cash equivalents Equity securities Foreign securities U.S. securities U.S. fixed income funds Bonds Foreign government bonds Foreign treasury notes Taiwan retirement fund Other Total Quoted Prices in Active Markets for Identical Assets (Level 1) $ $ 859 $ 1,022 9,512 10,534 2,014 2,259 24,727 26,986 7,830 183 48,406 $ Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) — $ — — 6,054 — 6,054 — 277 6,331 $ Total — $ 859 — — — — — — — — — — $ 1,022 9,512 10,534 2,014 8,313 24,727 33,040 7,830 460 54,737 The fair value of our pension plan assets at December 31, 2009, by asset category utilizing the fair value hierarchy as discussed in Note 14, is as follows: Cash and cash equivalents Equity securities Foreign securities U.S. securities U.S. fixed income funds Bonds Foreign government bonds Foreign treasury notes Taiwan retirement fund Other Total Quoted Prices in Active Markets for Identical Assets (Level 1) $ $ 9,049 $ 5,408 5,538 10,946 1,294 5,102 4,388 9,490 6,715 183 37,677 $ 85 Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) — $ — — — — — 2,500 2,500 — 586 3,086 $ Total — $ 9,049 — — — — — — — — — — $ 5,408 5,538 10,946 1,294 5,102 6,888 11,990 6,715 769 40,763 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The Taiwan retirement fund category of our plan assets represents accounts that our Taiwanese subsidiaries have in a government labor retirement fund in the custody of the Bank of Taiwan. The accounts earn a minimum guaranteed rate of return. We have no control over the investment decisions of the fund which is invested in a mix of cash, domestic and foreign equity securities and domestic and foreign debt securities. Our other category of plan assets includes receivables, payables and real estate. We contributed $7.9 million, $15.4 million and $8.6 million to the Plans during 2010, 2009 and 2008, respectively, and we expect to contribute $3.5 million during 2011. We closely monitor the funded status of the Plans with respect to legislative requirements. We intend to make at least the minimum contribution required by law each year. The estimated future benefit payments related to our foreign defined benefit plans are as follows: 2011 2012 2013 2014 2015 2016 to 2020 14. Fair Value Measurements $ 3,071 4,337 3,658 4,049 4,378 33,390 The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows: Level 1, defined as quoted market prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3, defined as unobservable inputs that are not corroborated by market data. Assets and Liabilities that are Measured at Fair Value on a Recurring basis Our financial assets and liabilities recorded at fair value on a recurring basis include cash and cash equivalents and restricted cash. Cash and cash equivalents and restricted cash are invested in U.S. money market funds and various U.S. and foreign bank operating and time deposit accounts, which are due on demand or carry a maturity date of less than three months when purchased. No restrictions have been imposed on us regarding withdrawal of balances with respect to our cash and cash equivalents as a result of liquidity or other credit market issues affecting the money market funds we invest in or the counterparty financial institutions holding our deposits. Money market 86 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) funds and restricted cash are valued using quoted market prices in active markets for identical assets as summarized in the following table: Quoted Prices in Active Markets for Identical Assets (Level 1) Cash equivalent money market funds Restricted cash money market funds $ 145,827 $ 17,781 Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) — $ — Total — $ — 145,827 17,781 We measure certain assets and liabilities, including property, plant and equipment, intangible assets and an equity investment, at fair value on a nonrecurring basis. Such measurements are generally obtained from third party appraisal reports. Impairment losses on property, plant and equipment included in cost of sales were $1.4 million, $6.0 million and $12.1 million in 2010, 2009 and 2008, respectively. Impairment losses included in selling, general and administrative expenses were $0.6 million in 2010 and zero in 2009 and 2008. Impairment losses included in research and development expenses were $2.6 million in 2009 and zero in 2010 and 2008. Financial Instruments Not Recorded at Fair Value on a Recurring Basis We measure the fair value of our debt on a quarterly basis for disclosure purposes. The following table presents the carrying amounts and fair values of financial instruments that are not recorded at fair value on a recurring basis as of December 31, 2010 and 2009: Carrying value of debt Fair value of debt 2010 December 31, (In thousands) 1,364,300 1,806,231 $ $ 2009 1,434,185 1,868,674 $ $ The estimated fair value of the debt is based primarily on quoted market prices reported on the respective balance sheet dates for our senior and senior subordinated notes. The estimated fair value for the debt of our subsidiaries and the December 2013 Notes is based on market based assumptions including current borrowing rates for similar types of borrowing arrangements adjusted for duration, optionality, and risk profile. 15. Commitments and Contingencies We have a $100.0 million senior secured revolving credit facility that matures in April 2015. The facility has a letter of credit sub-facility of $25.0 million. As of December 31, 2010, we have $0.4 million of standby letters of credit outstanding and have an additional $24.6 million available for letters of credit. Such standby letters of credit are used in the ordinary course of our business and are collateralized by our cash balances. We generally warrant that our services will be performed in a professional and workmanlike manner and in compliance with our customers' specifications. We accrue costs for known warranty issues. Historically, our warranty costs have been immaterial. 87 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Legal Proceedings We are involved in claims and legal proceedings and we may become involved in other legal matters arising in the ordinary course of our business. We evaluate these claims and legal matters on a case-by-case basis to make a determination as to the impact, if any, on our business, liquidity, results of operations, financial condition or cash flows. Except as indicated below, we currently believe that the ultimate outcome of these claims and proceedings, individually and in the aggregate, will not have a material adverse impact to us. Our evaluation of the potential impact of these claims and legal proceedings on our business, liquidity, results of operations, financial condition or cash flows could change in the future. Attorney fees related to legal matters are expensed as incurred. Arbitration Proceedings with Tessera, Inc. On March 2, 2006, Tessera, Inc. filed a request for arbitration with the International Court of Arbitration of the International Chamber of Commerce (the "ICC"), captioned Tessera, Inc. v. Amkor Technology, Inc. The subject matter of the arbitration was a license agreement ("License Agreement") entered into between Tessera and our predecessor in 1996. On October 27, 2008, the arbitration panel in that proceeding issued an interim order in this matter. While the panel found that most of the packages accused by Tessera were not subject to the patent royalty provisions of the License Agreement, the panel did find that past royalties were due to Tessera as damages for some infringing packages. The panel also denied Tessera's request to terminate the License Agreement. On January 9, 2009, the panel issued the final damage award in this matter awarding Tessera $60.6 million in damages for past royalties due under the License Agreement. The award was for the period March 2, 2002 through December 1, 2008. The final award, plus interest, and the royalties for December 2008 amounting to $64.7 million, was expensed in 2008 and paid when due in February 2009. We have been calculating, accruing and paying royalties under the License Agreement for periods subsequent to December 1, 2008 using the same methodology specified in the panel's interim order for calculating damages for past royalties. Tessera has made repeated statements to customers and others claiming that we are in breach of the royalty provisions of the License Agreement. We informed Tessera that we are in full compliance with the License Agreement and of our intent to continue making the royalty payments when due in accordance with the terms of the License Agreement. On August 7, 2009, we filed a request for arbitration in the ICC against Tessera, captioned Amkor Technology, Inc. v. Tessera, Inc. We have instituted this action in order to obtain declaratory relief confirming that we are a licensee in good standing under our 1996 License Agreement with Tessera and that the License Agreement remains in effect. We are also seeking damages and injunctive relief regarding Tessera's tortious interference with our contractual relations and prospective economic advantage, including Tessera's false and misleading statements questioning our status as a licensee under the License Agreement. On November 2, 2009, Tessera filed an answer to our request for arbitration and counterclaims in the ICC. In the answer and counterclaims, Tessera denies Amkor's claims. Tessera also alleges breach of contract, seeking termination of the License Agreement and asserting that Amkor owes Tessera additional royalties under the License Agreement, including royalties for use of thirteen U.S. and six foreign patents that Tessera did not assert in the previous arbitration. Tessera also alleges that Amkor has tortiously interfered with Tessera's prospective business relationships and seeks damages. Tessera claims that the amount in dispute is approximately $100 million. On February 17, 2011, Tessera sent Amkor a notice of termination of the License Agreement. We filed our response to Tessera's answer on January 15, 2010 denying Tessera's claims and filed a motion with the panel seeking priority consideration and phased early determination of issues from the previous arbitration decision, including the proper method for calculating royalties under the License Agreement for periods subsequent to December 1, 2008. On March 28, 2010, the panel granted our request for priority consideration and phased early determination. The first hearing regarding the issues from the previous arbitration of royalty calculations, including 88 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) the proper method for calculating royalties under the License Agreement, was held in December 2010 and a decision is expected in the first half of 2011. The hearing on Tessera's assertion of infringement on additional patents and the payment of additional royalties under the License Agreement relating to the additional asserted patents is currently scheduled for August 2011. While we believe we are a licensee in good standing and are paying all royalties to Tessera due under the License Agreement, the outcome of this matter is uncertain and an adverse decision could have a material adverse effect on our results of operations, cash flows and financial condition. In connection with the new arbitration proceeding, we have deposited $15.1 million in an escrow account, which is classified as restricted cash in current assets at December 31, 2010. This amount represents our good faith estimate of the disputed amount of royalties that we expected Tessera to allege that we owe on packages assembled by us for one of our customers for the period from December 2, 2008 through June 30, 2010. We do not believe that the funds held in escrow are owed to Tessera and these funds may only be distributed upon the order of the panel in the current arbitration proceeding. Amkor Technology, Inc. v. Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd, and Carsem Inc. On November 17, 2003, we filed a complaint against Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd, and Carsem Inc. (collectively "Carsem") with the International Trade Commission ("ITC") in Washington, D.C., alleging infringement of our United States Patent Nos. 6,433,277; 6,455,356 and 6,630,728 (collectively the "Amkor Patents") and seeking, under Section 337 of the Tariff Act of 1930, an exclusion order barring the importation by Carsem of infringing products. We allege that by making, using, selling, offering for sale, or importing into the U.S. the Carsem Dual and Quad Flat No-Lead Packages, Carsem has infringed on one or more of our MicroLeadFrame packaging technology claims in the Amkor Patents. On November 18, 2003, we also filed a complaint in the U.S. District Court for the Northern District of California, alleging infringement of the Amkor Patents and seeking an injunction enjoining Carsem from further infringing the Amkor Patents, compensatory damages, and treble damages due to willful infringement plus interest, costs and attorney's fees. This District Court action has been stayed pending resolution of the ITC case. The ITC Administrative Law Judge ("ALJ") conducted an evidentiary hearing during July and August of 2004 in Washington D.C. and, on November 18, 2004, issued an Initial Determination that Carsem infringed some of our patent claims relating to our MicroLeadFrame package technology, that some of our 21 asserted patent claims are valid, that we have a domestic industry in our patents, and that all of our asserted patent claims are enforceable. However, the ALJ did not find a statutory violation of Section 337 of the Tariff Act. We filed a petition in November 2004 to have the ALJ's ruling reviewed by the full International Trade Commission. On March 31, 2005, the ITC ordered a new claims construction related to various disputed claim terms and remanded the case to the ALJ for further proceedings. On November 9, 2005, the ALJ issued an Initial Determination on remand finding that Carsem infringed some of our patent claims and that Carsem had violated Section 337 of the Tariff Act. On remand, the ITC had also authorized the ALJ to reopen the record on certain discovery issues related to a subpoena of documents from a third party. An order by the U.S. District Court for the District of Columbia enforcing the subpoena became final on January 9, 2009, and the third party produced documents pursuant to the subpoena. On July 1, 2009, the Commission remanded the investigation for a second time to the ALJ to reopen the record to admit into evidence documents and related discovery obtained from the enforcement of the above-referenced third-party subpoena. Following a two-day hearing, on October 30, 2009, the ALJ issued an Initial Determination reaffirming his prior ruling that the Carsem Dual and Quad Flat No-Lead Packages infringe some of Amkor's patent claims relating 89 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) to MicroLeadFrame package technology, that all of Amkor's asserted patent claims are valid, and that Carsem violated Section 337 of the Tariff Act. On December 16, 2009, the Commission ordered a review of the ALJ's Initial Determination. On February 18, 2010, the Commission reversed a finding by the ALJ on the issue of whether a certain invention constitutes prior art to Amkor's asserted patents. The Commission remanded the investigation to the ALJ to make further findings in light of the Commission's ruling. On March 22, 2010, the ALJ issued a Supplemental Initial Determination. Although the ALJ's ruling did not disturb the prior finding that Carsem Dual and Quad Flat No-Lead Packages infringe some of Amkor's patent claims relating to MicroLeadFrame technology, the ALJ found that some of Amkor's patent claims are invalid and, as a result, the ALJ did not find a statutory violation of the Tariff Act. On July 20, 2010, the Commission issued a Notice of Commission Final Determination, in which the Commission determined that there is no violation of Section 337 of the Tariff Act and terminated the investigation. We have appealed the Commission's ruling to the U.S. Court of Appeals for the Federal Circuit. Leases Future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year are: (In thousands) 2011 2012 2013 2014 2015 Thereafter Total $ $ 5,905 6,624 6,907 6,900 5,593 4,785 36,714 Rent expense amounted to $16.3 million, $18.3 million and $19.7 million for 2010, 2009 and 2008, respectively. 16. Related Party Transactions We purchase leadframe inventory from Acqutek Semiconductor & Technology Co., Ltd. James J. Kim, our Executive Chairman of the Board of Directors, owns approximately 16.2% of Acqutek Semiconductor & Technology Co., Ltd. The purchases are arms-length transactions on terms consistent with our non-related party vendors. During 2010, 2009 and 2008, purchases from Acqutek Semiconductor & Technology Co., Ltd. were $10.3 million, $11.4 million and $15.7 million, respectively. Amounts due to Acqutek Semiconductor & Technology Co., Ltd. at December 31, 2010 and 2009 were $1.2 million and $1.6 million, respectively. Mr. JooHo Kim is an employee of Amkor and a brother of Mr. James J. Kim, our Executive Chairman of the Board of Directors. Mr. JooHo Kim, together with his wife and children, own 100% of Jesung C&M, a company that provided cafeteria services to Amkor Technology Korea, Inc. The contract terms expired on February 28, 2009, and the contract with Jesung C&M was not renewed. During 2009 and 2008, purchases from Jesung C&M were $0.4 million and $5.3 million respectively. No amount was due to Jesung C&M at December 31, 2010 or 2009. 90 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) 17. Business Segments, Customer Concentrations and Geographic Information We have two reportable segments, packaging and test. Packaging and test are integral steps in the process of manufacturing semiconductor devices and our customers will engage with us for both packaging and test services, or just packaging or test services. Packaging Services We offer a broad range of package formats and services designed to provide our customers with a full array of packaging solutions. The differentiating characteristics of package formats can include: (1) size, (2) number of electrical connections, (3) thermal and electrical characteristics, (4) number of chips incorporated, (5) types of interconnect technologies employed, and (6) integration of active and passive components. Test Services We provide a complete range of semiconductor testing services including wafer testing or probe, various types of final testing, strip testing and complete end-of-line test services up to and including final shipping. Testing solutions vary depending upon the complexity of the device. The accounting policies for segment reporting are the same as those for our Consolidated Financial Statements. We evaluate our operating segments based on gross profit and gross property, plant and equipment. We do not specifically identify and allocate total assets by operating segment. Summarized financial information concerning reportable segments is shown in the following table. The "other" column includes exit costs associated with contractual obligations for our Singapore land and building leases as well as abandoned leasehold improvements and asset impairments (see Note 18). Year Ended December 31, 2010 Net sales Gross profit Year Ended December 31, 2009 Net sales Gross profit Year Ended December 31, 2008 Net sales Gross profit Gross Property, Plant and Equipment December 31, 2010 December 31, 2009 Packaging Test Other (In thousands) Total $ $ $ $ $ $ $ $ 2,650,257 584,190 1,933,600 429,295 2,343,514 472,986 3,018,216 2,689,005 91 288,871 79,621 245,237 57,652 314,299 88,645 800,125 753,234 355 $ (55) $ 272 $ (6,551) $ 789 $ 107 $ 143,221 $ 135,116 $ 2,939,483 663,756 2,179,109 480,396 2,658,602 561,738 3,961,562 3,577,355 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) The following table presents net sales by country based on the location of our customer: Japan Singapore Taiwan Other foreign countries Total foreign countries United States Total net sales 2010 Net Sales 2009 (In thousands) 2008 $ $ 455,339 $ 643,496 177,505 772,337 2,048,677 890,806 2,939,483 $ 260,500 $ 482,333 138,793 543,658 1,425,284 753,825 2,179,109 $ 240,756 657,573 194,305 591,665 1,684,299 974,303 2,658,602 One customer exceeded 10% of our consolidated net sales in 2009, of which the majority is included in our packaging segment. No customer exceeded 10% of consolidated net sales in either 2010 or 2008. The following table presents property, plant and equipment, net, based on the physical location of the asset: China Japan Korea Philippines Singapore Taiwan Other foreign countries Total foreign countries United States Total property, plant and equipment, net 18. Restructuring and Reduction in Force 2010 Property, Plant and Equipment, net 2009 (In thousands) 2008 $ $ 265,116 $ 21,365 679,488 231,795 24 287,439 66 1,485,293 51,933 1,537,226 $ 229,666 $ 22,609 555,800 219,865 46,307 238,125 93 1,312,465 52,165 1,364,630 $ 239,734 17,603 593,202 261,741 90,620 219,592 146 1,422,638 51,125 1,473,763 As part of our ongoing efforts to improve our manufacturing operations and manage costs, we regularly evaluate our staffing levels and facility requirements compared to business needs. The following table summarizes our exit activities and reduction in force initiatives associated with these activities. "Charges" represents the initial charge related to the exit activity. "Cash Payments" consists of the utilization of "Charges". "Adjustments" 92 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) represents revisions of estimates. "Non-cash Amounts" consists of a curtailment gain, the relief of an asset retirement obligation and asset impairments. Accrual at December 31, 2007 Charges Cash Payments Non-cash Amounts Accrual at December 31, 2008 Charges Cash Payments Adjustments Non-cash Amounts Accrual at December 31, 2009 Charges Cash Payments Adjustments Non-cash Amounts Accrual at December 31, 2010 Employee Separation Costs Contractual Obligations Asset Impairments Other Total $ $ 534 $ 14,871 (13,071) (1,552) 782 12,273 (10,096) (135) 1,114 3,938 4,614 (7,882) — 670 $ (In thousands) — $ — — — — 4,731 (2,543) (468) 1,093 2,813 41 (2,854) — — — $ — $ — — — — 2,290 — — (2,290) — 282 — — (282) — $ — $ — — — — 186 — — (186) — — — — — — $ 534 14,871 (13,071) (1,552) 782 19,480 (12,639) (603) (269) 6,751 4,937 (10,736) — (282) 670 North Carolina Manufacturing Operations During 2007, we commenced a phased transition of all wafer level processing production from our wafer bumping facility in North Carolina to our facility in Taiwan. All wafer level processing production ceased at our North Carolina facility in the three months ended June 30, 2009, and the North Carolina facility is now exclusively used for research and development activities. We recorded charges for termination benefits during 2008 of $1.0 million, of which $0.7 million and $0.3 million were recorded in cost of sales and selling, general and administrative expenses, respectively. We recorded charges for termination benefits during 2009 of $1.2 million, of which $0.9 million and $0.3 million were recorded in cost of sales and selling, general and administrative expenses, respectively. All amounts were paid as of December 31, 2009. Reduction in Force During 2008, we reduced our headcount through reductions-in-force and attrition by 1,100 employees. We completed voluntary and involuntary reductions-in-force programs in the U.S and at certain foreign locations. We recorded a charge for special and contractual termination benefits, inclusive of a pension curtailment loss, related to our reductions-in-force of $13.8 million, of which $11.5 million and $2.3 million were charged to cost of sales and selling, general and administrative expenses, respectively. All amounts were paid as of December 31, 2008. During the first three months of 2009, we further reduced our headcount through reductions-in-force programs by 1,750 employees in certain foreign locations. We recorded a charge for one-time and contractual termination benefits of $6.3 million, net of a pension curtailment gain, of which $5.8 million and $0.5 million were charged to cost of sales and selling, general and administrative expenses, respectively. All amounts were paid prior to March 31, 2009. 93 Table of Contents AMKOR TECHNOLOGY, INC. Notes to Consolidated Financial Statements — (Continued) Singapore Manufacturing Operations In June 2009, we communicated to our employees the decision to wind-down and exit our manufacturing operations in Singapore. We have completed our exit as of December 31, 2010. This wind-down affected approximately 600 employees and enabled us to improve our cost structure by consolidating factories. The majority of the machinery and equipment was relocated to and utilized in other factories. We own a facility in Singapore which is being actively marketed for sale. At December 31, 2010, the related net book value of $13.1 million is classified as held for sale and included in other current assets. The liability for our one-time involuntary termination benefits for employees that have provided services beyond the minimum retention period was recognized over the service period. During 2010 and 2009, we recorded charges for termination benefits of $2.6 million and $4.8 million, of which $1.9 million and $3.4 million were recorded in cost of sales, and $0.7 million and $1.3 million were recorded in selling, general and administrative expenses, respectively. In 2009, $0.1 million were recorded in research and development expenses. Contractual obligation costs, asset impairments and other costs are included in costs of goods sold. During 2009, we recorded a charge of $4.7 million representing the expected costs associated with the termination of our lease of one of our facilities that was vacated. In October 2009, we entered into a pre-termination agreement with the lessor and this agreement required us to make specified payments through January 2010 in exchange for early termination and relief from our existing $1.1 million asset retirement obligation related to the leased property. As a result of remeasuring our remaining expected future lease costs, we reduced our liability by $0.5 million during 2009. This was reflected as a non-cash accrual amount in 2009 and a cash payment in 2010. Asset impairment expense of $0.3 million in 2010 and $2.3 million in 2009 related to non- transferable machinery and equipment as well as abandoned building improvements at the leased facility. All amounts accrued at December 31, 2010 are classified in current liabilities. Early Retirement Program In October 2010, our Korean subsidiary offered a voluntary early retirement program for eligible employees. As a result, we recorded charges for special termination benefits of $2.1 million, of which $1.8 million was recorded in cost of sales, $0.2 million was recorded in selling, general and administrative expenses, and $0.1 million was recorded in research and development expenses. All amounts accrued at December 31, 2010 are classified in current liabilities. 19. Gain on Sale of Real Estate During 2009, we sold land and dormitory buildings in Korea for $0.8 million in cash and reported a gain of $0.3 million, with no tax effect. During 2008, we sold land and a warehouse in Korea for $14.3 million in cash and recorded a gain of $9.9 million, with no tax effect. 94 Table of Contents Schedule SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS Allowance for doubtful accounts: Year ended December 31, 2008 Year ended December 31, 2009 Year ended December 31, 2010 Deferred tax asset valuation allowance: Year ended December 31, 2008 Year ended December 31, 2009 Year ended December 31, 2010 Balance at Beginning of Period Additions Charged to Expense Write-offs (In thousands) (a) Other Balance at End of Period $ $ 676 834 461 291,042 261,613 208,925 291 (80) 508 3,005 (28,056) 15,009 (133) (293) (345) — $ — — 834 461 624 (32,170) (25,666) (5) (264) $ 1,034 (317) 261,613 208,925 223,612 (a) Column represents adjustments to the deferred tax asset valuation allowance directly through stockholders' equity for changes in accumulated other comprehensive income (loss) related to our foreign defined benefit pension plans. 95 Table of Contents Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports to the Securities and Exchange Commission ("SEC") is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, based on the definition of "disclosure controls and procedures" in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934. In designing and evaluating the disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2010 and concluded those disclosure controls and procedures were effective as of that date. Management's Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2010 based on the framework established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on the results of this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2010 based on criteria in Internal Control — Integrated Framework issued by the COSO. The effectiveness of our internal control over financial reporting as of December 31, 2010 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears under Item 8. 96 Table of Contents Changes in Internal Control Over Financial Reporting As previously reported, we are implementing a new enterprise resource planning ("ERP") system over a multi-year program on a company- wide basis. During the three months ended June 30, 2010, we implemented several significant ERP modules including modules associated with financial reporting, inventory costing and invoicing. The implementation of the ERP modules represents a change in our internal control over financial reporting. During the three months ended December 31, 2010, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item 10, with the exception of information relating to the Code of Business Conduct and Ethical Guidelines as disclosed below, is incorporated herein by reference from the material included under the captions "Election of Directors," "Executive Officers," and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in our definitive proxy statement (to be filed pursuant to Regulation 14A) for our 2011 Annual Meeting of Stockholders. Additionally, our Code of Business Conduct and Ethical Guidelines, Code of Ethics for Directors, Corporate Governance Guidelines, and the charters of the Audit Committee, Nominating and Governance Committee and Compensation Committee are available and maintained on our web site (http://www.amkor.com). Item 11. Executive Compensation The information required by this Item 11 is incorporated herein by reference from the material included under the captions "Executive Compensation," "Compensation Committee Interlocks and Insider Participation," and "Report of the Compensation Committee on Executive Compensation" in our definitive proxy statement (to be filed pursuant to Regulation 14A) for our 2011 Annual Meeting of Stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item 12, with the exception of the equity compensation plan information presented below, is incorporated herein by reference to our definitive proxy statement (to be filed pursuant to Regulation 14A) for our 2011 Annual Meeting of Stockholders. EQUITY COMPENSATION PLANS 97 Table of Contents The following table summarizes our equity compensation plans as of December 31, 2010: (a) Number of Securities to be Issued Upon Exercise of Outstanding Options (In thousands) (b) Weighted-Average Exercise Price of Outstanding Options (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a) (In thousands) Equity compensation plans approved by stockholders Equity compensation plans not approved by stockholders Total equity compensation plans 7,807 $ 36 7,843 10.22 17.19 15,823(1) 436(2) 16,259 (1) As of December 31, 2010, a total of 15.8 million shares were reserved for issuance under the 2007 Equity Incentive Plan. Shares available for issuance under our 2007 Equity Incentive Plan can be granted pursuant to stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares. (2) As of December 31, 2010, a total of 0.4 million shares were reserved for issuance under the 2003 Nonstatutory Inducement Grant Stock Plan, and there is a provision in this plan that restores the number of shares of common stock reserved for issuance under the plan to 0.3 million as of each January 1. On January 1, 2011, no additional shares were added to the plan pursuant to the annual restoration provision. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item 13 is incorporated herein by reference from the material included under the captions "Certain Relationships and Related Transactions," and "Proposal One — Election of Directors" in our definitive proxy statement (to be filed pursuant to Regulation 14A) for our 2011 Annual Meeting of Stockholders. Item 14. Principal Accountant Fees and Services The information required by this Item 14 is incorporated herein by reference from the material included under "Proposal Two — Ratification of Appointment of Independent Registered Public Accounting Firm" in our definitive proxy statement (to be filed pursuant to Regulation 14A) for our 2011 Annual Meeting of Stockholders. Item 15. Exhibits and Financial Statement Schedules (a) Financial Statements, Financial Statement Schedules and Exhibits PART IV The financial statements and schedules filed as part of this Annual Report on Form 10-K are listed in the index under Part II, Item 8. The exhibits required by Item 601 of Regulation S-K which are filed with this report or incorporated by reference herein, are set forth in the Exhibit Index. Management contracts or compensatory plans or arrangements are identified by an asterisk. 98 Table of Contents Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed, on its behalf by the undersigned, thereunto duly authorized. SIGNATURES AMKOR TECHNOLOGY, INC. By: /s/ Kenneth T. Joyce Kenneth T. Joyce President and Chief Executive Officer Date: February 24, 2011 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kenneth T. Joyce and Joanne Solomon, and each of them, his attorneys-in-fact, and agents, each with the power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and conforming all that said attorneys-in-fact and agents of any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name /s/ Kenneth T. Joyce Kenneth T. Joyce /s/ Joanne Solomon Joanne Solomon /s/ James J. Kim James J. Kim /s/ Roger A. Carolin Roger A. Carolin /s/ Winston J. Churchill Winston J. Churchill /s/ John T. Kim John T. Kim /s/ Stephen G. Newberry Stephen G. Newberry Title Date President and Chief Executive Officer February 24, 2011 Executive Vice President and Chief Financial Officer February 24, 2011 Executive Chairman February 24, 2011 Director Director Director Director 99 February 24, 2011 February 24, 2011 February 24, 2011 February 24, 2011 Table of Contents Name /s/ John F. Osborne John F. Osborne /s/ James W. Zug James W. Zug Title Director Director 100 Date February 24, 2011 February 24, 2011 Table of Contents EXHIBIT INDEX 2.1 2.2 Stock Purchase Agreement, Stock Purchase Agreement, dated as of June 3, 2004, by and among Amkor Technology, Inc., Unitive Semiconductor Taiwan Corporation and Certain Shareholders of Unitive Semiconductor Taiwan Corporation, along with Letter Agreement dated July 9, 2004 regarding Amendment to Stock Purchase Agreement and Loan Agreement by and among Amkor Technology, Inc., Unitive Semiconductor Taiwan Corporation and Sellers' Representative on Behalf of each Seller.(8) Sales Contract of Commodity Premises between Shanghai Waigaoqiao Free Trade Zone Xin Development Co., Ltd. and Amkor Assembly & Test (Shanghai) Co., Ltd. dated May 7, 2004.(8) 4.6 4.7 4.4 4.5 4.8 3.1 Certificate of Incorporation.(1) 3.2 Certificate of Correction to Certificate of Incorporation.(3) 3.3 Restated Bylaws.(21) 4.1 Specimen Common Stock Certificate.(2) 4.2 Indenture dated May 8, 2003, between Amkor Technology, Inc. and U.S. Bank N.A., relating to the 7.75% Senior Notes due May 15, 2013.(4) Indenture dated March 12, 2004, between Amkor Technology, Inc. and Wells Fargo Bank, N.A., relating to the 7.125% Senior Notes due 4.3 March 15, 2011.(6) Indenture, dated November 18, 2005, by and between Amkor Technology, Inc. and U.S. National Bank Association as Trustee, 6.25% Convertible Subordinated Notes due 2013.(11) Indenture, dated May 26, 2006, among Amkor Technology, Inc., the Guarantors party thereto and U.S. Bank National Association, relating to the 9.25% Senior Notes due 2016.(12) Indenture, dated May 26, 2006, between Amkor Technology, Inc. and U.S. Bank National Association, relating to the 2.50% Convertible Senior Subordinated Notes due 2011.(12) Supplemental Indenture, dated as of June 30, 2006, among Amkor, AIH, ATL, ATP and U.S. Bank, as Trustee, to Indenture, dated as of May 8, 2003, among Amkor and U.S. Bank, regarding Amkor's 7.75% Senior Notes due 2013.(13) Supplemental Indenture, dated as of June 30, 2006, among Amkor, AIH, ATL, ATP and Wells Fargo Bank, N.A., as Trustee, to Indenture, dated as of March 12, 2004, among Amkor and Wells Fargo Bank, N.A., regarding Amkor's 7.125% Senior Notes due 2011.(13) Supplemental Indenture, dated as of June 30, 2006, among Amkor, AIH, ATL, ATP and U.S. Bank, as Trustee, to Indenture, dated as of May 26, 2006, among Amkor and U.S. Bank, regarding Amkor's 9.25% Senior Notes due 2016.(13) Supplemental Indenture, dated as of October 29, 2004, among Amkor, Unitive and U.S. Bank, as Trustee, to Indenture, dated as of May 8, 2003, among Amkor and U.S. Bank, regarding Amkor's 7.75% Senior Notes due 2013.(9) Supplemental Indenture, dated as of October 29, 2004, among Amkor, Unitive Electronics and U.S. Bank, as Trustee, to Indenture, dated as of May 8, 2003, among Amkor and U.S. Bank, regarding Amkor's 7.75% Senior Notes due 2013.(9) Supplemental Indenture, dated as of October 29, 2004, among Amkor, Unitive and Wells Fargo Bank, N.A., as Trustee, to Indenture, dated as of March 12, 2004, among Amkor and Wells Fargo Bank, N.A., regarding Amkor's 7.125% Senior Notes due 2011.(9) Supplemental Indenture, dated as of October 29, 2004, among Amkor, Unitive Electronics and Wells Fargo Bank, N.A., as Trustee, to Indenture, dated as of March 12, 2004, among Amkor and Wells Fargo Bank, N.A., regarding Amkor's 7.125% Senior Notes due 2011.(9) Supplemental Indenture, dated as of January 5, 2005, among Amkor, AIH, P-Four, ATL, AAP and U.S. Bank, as Trustee, to Indenture, dated as of May 8, 2003, among Amkor and U.S. Bank, regarding Amkor's 7.75% Senior Notes due 2013.(10) Supplemental Indenture, dated as of January 5, 2005, among Amkor, AIH, P-Four, ATL, AAP and Wells Fargo Bank, N.A., as Trustee, to Indenture, dated as of March 12, 2004, among Amkor and Wells Fargo Bank, N.A., regarding Amkor's 7.125% Senior Notes due 2011.(10) Indenture, dated as of April 1, 2009, between Amkor Technology, Inc. and U.S. Bank National Association, as trustee regarding Amkor's 6.00% Convertible Senior Subordinated Notes due 2014.(18) 4.11 4.16 4.12 4.15 4.10 4.13 4.14 4.9 101 Table of Contents 4.17 Form of Note for Amkor's 6.00% Convertible Senior Subordinated Notes due 2014.(18) 4.18 Letter Agreement, dated March 26, 2009, between Amkor Technology, Inc., James J. Kim and 915 Investments, LP.(18) 4.19 Indenture, dated May 4, 2010, by and between Amkor Technology, Inc. and U.S. Bank National Association, as trustee, regarding the 7.375% Senior Notes due 2018.(23) Registration Rights Agreement, dated May 4, 2010, by and among Amkor Technology, Inc. and Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. regarding the 7.375% Senior Notes due 2018.(23) 4.20 10.1 Form of Indemnification Agreement for directors and officers.(2) 10.2 1998 Stock Plan, as amended.(17)* 10.3 Form of Stock Option Agreement under the 1998 Stock Plan.(11)* 10.4 Contract of Lease between Corinthian Commercial Corporation and Amkor/Anam Pilipinas Inc., dated October 1, 1990.(1) 10.5 Contract of Lease between Salcedo Sunvar Realty Corporation and Automated Microelectronics, Inc., dated May 6, 1994.(1) 10.6 Lease Contract between AAPI Realty Corporation and Amkor/Anam Advanced Packaging, Inc., dated November 6, 1996.(1) 10.7 1998 Director Option Plan and form of agreement thereunder.(2)* 10.8 2003 Nonstatutory Inducement Grant Stock Plan, as amended.(17)* 10.9 2007 Equity Incentive Plan.(15)* 10.10 Form of Stock Option Agreement under the 2007 Equity Incentive Plan.(16)* 10.11 2007 Executive Incentive Bonus Plan.(15)* 10.12 Credit Facility Agreement, dated March 30, 2007, between Woori Bank and Amkor Technology Korea, Inc.(14) 10.13 Additional Agreement, dated March 30, 2007, between Woori Bank and Amkor Technology Korea, Inc.(14) 10.14 General Terms and Conditions for Bank Credit Transactions, dated March 30, 2007, between Woori Bank and Amkor Technology Korea, Inc.(14) 10.15 Kun-Mortgage Agreement, dated March 30, 2007, between Woori Bank and Amkor Technology Korea, Inc.(14) 10.16 Kun-Guarantee, dated March 30, 2007, delivered by Amkor Technology, Inc. to Woori Bank.(14) 10.17 Voting Agreement, by and among Amkor Technology, Inc. and the Investors named therein, dated November 18, 2005.(11) 10.18 Working Capital Facility Agreement, dated January 20, 2009, between China Construction Bank Co., Ltd. And Amkor Assembly and Test (Shanghai) Co., Ltd.(20) Real Property Mortgage Agreement, dated January 20, 2009, between China Construction Bank Co., Ltd. and Amkor Assembly and Test (Shanghai) Co., Ltd.(20) 10.19 10.20 2009 Voting Agreement, dated as of March 26, 2009, between Amkor Technology, Inc., James J. Kim and 915 Investments, LP.(18) 10.21 Amended and Restated Loan and Security Agreement, dated as of April 16, 2009, among Amkor Technology, Inc., its subsidiaries from time to time party thereto, the lending institutions from time to time party thereto and Bank of America, N.A., as administrative agent.(19) Separation of Employment and Release Agreement, dated October 8, 2009, by and between KyuHyun Kim and Amkor Technology Korea, Inc.(22)* 10.22 10.23 Credit Facility Agreement, dated May 24, 2010, by and between Amkor Technology Korea, Inc. and Woori Bank.(24) 10.24 Additional Agreement, dated May 24, 2010, between Woori Bank and Amkor Technology Korea, Inc.(24) 10.25 General Terms and Conditions for Bank Credit Transactions, dated May 24, 2010, between Woori Bank and Amkor Technology Korea, Inc. (24) 10.26 Amendment to Kun-Mortgage Agreement, dated May 24, 2010, by and between Amkor Technology Korea, Inc. and Woori Bank.(24) 102 Table of Contents 10.27 10.28 12.1 14.1 14.2 21.1 23.1 31.1 31.2 32.1 Kun-Guarantee, dated May 24, 2010, by and between Amkor Technology, Inc. and Woori Bank.(24) First Amendment to Amended and Restated Loan and Security Agreement, dated as of September 10, 2010, among Amkor Technology, Inc., its subsidiaries from time to time party thereto, the lending institutions from time to time party thereto and Bank of America, N.A., as administrative agent.(25) Computation of Ratio of Earnings to Fixed Charges Amkor Technology, Inc. Code of Business Conduct and Ethical Guidelines.(5) Amkor Technology, Inc. Director Code of Ethics.(5) List of subsidiaries of the Registrant. Consent of PricewaterhouseCoopers LLP. Certification of Kenneth T. Joyce, Chief Executive Officer of Amkor Technology, Inc., Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. Certification of Joanne Solomon, Chief Financial Officer of Amkor Technology, Inc., Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS** XBRL Instance Document 101.SCH** XBRL Taxonomy Extension Schema Document 101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB** XBRL Taxonomy Extension Label Linkbase Document 101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF** XBRL Taxonomy Extension Definition Linkbase Document * Indicates management compensatory plan, contract or arrangement. ** This information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. (1) Incorporated by reference to the Company's Registration Statement on Form S-1 filed October 6, 1997 (File No. 333-37235). (2) Incorporated by reference to the Company's Registration Statement on Form S-1 filed on October 6, 1997, as amended on March 31, 1998 (File No. 333-37235). (3) Incorporated by reference to the Company's Registration Statement on Form S-1 filed on April 8, 1998, as amended on August 26, 1998 (File No. 333-49645). (4) Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed May 9, 2003. (5) Incorporated by reference to the Company's Quarterly Report on Form 10-K filed on March 4, 2004. (6) Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed May 5, 2004. (7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed August 6, 2004. (8) Incorporated by reference to the Company's Current Report on Form 8-K filed on September 3, 2004. (9) Incorporated by reference to the Company's Current Report on Form 8-K filed on November 4, 2004. (10) Incorporated by reference to the Company's Current Report on Form 8-K filed on January 10, 2005. (11) Incorporated by reference to the Company's Annual Report on Form 10-K filed on March 16, 2006. (12) Incorporated by reference to the Company's Current Report on Form 8-K filed on May 31, 2006. (13) Incorporated by reference to the Company's Current Report on Form 8-K filed on July 7, 2006. (14) Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed May 4, 2007. (15) Incorporated by reference to the Company's Current Report on Form 8-K filed August 10, 2007. (16) Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed May 5, 2008. (17) Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed August 7, 2008. (18) Incorporated by reference to the Company's Current Report on Form 8-K filed on April 1, 2009. 103 Table of Contents (19) Incorporated by reference to the Company's Current Report on Form 8-K filed on April 16, 2009. (20) Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed May 6, 2009. (21) Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed August 5, 2009. (22) Incorporated by reference to the Company's Current Report on Form 8-K filed on October 15, 2009. (23) Incorporated by reference to the Company's Current Report on Form 8-K filed May 5, 2010. (24) Incorporated by reference to the Company's Current Report on Form 8-K filed May 27, 2010. (25) Incorporated by reference to the Company's Current Report on Form 8-K filed September 10, 2010. 104 AMKOR TECHNOLOGY, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 2010 2009 Year Ended December 31, 2008 (In thousands) 2007 Exhibit 12.1 2006 Earnings Income (loss) before income taxes Equity in earnings of unconsolidated affiliate Income (loss) before income taxes and equity in earnings of unconsolidated affiliate Interest expense Amortization of debt issuance costs Interest portion of rent (1) Fixed Charges Interest expense Amortization of debt issuance costs Interest portion of rent Ratio of earnings to fixed charges (2) — (6,435) (2,373) $ 251,159 $ 126,523 $ (425,688) $ 234,837 $ 182,494 — 244,724 124,150 (425,688) 234,837 182,494 96,340 110,747 120,513 134,819 160,909 7,250 5,583 $ 351,019 $ 245,425 $ (294,150) $ 381,434 $ 356,236 4,466 6,559 4,505 5,450 4,649 5,879 5,326 6,452 — 4,505 5,450 $ 96,340 $ 110,747 $ 120,513 $ 134,819 $ 160,909 7,250 5,583 $ 106,295 $ 121,275 $ 131,538 $ 146,597 $ 173,742 2.1 4,466 6,559 4,649 5,879 5,326 6,452 2.0 3.3 2.6 — (1) Represents one-third of total rent expense which we believe is a reasonable estimate of the interest component of rent expense. (2) The ratio of earnings to fixed charges was less than 1:1 for 2008. In order to achieve a ratio of earnings to fixed charges of 1:1, we would have had to generate an additional $425.7 million of earnings in 2008. AMKOR TECHNOLOGY, INC. LIST OF SUBSIDIARIES Subsidiary Amkor Advanced Technology Taiwan, Inc. Amkor Assembly & Test (Shanghai) Co., Ltd. Amkor Iwate Company, Ltd. Amkor Regional Treasury Center Pte. Ltd. Amkor Technology Euroservices, S.A.R.L. Amkor Technology Japan, K.K. Amkor Technology Korea, Inc. Amkor Technology Limited Amkor Technology Philippines, Inc. Amkor Technology Singapore Investment Pte. Ltd. Amkor Technology Singapore IP Holding Pte. Ltd. Amkor Technology Singapore Philippines Holding Pte. Ltd Amkor Technology Singapore Pte. Ltd. Amkor Technology Taiwan Ltd. Amkor Wafer Fabrication Services, S.A.R.L. Amkor Worldwide Services LLC Guardian Assets, Inc. Unitive International N.V. EXHIBIT 21.1 Jurisdiction of Organization Taiwan China Japan Singapore France Japan Korea Cayman Islands Philippines Singapore Singapore Singapore Singapore Taiwan France Delaware Delaware Netherlands Antilles CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-62891, 333-86161, 333-63430, 333-100814, 333-113512 and 333-149376) of Amkor Technology, Inc. of our report dated February 24, 2011 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. Exhibit 23.1 /s/ PricewaterhouseCoopers LLP Phoenix, Arizona February 24, 2011 Exhibit 31.1 I, Kenneth T. Joyce, certify that: 1. I have reviewed this Annual Report on Form 10-K of Amkor Technology, Inc.; SECTION 302(a) CERTIFICATION 2. Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this Annual Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and d) Disclosed in this Annual Report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of this Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. /s/ Kenneth T. Joyce By: Kenneth T. Joyce Title: President and Chief Executive Officer Date: February 24, 2011 Exhibit 31.2 I, Joanne Solomon, certify that: 1. I have reviewed this Annual Report on Form 10-K of Amkor Technology, Inc.; SECTION 302(a) CERTIFICATION 2. Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this Annual Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and d) Disclosed in this Annual Report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of this Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. /s/ Joanne Solomon By: Joanne Solomon Title: Executive Vice President and Chief Financial Officer Date: February 24, 2011 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32 I, Kenneth T. Joyce, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Amkor Technology, Inc. on Form 10-K for the year ended December 31, 2010 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents in all material respects the financial condition and results of operations of Amkor Technology, Inc. I, Joanne Solomon, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Amkor Technology, Inc. on Form 10-K for the year ended December 31, 2010 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents in all material respects the financial condition and results of operations of Amkor Technology, Inc. /s/ Kenneth T. Joyce By: Kenneth T. Joyce Title: President and Chief Executive Officer Date: February 24, 2011 /s/ Joanne Solomon By: Joanne Solomon Title: Executive Vice President and Chief Financial Officer Date: February 24, 2011 

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