Amkor
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2018Commission File Number 000-29472Amkor Technology, Inc.(Exact name of registrant as specified in its charter) Delaware(State of incorporation) 23-1722724(I.R.S. Employer Identification Number) 2045 East Innovation CircleTempe, AZ 85284(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 Name of Each Exchange on Which Registered Common Stock, $0.001 par value The NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No oIndicate 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 þIndicate 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, as amended, during thepreceding 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 past90 days. Yes þ No oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during thepreceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No oIndicate 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’sknowledge, 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. þ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer þAccelerated filer oNon-accelerated filer oSmaller reporting company oEmerging growth company oIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þThe aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 29, 2018, based upon the closing price of the commonstock as reported by the NASDAQ Global Select Market on that date, was approximately $872 million.The number of shares outstanding of each of the issuer’s classes of common equity, as of February 15, 2019, was as follows: 239,572,534 shares of Common Stock, $0.001 parvalue.DOCUMENTS INCORPORATED BY REFERENCE:Portions of the registrant’s Proxy Statement relating to its 2019 Annual Meeting of Stockholders, to be filed subsequently, are incorporated by reference into Part III of this Reportwhere indicated. Table of ContentsTABLE OF CONTENTS PagePART IItem 1.Business 3Item 1A.Risk Factors 17Item 1B.Unresolved Staff Comments 32Item 2.Properties 33Item 3.Legal Proceedings 33Item 4.Mine Safety Disclosures 33 PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33Item 6.Selected Financial Data 36Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations 37Item 7A.Quantitative and Qualitative Disclosures About Market Risk 47Item 8.Financial Statements and Supplementary Data 49Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 87Item 9A.Controls and Procedures 87Item 9B.Other Information 88 PART IIIItem 10.Directors, Executive Officers and Corporate Governance 88Item 11.Executive Compensation 88Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 88Item 13.Certain Relationships and Related Transactions and Director Independence 89Item 14.Principal Accountant Fees and Services 89 PART IVItem 15.Exhibits and Financial Statement Schedules 89Item 16.Form 10-K Summary 90All references in this Annual Report on Form 10-K to “Amkor,” “we,” “us,” “our” or the “company” are to Amkor Technology, Inc. and its subsidiaries. Werefer to the Republic of Korea, which is also commonly known as South Korea, as “Korea”. All references to "J-Devices", "Toshiba" and "Qualcomm" are to J-Devices Corporation, our wholly owned subsidiary in Japan, Toshiba Corporation and Qualcomm Incorporated, respectively. We also refer to our new factoryand research and development facility in Incheon, Korea as "K5". Amounts preceded by ¥ are in Japanese yen, and amounts preceded by ₩ are in Koreanwon. Amkor®, Amkor Technology®, ChipArray®, FusionQuad®, J-DevicesTM, MicroLeadFrame®, TMV®, and SWIFT®, among others, are trademarks ofAmkor Technology, Inc. All other trademarks appearing herein are held by their respective owners. Subsequent use of the above trademarks in this report mayoccur without the respective superscript symbol (®and TM) in order to facilitate the readability of the report and are not a waiver of any rights that may beassociated with the relevant trademarks.1Table of ContentsThis report contains forward-looking statements within the meaning of the federal securities laws, including but not limited to statements regarding: (1) theamount, timing and focus of our expected capital investments in 2019 including expenditures in support of advanced packaging and test equipment, (2) ourability to fund our operating activities and financial requirements for the next twelve months, (3) the effect of changes in revenue levels and capacityutilization on our gross margin, (4) the focus of our research and development activities, (5) the anticipated impact of the Tax Cuts and Jobs Act (the "TaxAct") on our taxes, (6) the grant and expiration of tax holidays in jurisdictions in which we operate and expectations regarding our effective tax rate and theavailability of tax incentives, (7) the creation or release of valuation allowances related to taxes in the future, (8) our repurchase or repayment of outstandingdebt or the conversion of debt in the future, (9) payment of dividends, (10) compliance with our covenants, (11) expected contributions to foreign pensionplans, (12) liability for unrecognized tax benefits and the potential impact of our unrecognized tax benefits on our effective tax rate, (13) the effect of foreigncurrency exchange rate exposure on our financial results, (14) the volatility of the trading price of our common stock, (15) changes to our internal controlsrelated to integration of acquired operations and implementation of an enterprise resource planning system, (16) our efforts to enlarge our customer base incertain geographic areas and markets, (17) demand for advanced packages in mobile and automotive devices and our technology leadership and potentialgrowth in this market, (18) our expected forfeiture rate for outstanding stock options and restricted shares, (19) our expected rate of return for pension planassets, (20) interest savings from the redemption of our 6.625% Senior Notes due 2021, (21) the anticipated impact of changes in accounting standards, and(22) 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 comparableterminology. Because such statements include risks and uncertainties, actual results may differ materially from those anticipated in such forward-lookingstatements as a result of various factors, including those set forth in the following report as well as in Part I, Item 1A of this Annual Report on Form 10-K.2Table of ContentsPART IItem 1.BusinessOVERVIEWAmkor is one of the world’s leading providers of outsourced semiconductor packaging and test services. Amkor pioneered the outsourcing of semiconductorpackaging and test services through a predecessor corporation in 1968, and over the years we have built a leading position by:•Designing and developing innovative packaging and test technologies;•Offering a broad portfolio of cost-effective solutions and services;•Focusing on strategic end markets that offer solid growth potential;•Cultivating long-standing relationships with our customers, which include many of the world’s leading semiconductor companies;•Collaborating with customers, original equipment manufacturers (“OEMs”) and equipment and material suppliers;•Developing a competitive cost structure with disciplined capital investment;•Building expertise in high-volume manufacturing processes and developing a reputation for high quality and solid execution and•Providing a geographically diverse operating base, with research and development, engineering support and production capabilities at variousfacilities in China, Japan, Korea, Malaysia, the Philippines, Portugal and Taiwan.Our packaging and test services are designed to meet application and chip specific requirements including the required type of interconnect technology;size; thickness and electrical, mechanical and thermal performance. We provide turnkey packaging and test services including semiconductor wafer bump,wafer probe, wafer back-grind, package design, packaging, system-level and final test and drop shipment services. Our customers use us for one or more ofthese services.We provide our services to integrated device manufacturers (“IDMs”), “fabless” semiconductor companies and contract foundries. IDMs generally design,manufacture, package and test semiconductors in their own facilities. However, the availability of technologically advanced outsourced manufacturingservices has encouraged IDMs to outsource a portion of their manufacturing. Fabless semiconductor companies do not have factories and focus exclusivelyon the semiconductor design process and outsource virtually every step of the manufacturing process. Fabless semiconductor companies utilize contractfoundries to manufacture their semiconductors in wafer form, and companies such as Amkor for their packaging and test needs. Some companies will engagea contract foundry to manage the complete semiconductor manufacturing process, and in turn, the contract foundry will outsource some of its packaging andtest needs.Our IDM customers include: Intel Corporation; Renesas Electronics Corporation; STMicroelectronics N.V.; Texas Instruments Incorporated and ToshibaCorporation. Our fabless customers include: Broadcom Limited; Qualcomm Incorporated and Toshiba Memory Corporation. Our contract foundry customersinclude: Samsung Electronics Company Limited and Taiwan Semiconductor Manufacturing Company Limited.AVAILABLE INFORMATIONAmkor files annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (the “SEC”).The SEC maintains a website that contains annual, quarterly and current reports, proxy statements and other information that issuers (including Amkor) fileelectronically with the SEC. The SEC’s website is http://www.sec.gov.Amkor’s website is https://www.amkor.com. Amkor makes available, free of charge, through its website, our annual reports on Form 10-K; quarterly reports onForm 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 orfurnished pursuant to the Securities Exchange Act of3Table of Contents1934, as amended (the "Exchange Act"), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We alsomake available, free of charge, through our website, our Corporate Governance Guidelines, the charters of the Audit Committee, Nominating and GovernanceCommittee and Compensation Committee of our Board of Directors, our Code of Business Conduct, our Code of Ethics for Directors and other informationand materials. The information on Amkor’s website is not incorporated by reference into this report.INDUSTRY BACKGROUNDSemiconductor devices are the essential building blocks used in most electronic products. As electronic and semiconductor devices have evolved, severalimportant trends have emerged that have fueled the growth of the overall semiconductor industry, as well as the market for outsourced semiconductorpackaging and test services. These trends include:•An increasing demand for mobile and internet-connected devices, including the world-wide adoption of “smart” phones, tablets and other consumerelectronic devices that can access the internet and provide multimedia capabilities.•An increase in mobility and connectivity capabilities and growing digital content driving demand for new broadband wired and wireless networkingequipment.•The proliferation of semiconductor devices into well-established end products such as automotive systems due to increased use of electronics forsafety, navigation, fuel efficiency, emission reduction and entertainment systems.•An overall increase in the semiconductor content within electronic products to provide greater functionality and higher levels of performance.•The growth of advanced System-in-Package ("SiP") modules where multiple semiconductor and other electronic components with differentfunctionalities are combined into a single package. The increasing demand for miniaturization and higher functionality at competitive cost isdriving the adoption of advanced SiP in new products. Advanced SiPs are the primary vehicle for package-level integration, which allow customersto combine integrated circuits ("ICs") from different silicon nodes and different foundries.As a supplier in the semiconductor industry, our business is cyclical by nature and impacted by broad economic factors, such as world-wide gross domesticproduct and consumer spending. Historical trends indicate there has been a strong correlation between world-wide gross domestic product levels, consumerspending and semiconductor industry cycles.Outsourcing Trends in Semiconductor ManufacturingSemiconductor companies outsource their packaging and test needs to service providers such as Amkor for the following reasons:Packaging and test service providers have developed expertise in advanced technologies.The increasing demands for miniaturization, greater functionality, lower power consumption and improved thermal and electrical performance are driving thecontinuous development of semiconductor packaging and test technologies that are more sophisticated, complex and customized. This trend has led manysemiconductor companies and OEMs to view packaging and test as enabling technologies requiring the kind of leading-edge expertise for technologicalinnovation found in the leading outsourced assembly and test companies. At the same time, these companies are often looking to reduce the internalmanufacturing and research and development costs in packaging and test. As a result, many of these companies are increasingly relying on packaging andtest service providers as key sources for new package designs and advanced interconnect technologies.4Table of ContentsPackaging and test 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 changes in worldwide gross domestic product andconsumer spending. Semiconductor packaging and test are complex processes requiring substantial investment in specialized equipment, factories andhuman resources. As a result of this cyclicality and the large investments required, manufacturing facilities must operate at consistently high levels ofutilization to be cost effective. Shorter product life cycles, coupled with the need to update or replace packaging and test equipment to accommodate newpackage types, make it more difficult for integrated semiconductor companies to maintain cost effective utilization of their packaging and test assetsthroughout semiconductor industry cycles. Packaging and test service providers, on the other hand, can typically use their assets to support a broad range ofcustomers, potentially generating more efficient use of their production assets and a more cost effective solution.Packaging and test service providers can facilitate a more efficient supply chain and 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 aneffective supply chain is a critical factor in facilitating timely and successful product introductions. Packaging and test service providers have the resourcesand expertise to timely develop their capabilities and implement new packaging technology in volume. For this reason, semiconductor companies and OEMsare leveraging the capabilities of packaging and test service providers to deliver their new products to market more quickly.High quality packaging and test service providers enable semiconductor manufacturers to focus their resources on semiconductor design and waferfabrication.As semiconductor process technology migrates to larger wafers and smaller feature sizes, the cost of building a state-of-the-art wafer fabrication factory hasrisen significantly and can now be several billions of dollars. The high cost of investing in next generation silicon technology and equipment is causingmany semiconductor companies to adopt or maintain a “fabless” or “fab-lite” strategy to reduce or eliminate their investment in wafer fabrication andassociated packaging and test operations. As a result, these companies are increasing their reliance on outsourced providers of semiconductor manufacturingservices, including packaging and test.STRATEGY AND COMPETITIVE STRENGTHSStrategyOur financial goals are sales growth and improved profitability, and we are focusing on the following strategies to achieve these goals:Leverage Our Investment in Services for Advanced TechnologiesWe are an industry leader in developing and commercializing cost-effective advanced packaging and test technologies. These advanced technologysolutions provide increased value to our customers. An important factor for success in the advanced packaging and test area is to generate reasonably quickreturns on investments made in support of customers seeking leading-edge technologies.In recent years we have made significant investments in state-of-the-art facilities and equipment to provide services for the industry’s most complex devices.With more than 600 employees engaged in research and development and manufacturing process engineering for new semiconductor packaging and testtechnologies, we are a technology leader in areas such as fine pitch bumping, advanced flip chip, wafer-level processing and advanced SiPs. During 2018, wehad success capitalizing on our advanced technology to achieve design wins and new product introductions in areas such as chips fabricated at 7, 10, 14 and16 nanometer geometries; advanced SiP products including radio frequency ("RF"), front end modules and micro-electro-mechanical systems ("MEMS")devices; optical sensors and cavity MEMS; advanced Flip Chip with Through Silicon Via ("TSV") Technology and wafer-level Chip Scale Packaging("CSP") and wafer-level fan-out packages.5Table of ContentsWe work closely with our customers to develop cost-effective leading-edge packages for the next generation of devices, and we are making substantialprogress in a number of areas. These include integrated technologies such as advanced SiP, wafer-level fan-out, and Silicon Wafer Integrated Fan-outTechnology ("SWIFT") solutions which enable very thin, very small products combining application processors, memory, baseband and other peripheralintegrated circuits ("ICs"). They also include packages utilizing Through Silicon Via ("TSV") interconnects and silicon interposers which enable theintegration of high performance chips such as high bandwidth memory and graphics processors into a single package.We believe that advanced packaging services will continue to grow as our customers and leading electronics OEMs strive for smaller device geometries,higher levels of speed and performance and lower power consumption. We intend to continue to leverage our investment in advanced technology to meet thedemand for these services.Improve Utilization of Existing Assets and Broaden Our Customer BaseAnother key to our success is to improve the utilization of our existing assets. The transition by leading edge customers to newer packaging and testequipment platforms typically frees up capacity in existing, previously installed equipment. As part of our strategy, we are focused on developing a secondwave of customers to more effectively utilize these assets over a longer period of time.In particular, we are devoting substantial resources to increasing our sales to Chinese and Taiwanese fabless chip companies which have a significant portionof the mid-tier and entry-level segments of the mobile device market.A key element of our Greater China strategy is our world-class factory in Shanghai. In 2016, we expanded our clean room space at this facility by nearly 45%,to a total of about 625,000 square feet. Our Shanghai facility serves both international and local customers, with a heavy emphasis on wafer-level packaging,wafer bumping, stacked die packaging and advanced test services.A portion of our expanded Shanghai facility houses Qualcomm Communication Technologies (Shanghai) Co. Ltd., Qualcomm’s semiconductor test facility.This test center combines Amkor’s extensive test services experience and state-of-the-art cleanroom facilities with Qualcomm's industry leadership in cutting-edge product engineering and development. The co-location of the test center at our Shanghai factory helps to strengthen our close business relationshipwith a key customer.Balanced GrowthRevenue growth is a significant objective for Amkor. We strive to grow in a balanced way and avoid over-reliance on any single market or customer. Our goalis to achieve more consistent financial performance through all phases of the business cycle. Our balanced growth strategy has four components, as follows:•First, we are increasing our revenue in markets other than smartphones and tablets, such as automotive, which now drives approximately 26% ofAmkor's total revenue. Revenue from these markets tends to be more stable, with less pronounced highs and lows from year to year. Sales in theseother markets now account for 56% of our overall revenue, up from 47% in 2015, prior to the acquisition of J-Devices.•Second, we are expanding our customer base in the smartphone and tablet market, primarily by engaging with fabless companies in Greater China.This allows us to more fully utilize our existing assets and broadens our participation in all tiers of the mobile device market.•Third, we continue to focus on share gains in the iOS and high-end Android ecosystems, leveraging our expertise in advanced SiP, MEMS and otheradvanced packages to expand our content in flagship phones.•Finally, we are building and utilizing manufacturing lines which support multiple customers, and increasing factory utilization through moresophisticated planning processes and more intensive efficiency improvement activities.6Table of ContentsSelectively Grow Our Scale and Scope through Strategic InvestmentsFrom time to time we see attractive opportunities to grow our customer base and expand markets through strategic investments. For example, in 2017 wecompleted the acquisition of Nanium, S.A. ("Nanium"), a provider of wafer-level fan-out semiconductor packaging solutions. We believe that this acquisitionhas strengthened our position in the market for wafer-level packaging. In 2015, we completed the acquisition of 100% of J-Devices, our outsourcedsemiconductor assembly and test ("OSAT") joint venture in Japan. We believe that with this acquisition we are the largest OSAT by revenue for theautomotive market, with over $1 billion in automotive-based revenues in 2018.We believe that selective growth through joint ventures, acquisitions and other strategic investments can help diversify our revenue streams, improve ourprofits and maintain our technological leadership.Competitive StrengthsThe outsourced semiconductor packaging and test market is very competitive. We also compete with the internal semiconductor packaging and testcapabilities of many of our customers and foundries. We believe we are well-positioned in the outsourced packaging and test services market. The followingcompetitive strengths allow us to build upon our industry position and to remain one of the preferred providers of semiconductor packaging and test services.Leading Technology InnovatorWe are a leader in developing and deploying advanced semiconductor packaging and test solutions. We have designed and developed several state-of-the-artpackage formats and technologies including our Package-on-Package (“PoP”) platform with Through Mold Via (“TMV”) technology, molded embeddedpackages, FusionQuad, flip chip ball grid array, multi-chip modules with a silicon interposer placed between the module chips and substrate, copper pillarbumping and fine pitch copper pillar flip chip packaging technologies. In addition, we believe that as semiconductor technology continues to achievesmaller device geometries with higher levels of speed and performance, packages will increasingly require wafer-level CSP, wafer-level fan-out, SWIFT andflip chip interconnect solutions and advanced SiP products.We continue to invest in developing the key processes and packaging and test technologies required for our customers to deliver advanced integrated andmodular solutions to market. We are a leader in wafer thinning, micro-bumping, die stacking, hybrid packaging and TSV-based flip chip innovation. We arealso a developer of environmentally friendly IC packaging, which involves the elimination of lead and certain other materials.Long-Standing Relationships and Collaboration with Prominent Semiconductor CompaniesOur customers include most of the world’s largest semiconductor companies and over the last five decades, we have developed long-standing relationshipswith many of these companies. We believe that our production excellence has been a key factor in our success in attracting and retaining customers. We workwith our customers and our suppliers to develop proprietary process technologies to enhance our existing capabilities, reduce time-to-market, increasequality and lower 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 ofour new package designs as industry standards. We collaborate with customers and leading OEMs to develop comprehensive packaging solutions that makeit easier for next-generation semiconductors to be designed into next-generation end products. By collaborating with leading semiconductor companies andOEM electronic companies, we gain access to technology roadmaps for next generation semiconductor designs and obtain the opportunity to develop newpackages that satisfy their future requirements.Broad Offering of Semiconductor Package Design, Packaging and Test ServicesCreating successful interconnect solutions for advanced semiconductor devices often poses unique thermal, electrical and mechanical design challenges, andwe employ a large number of engineers to solve these challenges. We provide services for a wide variety of products. This wide variety of packaging offeringsis necessary to meet the diverse needs of our customers for the optimal combination of performance, size and cost attributes. Our solutions enable ourcustomers to focus7Table of Contentson semiconductor design and wafer fabrication while utilizing Amkor as their turnkey design, packaging and test services provider and, in many cases, theirpackaging technology innovator.We also offer an extensive line of advanced probe and final test services for analog, digital, logic, mixed signal and RF semiconductor devices. We believethat the breadth of our design, packaging and test services is important to customers seeking to limit the number of their suppliers.Geographically Diversified Operating BaseWe have a broad and geographically diversified operating footprint strategically located in seven countries in many of the world’s important electronicsmanufacturing 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 InvestmentThere is a continuous push throughout the entire semiconductor supply chain for lower cost solutions. We work to maintain a competitive cost structure andmake disciplined capital investment decisions so that we can provide cost-competitive solutions to our customers and achieve sustainable profitability andcash flow. Some of our cost control efforts have included: (1) improving the utilization of our existing assets; (2) developing new manufacturing methods toreduce processing costs; (3) utilizing flexible manufacturing lines that can accommodate a variety of products and customers; (4) increasing strip densities todrive higher throughput; (5) implementing more cost-effective materials; (6) utilizing our scale to drive world-wide purchasing leverage and (7) increasinglabor productivity.We operate in a cyclical industry. During an industry downturn we seek to reduce our costs and drive greater factory and administrative efficiencies. Costcontrol efforts can include reducing labor costs by temporarily lowering compensation, reducing employee and contractor headcount, shortening work weeksand obtaining labor-related foreign government subsidies where available.PACKAGING AND TEST SERVICESOverview of Semiconductor Manufacturing ProcessIn general, the semiconductor manufacturing process consists of IC design, wafer fabrication, wafer probe, packaging and final test.Integrated circuit design involves the laying out of electronic components, such as transistors, resistors, capacitors and the metallic interconnect of thesecomponents, to achieve the desired device functionality. Wafer fabrication is a multiple-step sequence of photolithographic and chemical processing stepsduring which the ICs are gradually created on semiconductor material, typically a silicon wafer. Individual ICs are generally known as a “chip” or “die”, anda single wafer will contain many die. Wafers are fabricated by two types of companies - IDMs which design and fabricate wafers using their own in-housemanufacturing facilities, and contract foundries which manufacture wafers that are designed by fabless companies or other customers.The packaging and test services we provide occur subsequent to wafer fabrication. The wafers that we receive from our customers are generally consigned tous; we do not own the consigned wafers or record their value in our financial statements. During wafer probe, each individual die is electrically tested, orprobed, for defects. Packaging is the processing of bare8Table of Contentsdie to facilitate electrical connections and heat dissipation and protect the die. The wafer is separated into individual die. Each good die is then assembledinto a package that typically encapsulates the die for protection and creates the electrical connections used to connect the package to a printed circuit board,module or other part of the electronic device. In some packages, chips are attached to a substrate or leadframe carrier through wirebonding or flip chipinterconnects and then encased in a protective material. Or, for a wafer-level package, the electrical interconnections are created directly on the surface of thedie so that the chip may be attached directly to other parts of an electronic device without a substrate or leadframe. The packages are then tested usingsophisticated equipment to ensure that each packaged chip meets its design and performance specifications.Packaging and Test Technologies and ProcessesOur packages employ wirebond, flip chip, copper clip and other interconnect technologies. We use leadframe and substrate package carriers, and we performa variety of test services.Interconnect TechnologiesWirebond: In packages that employ wirebond interconnect technology, the die is mounted face up on the package carrier and the interconnections betweenthe die and package carrier are made through very fine gold, silver or copper wires which are attached from the bond pads of the die to the package carrier.The interconnections are placed along the perimeter of the die. Wirebonding is generally considered to be the most cost-effective and flexible interconnecttechnology and is used to assemble the majority of semiconductor packages.Flip Chip: In packages that employ flip chip interconnect technology, the interconnections between the die and package carrier are made throughconductive “bumps” that are placed directly on the die surface utilizing a process called wafer bumping. The bumped die is then “flipped over” and placedface down, with the bumps connecting directly to the package carrier. Flip chip allows a higher number of interconnects than wirebond as it uses the entiresurface area of the die, and sometimes the perimeter as well, instead of just the perimeter as used by most wirebond packages. Flip chip also providesenhanced thermal and electrical performance, and enables smaller die and thinner, smaller form factors (or physical package dimensions).The wafer bumping process consists of preparing the wafer for bumping and forming or placing the bumps. Preparation may include cleaning, removinginsulating oxides and providing a pad metallurgy that will protect the interconnections while making good mechanical and electrical connection betweenthe bump and the wafer.Copper Clip: Copper clip interconnect technology uses a solid copper bridge or “clip” to connect the die to the package carrier. The clip allows a higherlevel of current flow than a wire and also provides a better method of heat transfer from the die. The clip is either spot welded, or more often re-flow soldered,to the die pads and the package carrier pads.Package CarriersLeadframe: A leadframe is a miniature sheet of metal, generally made of copper and silver alloys, on which a pattern of electrical connections (or “leads”) hasbeen cut. The leads are generally placed around the perimeter of the leadframe and are used to connect the package to the system board. The number of leadson an individual leadframe is limited as electrical shorting can occur if the leads are placed too close together.Substrate: A substrate is a laminate of either single or multiple layers of epoxy resin, woven glass fibers and metal conductors. Solder bumps provide theelectrical connection to the system board. The bumps are typically distributed evenly across the bottom surface of the substrate (called a “ball grid array”format). This allows less distance between individual leads and a higher number of interconnects than leadframe packages.Test ServicesAmkor provides a complete range of semiconductor testing services including wafer testing or probe and final test. 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. Substantially all of our test businessis derived from testing packages that we assemble.9Table of ContentsWafer Test Services: Wafer test, also referred to as wafer probe, is performed after wafer fabrication or wafer bumping to screen out defective devices prior topackaging. We offer a range of wafer test coverage that can be tailored based on the cost and complexity of the die, the package and the product. Theseservices range from coarse level screening for major defects all the way up to probing at high digital speeds and can include full radio frequency transmit andreceive as well as testing at multiple temperatures. Wafer testing can also involve a range of wafer mapping and inspection operations.Final Test Services: After the packaging process, final test is performed to ensure that the packaged device meets the customer’s requirements. Final test spansa range of rigor and complexity depending on the device and end market application. More rigorous types of final test include testing multiple times underdifferent electrical and temperature conditions and before and after device reliability stresses, such as burn-in. In addition to electrical testing, specializedsolutions 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 andinnovative types of low cost test equipment developed by Amkor.Advanced Products and Mainstream ProductsWe offer a broad range of advanced and mainstream packaging and test services to our customers. We refer to our flip chip, wafer-level processing and relatedtest services as “Advanced Products”, and our wirebond packaging and related test services as “Mainstream Products”. The following table sets forth, for theperiods indicated, the amount of advanced and mainstream packaging and test net sales and the percentage of such net sales: For the Year Ended December 31, 2018 2017 2016 (In millions, except percentage of net sales)Advanced Products$2,118 49.1% $1,966 46.7% $1,703 43.4%Mainstream Products2,198 50.9% 2,241 53.3% 2,225 56.6%Total net sales$4,316 100.0% $4,207 100.0% $3,928 100.0%Effective January 1, 2018, we adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), utilizing thefull retrospective transition method. Unless otherwise indicated, the prior periods presented herein have been revised to reflect this change. For moreinformation, see Note 2 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.Advanced ProductsOur Advanced Products include flip chip chip scale packages, wafer-level packages and flip chip ball grid array packages. These package families use flipchip interconnect technology so that the die can be connected to a substrate package carrier or, in the case of wafer-level chip scale packages, directly to aprinted circuit board.Flip Chip Chip Scale Package ("FC CSP") Products: FC CSP packages are small form factor packages where the substrate size is not much larger than the dieitself. The size advantage provided by CSP technologies has made FC CSP an attractive choice for a wide variety of applications that require very small formfactors such as smartphones, tablets and other mobile consumer electronic devices.Flip chip stacked chip scale packages ("FC SCSP") stack a second die on top of the original flip-chip die. The top die is typically a memory device, andwirebond interconnects are used to attach it to the substrate. FC SCSP is frequently used to stack memory on top of digital baseband and applicationsprocessors for use in mobile devices.We continue to drive thinner package solutions for our PoP technology through the development of ultra-thin substrates and enhancing our pre-stacking andthin die handling capabilities.10Table of ContentsWe developed fine pitch copper pillar flip chip interconnect technology, which creates interconnections at finer pitches using a plating process to reduce thenumber of substrate layers to facilitate very thin packages. This innovative solution is also an enabling technology for package stacking with TSVs.Flip Chip Ball Grid Array ("FC BGA") Products: FC BGA packages are large form factor substrate-based packages which are used where processing powerand speed are needed, and small form factors are not required. Our FC BGA packages are assembled around state-of-the-art substrates. Utilizing multiple highdensity routing layers, laser drilled vias, and ultra-fine line and space metallization, FC BGA substrates have the highest routing density available. Thevariety of FC BGA package options allows package selection to be tailored to the specific thermal needs of the end product. We offer FC BGA packaging in avariety of product formats to fit a wide range of end application requirements, including networking, storage, computing and consumer applications.Wafer-level Package Products: We offer three types of wafer-level packages: Wafer-level CSP, wafer-level fan-out and SWIFT.•Wafer-level CSP packages (also known as fan-in wafer-level packages) do not utilize a package carrier. The bumped wafer is singulated intoindividual die, and the wafer-level package is then attached directly to the system board. Wafer-level CSP offers one of the lowest total system costs,enabling higher semiconductor content while leveraging the smallest form factor and one of the highest performing, most reliable, semiconductorpackage platforms on the market today. We have seen significant growth in our wafer-level CSP business, driven largely by mobile communications.Applications for wafer-level CSP include power management, transceivers, sensors, wireless charging, codecs, and specialty silicon for new orunique functionality.•Wafer-level fan-out packages (also known as low-density fan-out packages) are utilized for ICs where the die surface area is too small toaccommodate all of the bond pads. The fan-out package enlarges the bondable surface area by building a border around the die using low-costmolding compound. Wafer-level CSP and wafer-level fan-out are complementary technologies. Customers can choose between the two packagetypes as their die sizes shrink or grow. With the acquisition of Nanium, we became a leader in low-density fan-out technology.•Silicon Wafer Integrated Fan-out Technology ("SWIFT", also known as high-density fan-out) replaces a laminate substrate with a thinner structure.SWIFT solutions enable very thin, very small products combining application processors, memory, baseband and other peripheral ICs.Mainstream ProductsOur Mainstream Products include leadframe packages, substrate-based wirebond packages and MEMS packages. These package families use wirebondinterconnect technology to connect a die to a leadframe or substrate package carrier.Leadframe Packages: Leadframe packages use wirebond or flip chip technology to interconnect a die to a leadframe package carrier. Leadframe packages areused in many electronic devices and remain the most practical and cost-effective solution for many low to medium pin count applications.Traditional leadframe packages support a wide variety of device types and applications. Two of our most popular traditional leadframe package types aresmall outline integrated circuit and quad flat package, commonly known as “dual” and “quad” products, respectively, based upon the number of sides fromwhich the leads extend. The traditional leadframe package family has evolved from “through hole design,” where the leads are plugged into holes on thecircuit 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 tosatisfy variations in the size of customers’ semiconductor devices.Through a process of continuous engineering and customization, we have designed several leadframe package types that are thinner and smaller thantraditional leadframe packages and can accommodate more leads on the perimeter of the package. These leadframe packages typically have superior thermaland electrical characteristics, which allow them to dissipate heat generated by high-powered semiconductor devices while providing enhanced electricalconnectivity. We are developing increasingly smaller versions of these packages to keep pace with continually shrinking semiconductor device11Table of Contentssizes and demand for miniaturization of portable electronic products. One of our more successful leadframe package offerings is the MicroLeadFrame familyof quad flat no lead packages.Power discrete devices use a leadframe as the package carrier and primarily use wirebond interconnect technology. However, power applications that requireimproved thermal and electrical performance will use packaging with copper clip interconnect technology.Substrate-based Wirebond Packages: Substrate-based wirebond packages use wirebond technology to connect a die to a substrate. Some of our packages inthis category include stacked CSP, wirebond ball grid array packages and plastic ball grid array ("PBGA") packages.Stacked CSP technology enables the stacking of a wide range of different semiconductor devices to deliver high levels of silicon integration and areaefficiency. Stacked CSP utilizes high density thin core substrates and advanced materials, along with leading-edge wafer thinning, die attach, and moldingcapabilities to stack multiple die on a substrate. Stacked CSP is ideal for memory, including NAND and DRAM memory, and mixed signal applications.Wirebond ball grid array packages offer a broad selection of ball array pitches, ball counts and body sizes, single and multi-die layouts, stacked die andpassive component integration. They are applicable for a wide range of semiconductors requiring a smaller package size than conventional PBGAs orleadframe packages.Plastic ball grid array packages are used in applications requiring higher pin count than leadframe packages, but typically have lower pin counts than flipchip. PBGA packages are designed for low inductance, improved thermal operation and enhanced surface-mount technology ability. Custom performanceenhancements, like ground and power planes, are also available.Micro-Electro-Mechanical Systems Packages: MEMS are miniaturized mechanical and electro-mechanical devices that can sense and provide informationabout the physical world and sometimes trigger a response. Examples of MEMS devices include microphones, accelerometers, airbag deployment sensors,gyrometers, magnetometers, and humidity, temperature and pressure sensors. We also specialize in sensor fusion products which utilize our cavity MEMSplatform and combine multiple sensors into a single package. MEMS packages leverage our expertise in wafer thinning, die stacking, wirebonding and flipchip interconnect to deliver sophisticated products with a very small form factor.Advanced System-in-Package ModulesAdvanced SiP modules combine multiple semiconductor and other electronic components with different functionalities into a single package. These modulesuse wirebond, flip chip or wafer-level interconnect technologies. Components can include passive devices (inductors, capacitors, resistors, filters anddiplexers), antennas and mechanical parts.The increasing demand for miniaturization and higher functionality at competitive cost is driving the adoption of advanced SiP in new products. AdvancedSiP modules are used for many applications such as RF and front end modules, basebands, connectivity, fingerprint sensors, display and touch screen drivers,sensors and MEMS, NAND memory and solid state drives. Advanced SiP modules are found in many products including smartphones and tablets,automobiles, wearable electronics, high-performance gaming systems, computers and network systems.In 2018, 2017 and 2016, we had net sales of approximately $990 million, $840 million and $770 million, respectively, from our advanced SiP moduleswhich are included in either Advanced Products or Mainstream Products depending upon the interconnect technology used in the module.12Table of ContentsEnd MarketsThe following table lists the end markets that use our products and sets forth, for the periods indicated, the percentage of net sales in each end market. Allprior periods have been retrospectively recast to conform with current year presentation. 2018 2017 2016End Market Distribution Data (an approximation including representative devices and applications based on a sampling of ourlargest customers): Communications (smart phones, tablets, handheld devices)44% 43% 42%Automotive, industrial and other (driver assist, infotainment, safety, performance)26% 26% 26%Computing (data center, infrastructure, PC/laptops, storage)18% 18% 18%Consumer (set-top boxes, televisions, connected home, personal electronics, visual imaging)12% 13% 14%Total net sales100% 100% 100%RESEARCH AND DEVELOPMENTOur research efforts focus on developing new packaging solutions and test services, and improving the efficiency and capabilities of our existing productionprocesses. We believe that technology development is one of the keys to success in the semiconductor packaging and test industry. By concentrating ourresearch and development on our customers’ needs for innovative packages, increased performance and lower cost, we gain opportunities to enter marketsearly, capture market share and promote our new package offerings as industry standards.One of our top priorities is developing low-cost packaging solutions for the next generation of mobile devices, which minimize material and processingcosts, while maximizing yields and reliability. This development effort is particularly important for customers seeking cost-effective alternatives to furthersilicon-level integration. Another important focus area is the development of wafer-level packages for larger chips. These wafer-level chip-scale packages andwafer-level fan-out (low density) packages are increasingly the preferred package type for many chips used in mobile devices. They provide a very low-profile product at a competitive cost. We are also developing integrated (high density) wafer-level fan-out solutions called SWIFT which enable very thin,very small products by combining application processors, memory, baseband and other peripheral ICs into one packaged module. Through the use of diepartitioning and heterogeneous die integration, these sub-system and system modules provide higher functionality at lower cost versus multi-packageoptions. Our research and development employees are located throughout Asia and in the United States and Portugal. In 2018, we had approximately 600 employeesengaged in research and development activities. In 2018, 2017 and 2016, we incurred $157.2 million, $166.6 million and $117.2 million, respectively, ofresearch and development expense. The 2017 increase was primarily due to development and other costs associated with our new K5 factory and research anddevelopment facility in Korea.SALES AND MARKETINGOur sales offices are located throughout Asia, Europe and North America. Our support personnel manage and promote our packaging and test services andprovide key customer and technical support. To provide comprehensive sales and customer service, we typically assign our customers a direct support teamconsisting of an account manager, technical program manager, test program manager and both field and factory customer support representatives. We alsosupport our largest multinational customers from multiple office locations to ensure that we are aligned with their global operational and businessrequirements.Our direct support teams are further supported by an extended staff of product, process, quality and reliability engineers, as well as marketing and advertisingspecialists, information systems technicians and factory personnel. Together, these direct and extended support teams deliver an array of services to ourcustomers.13Table of ContentsSEASONALITYOur 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 andAsia and the timing of flagship mobile device launches. In addition, semiconductor companies generally reduce their production during the holidays at theend of December which generally results in a decrease in packaging and test services during the first quarter. General economic conditions, changes in oursupply chain or overall demand in any of our end-markets can impact our seasonality. CUSTOMERSIn 2018, we had approximately 275 customers, including many of the largest semiconductor companies in the world. Our ten largest customers accounted for62% of our net sales in 2018. Toshiba accounted for more than 10% of our net sales in 2018.MATERIALS AND EQUIPMENTMaterialsOur 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. Thesilicon wafer is generally consigned from the customer. We generally do not take ownership of the customer consigned wafer, and title and risk of lossremains with the customer for these materials. Test materials constitute a very small portion of our total test cost. We purchase materials based on customerforecasts, and our customers are generally responsible for any unused materials which we purchased based on such forecasts.We obtain the materials required for packaging services from various suppliers. We source most of our materials, including critical materials such asleadframes, laminate substrates and gold wire, from a limited group of suppliers. We work closely with our primary material suppliers in an effort to ensureconsistent quality and that materials are available and delivered on time. We also negotiate world-wide pricing agreements with our major suppliers to takeadvantage of the scale of our operations.EquipmentOur ability to meet the changing demand from our customers for manufacturing capacity depends upon obtaining packaging and test equipment in a timelymanner. We work closely with our main equipment suppliers to coordinate the ordering and delivery of equipment to meet our expected capacity needs.The primary types of equipment used in providing our packaging services are wirebonders and die bonders. In addition, we maintain a variety of otherpackaging equipment, including mold, singulation, die attach, ball attach and wafer backgrind, along with numerous other types of manufacturingequipment. A substantial portion of our packaging equipment base can generally be used and adapted to support the manufacture of many of our packagesthrough the use of relatively low cost tooling, although equipment used in advanced packaging can be more difficult to redeploy than equipment used intraditional wirebond packaging.We also purchase wafer bumping equipment to facilitate our flip chip and wafer level packaging services. Wafer bump equipment includes sputter and spincoaters, electroplating equipment, reflow ovens and other types of equipment. This equipment tends to have longer lead times for delivery and installationthan other packaging equipment and is sold in relatively larger increments of capacity.The primary equipment used in the testing process includes testers, handlers and probers. Handlers are used to transfer individual or small groups of packagedICs to a tester. Test equipment is generally a more capital intensive portion of the process and tends to have longer delivery lead times than most types ofpackaging equipment. We focus our capital expenditures on standardized tester platforms in order to maximize test equipment utilization where possible. Insome14Table of Contentscases, our customers will consign test equipment to us. In those cases, we operate the equipment on their behalf but do not own it.ENVIRONMENTAL MATTERSThe 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. Inaddition, semiconductor packages have historically utilized metallic alloys containing lead (Pb) within the interconnect terminals typically referred to asleads, pins or balls. The usage of lead (Pb) has decreased over the past few years, as we have ramped volume production of alternative lead (Pb)-free processes.Our operations are subject to numerous laws and regulations governing the protection of the environment, disposal of waste, discharges into water, emissionsinto the atmosphere and the protection of employee health and safety. Future regulations may impose stricter environmental requirements on thesemiconductor packaging and test industry and may require additional capital investment.We are engaged in a continuing program to assure compliance with federal, state and local environmental laws and regulations. We do not expect that capitalexpenditures 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.We are committed to sound and responsible environmental practices in conducting our business. We are an active member of the Responsible BusinessAlliance (formerly known as the Electronics Industry Citizenship Coalition), the largest industry organization dedicated to supply chain responsibility. Wealso continuously engage with our customers and suppliers to improve the sustainability of our operations around the world.COMPETITIONThe outsourced semiconductor packaging and test market is very competitive. We face substantial competition from established packaging and test serviceproviders primarily located in Asia, including companies with significant manufacturing capacity, financial resources, research and development operations,marketing and other capabilities. These companies include ASE Technology Holding Co., Ltd. and Jiangsu Changjiang Electronics Technology Co., Ltd.Such companies also have developed relationships with most of the world’s largest semiconductor companies, including current or potential customers ofAmkor.We also compete with the internal semiconductor packaging and test capabilities of many of our customers. Our IDM customers continually evaluate theattractiveness of outsourced services against their own in-house packaging and test services and at times may decide to shift some or all of their outsourcedpackaging and test services to internally sourced capacity. We also compete with contract foundries, such as Taiwan Semiconductor ManufacturingCompany Limited and Samsung Electronics Co., Ltd., which offer full turnkey services from silicon wafer fabrication through packaging and final test. Inaddition, we compete with companies that offer only test services and not packaging.The principal elements of competition in the semiconductor packaging and test services market include:•technical competence;•quality;•price;•breadth of packaging and test services offered, including turnkey services;•new package and test design, technology innovation and implementation;•cycle times;•customer service and15Table of Contents•available capacity and ability to invest in capacity, geographic location and scale of manufacturing.We believe that we compete favorably with respect to each of these elements.INTELLECTUAL PROPERTYWe maintain an active program to protect and derive value from our investment in technology and the associated intellectual property rights. Intellectualproperty rights that apply to our various products and services include patents, copyrights, trade secrets and trademarks. We have filed and obtained a numberof patents in the U.S. and abroad, and their durations vary depending on the jurisdiction in which each patent is filed. Although our patents are an importantelement 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 tofile patent applications when appropriate to protect our proprietary technologies, but we cannot assure you that we will receive patents from pending orfuture applications. In addition, any patents we obtain may be challenged, invalidated or circumvented and may not provide meaningful protection or othercommercial advantage to us.We also protect and maintain the confidentiality of certain information about our processes, products and strategies which we believe provides us with acompetitive advantage. We have ongoing programs designed to maintain the confidentiality of such information. Further, to distinguish our products fromour competitors’ products, we have obtained certain trademarks and service marks and may promote our particular brands through advertising and othermarketing techniques.EMPLOYEESIn 2018, Amkor had approximately 30,850 full-time employees. We believe that our relations with our employees are good, and we have not experienced awork stoppage in any of our factories. Our employees in the Philippines, Singapore, Taiwan and the U.S. are not represented by any union. Certain employeesat our factories in China, Japan, Korea, Malaysia and Portugal are members of a union, and we operate subject to collective bargaining agreements that wehave entered into with these unions.16Table of ContentsItem 1A.Risk FactorsThe factors discussed below are cautionary statements that identify important factors and risks that could cause actual results to differ materially from thoseanticipated by the forward-looking statements contained in this report. For more information regarding the forward-looking statements contained in thisreport, see the Table of Contents of this Annual Report on Form 10-K. You should carefully consider the risks and uncertainties described below, togetherwith all of the other information included in this report, in considering our business and prospects. The risks and uncertainties described below are not theonly ones facing Amkor. Additional risks and uncertainties not presently known to us may also impair our business operations. The occurrence of any of thefollowing risks could affect our business, liquidity, results of operations, financial condition or cash flows.Dependence on the Highly Cyclical Semiconductor Industry - We Operate in Volatile Industries and Industry Downturns and Declines in Global Economicand 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 asworld-wide gross domestic product and consumer spending. The semiconductor industry has experienced significant and sometimes sudden and prolongeddownturns in the past. If the industry or markets we compete in experience slower, or even negative growth, our business and results of operations may beadversely affected.Since our business is, and will continue to be, dependent on the requirements of semiconductor companies for outsourced packaging and test services, anydownturn in the semiconductor industry or any other industry that uses a significant number of semiconductor devices, such as telecommunications,consumer electronics, or computing, could have a material adverse effect on our business and operating results. During downturns, we have experienced,among other things, reduced demand, excess capacity and reduced sales. For example, generally soft economic conditions and a lack of compelling newmobile products constrained overall demand during 2015. In addition, we believe that there is an inventory correction currently underway in the smartphonemarket in the first quarter of 2019 and that the general semiconductor market is going through a normal cyclical correction. Macroeconomic uncertaintiesand a cautious business climate are also expected to constrain the revenue growth in our business. It is difficult to predict the timing, strength or duration ofany economic slowdown or subsequent economic recovery, which, in turn, makes it more challenging for us to forecast our operating results, make businessdecisions and identify risks that may affect our business, sources and uses of cash, financial condition and results of operations. Additionally, if industryconditions 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 ofFactors 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 andcash flows, or lead to significant variability of quarterly or annual operating results. Our profitability and ability to generate cash from operations isprincipally 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 and our ability to control our costs including labor, material, overhead and financing costs.Our net sales, gross profit, operating income and cash flows have historically fluctuated significantly from quarter to quarter as a result of many of thefollowing 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 generally, as well as by specific customers, such asinventory reductions by our customers impacting demand in key markets;•our ability to achieve our major growth objectives, including: transitioning second-wave customers to advanced packages; expanding our sales tocustomers in Greater China and, in particular, in the mid-level and entry-level tiers of the mobile device market; and increasing our share of theautomotive market;•changes in our capacity and capacity utilization rates;•changes in average selling prices which can occur quickly due to the absence of long-term agreements on price;17Table of Contents•changes in the mix of the semiconductor packaging and test services that we sell;•the development, transition and ramp to high volume manufacture of more advanced silicon nodes and evolving wafer, packaging and testtechnologies, may cause production delays, lower manufacturing yields and supply constraints for new wafers and other materials;•absence of backlog, the short-term nature of our customers’ commitments, double bookings by customers and deterioration in customer forecasts andthe impact of these factors, including the possible delay, rescheduling and cancellation of large orders, or the timing and volume of orders relative toour production capacity;•changes in costs, quality, availability and delivery times of raw materials, components and equipment;•changes in labor costs to perform our services;•wage inflation and fluctuations in commodity prices, including gold, copper and other precious metals;•the timing of expenditures in anticipation of future orders;•changes in effective tax rates;•the availability and cost of financing;•intellectual property transactions and disputes;•high leverage and restrictive covenants;•warranty and product liability claims and the impact of quality excursions and customer disputes and returns;•costs associated with legal claims, indemnification obligations, judgments and settlements;•political instability and government shutdowns, civil disturbances or environmental or natural events, such as earthquakes like the recent ones inJapan, that impact our operations, and international events, such as the United Kingdom's vote to leave the European Union;•pandemic illnesses that may impact our labor force and our ability to travel;•costs of acquisitions and divestitures and difficulties integrating acquisitions;•our ability to attract and retain qualified personnel to support our global operations;•fluctuations in interest rates and currency exchange rates;•fluctuations in our manufacturing yields;•our ability to penetrate new end markets or expand our business in existing end markets;•dependence on key customers or concentration of customers in certain end markets, such as mobile communications and automotive and•restructuring charges, asset write-offs and impairments.It is often difficult to predict the impact of these factors upon our results for a particular period. These factors may have a material and adverse effect on ourbusiness, liquidity, results of operations, financial condition and cash flows or lead to significant variability of quarterly or annual operating results. Inaddition, these factors may adversely affect our credit ratings which could make it more difficult and expensive for us to raise capital and could adverselyaffect the price of our securities.18Table of ContentsRisks Associated with International Operations - We Depend on Our Factories and Operations in China, Japan, Korea, Malaysia, the Philippines,Portugal, Singapore 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, Malaysia, the Philippines, Portugal,Singapore and Taiwan. Substantially all of our property, plant and equipment is located outside of the United States. Moreover, many of our customers andthe vendors in our supply chain 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;•laws, rules, regulations and policies imposed by U.S. or foreign governments, such as tariffs, customs, duties and other restrictive trade barriers,national security, data privacy and cybersecurity, antitrust and competition, tax, currency and banking, labor, environmental, health and safety, andin particular the recent increase in tariffs, customs, duties and other restrictive trade barriers considered or adopted by U.S. and foreign governments;•laws, rules, regulations and policies within China and other countries that may favor domestic companies over non-domestic companies, includingcustomer- or government-supported efforts to promote the development and growth of local competitors;•the payment of dividends and other payments by non-U.S. subsidiaries may be subject to prohibitions, limitations or taxes in local jurisdictions;•fluctuations in currency exchange rates, particularly the dollar/yen exchange rate for J-Devices;•political and social conditions, and the potential for civil unrest, terrorism or other hostilities;•disruptions or delays in shipments caused by customs brokers or government agencies;•difficulties in attracting and retaining qualified personnel and managing foreign operations, including foreign labor disruptions;•difficulty in enforcing contractual rights and protecting our intellectual property rights;•potentially adverse tax consequences resulting from tax laws in the U.S. and in foreign jurisdictions in which we operate and•local business and cultural factors that differ from our normal standards and practices, including business practices that we are prohibited fromengaging in by the Foreign Corrupt Practices Act and other anti-corruption laws and regulations.In particular, we have significant facilities and other investments in South Korea, and there have been heightened security concerns in recent years stemmingfrom North Korea’s nuclear weapon and long-range missile programs as well as its military actions in the region. Furthermore, there has been a history ofconflict and a recent rise in tensions within and among other countries in the region.Competition - We Compete Against Established Competitors in the Packaging and Test Business as Well as Internal Customer Capabilities and May FaceCompetition from New Competitors, Including Foundries.The outsourced semiconductor packaging and test market is very competitive. We face substantial competition from established and emerging packagingand test service providers primarily located in Asia, including companies with significantly greater processing capacity, financial resources, local presence,research and development operations, marketing, technology and other capabilities. We also may face increased competition from domestic companieslocated in the People’s Republic of China, or the PRC, where there are government-supported efforts to promote the development and growth of the localsemiconductor industry. For example, STATS ChipPAC was acquired in 2015 by Jiangsu Electronics Technology Co., Ltd., a local PRC company. We maybe at a disadvantage in attempting to compete with entities associated with such government-supported initiatives based on their lower cost of capital, accessto government resources and incentives, preferential sourcing practices, stronger local relationships or otherwise. Our competitors may also have19Table of Contentsestablished relationships, or enter into new strategic relationships, with one or more of the large semiconductor companies that are our current or potentialcustomers, or key suppliers to these customers. Consolidation among our competitors could also strengthen their competitive position. For example,Advanced Semiconductor Engineering, Inc. and Siliconware Precision Industries Co., Ltd. became sister companies under a new joint holding company, ASETechnology Holding Co. LTD., in April 2018.We also face competition from the internal capabilities and capacity of many of our current and potential IDM and foundry customers. In addition, wecompete with contract foundries, such as Taiwan Semiconductor Manufacturing Company Limited and Samsung Electronics Co., Ltd., which offer fullturnkey services from silicon wafer fabrication through packaging and final test. These semiconductor foundries, which are substantially larger and havegreater financial resources than we do, have expanded their operations to include packaging and test services, and may continue to expand these capabilitiesin the future.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 notrely on internal sources for packaging and test services, or that our business, liquidity, results of operations, financial condition and cash flows will not beadversely affected by such increased competition.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 aresubstantially dependent upon our customers’ demand in that quarter. None of our customers have committed to purchase any significant amount ofpackaging 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. Inaddition, we sometimes experience double booking by customers and our customers often reduce, cancel or delay their purchases of packaging and testservices for a variety of reasons including industry-wide, customer-specific and Amkor-specific reasons. This makes it difficult for us to forecast our capacityutilization and net sales in future periods. Since a large portion of our costs is fixed and our expense levels are based in part on our expectations of futuresales, we may not be able to adjust costs in a timely manner to compensate for any sales shortfall. If we are unable to adjust costs in a timely manner, ourmargins, operating results, financial condition and cash flows would be adversely affected.High Fixed Costs - Due to Our High Percentage of Fixed Costs, We Will Be Unable to Maintain Satisfactory Gross Margins if We Are Unable to AchieveRelatively High Capacity Utilization Rates.Our operations are characterized by relatively high fixed costs and the absence of any material backlog. Our profitability depends in part not only on pricinglevels for our packaging and test services, but also on the efficient utilization of our human resources and packaging and test equipment. Increases ordecreases in our capacity utilization can significantly affect gross margins. In periods of low demand, we experience relatively low capacity utilization in ouroperations, which leads to reduced margins during that period. Transitions between different packaging technologies, such as the transition from goldwirebond to flip chip and copper wirebond packages, can also impact our capacity utilization if we do not efficiently redeploy our equipment for otherpackaging and test opportunities. For example, in 2011 the migration of some customer demand from wirebond to flip chip packages resulted in under-utilized wirebond assets which negatively impacted our capacity utilization and gross margin. We cannot assure you that we will be able to achieveconsistently high capacity utilization, and if we fail to do so, our gross margins will be negatively impacted. If our gross margins decrease, our business,liquidity, results of operations, financial condition and cash flows could be materially 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 capitalexpenditures. Forecasted customer demand for which we have made capital investments may not materialize, especially if industry conditions deteriorate. Asa result, our sales may not adequately cover fixed costs resulting in reduced profit levels or causing significant losses, both of which may adversely impactour business, liquidity, results of operations, financial condition and cash flows.20Table of ContentsGuidance - 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 publishtheir own projections with respect to our future operating results. As discussed above under “Fluctuations in Operating Results and Cash Flows - OurOperating Results and Cash Flows Have Varied and May Vary Significantly as a Result of Factors That We Cannot Control,” our operating results and cashflows vary significantly and are difficult to accurately predict. Volatility in customer forecasts and fluctuations in global consumer demand make itparticularly difficult to predict future results. Further, providing guidance requires us to make estimates and assumptions about such things as revenue, costsand expenses, which may turn out to be incorrect or change. To the extent we fail to meet or exceed our own guidance or the analyst projections for anyreason, the trading prices of our securities may be adversely impacted. Moreover, even if we do meet or exceed that guidance or those projections, if analystsand investors do not react favorably, or if analysts were to discontinue providing coverage of our company, the trading prices of our securities may beadversely impacted.Declining Average Selling Prices - Historically There Has Been Downward Pressure on the Prices of Our Packaging and Test Services.Prices for packaging and test services have generally declined over time, and sometimes prices can change significantly in relatively short periods of time.We expect downward pressure on average selling prices for our packaging and test services to continue in the future, and this pressure may intensify duringdownturns in business. If we are unable to offset a decline in average selling prices by developing and marketing new packages with higher prices, reducingour purchasing costs, recovering more of our material cost increases from our customers and reducing our manufacturing costs, our business, liquidity, resultsof operations, financial condition and cash flows could be materially adversely affected.Decisions by Our Integrated Device Manufacturer and Foundry 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 IDM customers. Our IDM and foundry customerscontinually evaluate the need for outsourced services against their own in-house packaging and test services. As a result, at any time and for a variety ofreasons, IDMs and foundries may decide to shift some or all of their outsourced packaging and test services to internally sourced capacity.The reasons IDMs and foundries may shift their outsourced business to internal capacity include:•their desire to realize higher utilization of their existing packaging and test 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.In addition, to the extent we limit capacity commitments for certain customers, these customers may increase their level of in-house packaging and testcapabilities, which could make it more difficult for us to regain their business when we have available capacity.In a downturn in the semiconductor industry, IDMs and foundries could respond by shifting some or all outsourced packaging and test services to internallyserviced capacity on a short-term basis. Also, the IDMs and foundries could curtail or reverse the trend of outsourcing packaging and test services. If weexperience a significant loss of IDM or foundry business, it could have a material adverse effect on our business, liquidity, results of operations, financialcondition and cash flows, especially during a prolonged industry downturn.21Table of ContentsOur Substantial Indebtedness Could Adversely Affect Our Financial Condition and Prevent Us from Fulfilling Our Obligations.We have a significant amount of indebtedness, and the terms of the agreements governing our indebtedness allow us and our subsidiaries to incur more debt,subject to certain limitations. As of December 31, 2018, our total debt balance was $1,332.3 million, of which $114.6 million was classified as a currentliability and $537.0 million was collateralized indebtedness at our subsidiaries. We may consider investments in joint ventures, increased capitalexpenditures, refinancings, or acquisitions which may increase our indebtedness. If new debt is added to our consolidated debt level, the related risks that weface 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 purchasenotes 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 business opportunities, including jointventures and acquisitions;•require us to dedicate a substantial portion of our cash flow from operations to service payments of interest and principal on our debt, therebyreducing the availability of our cash flow to fund future working capital, capital expenditures, research and development expenditures and othergeneral corporate requirements;•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;•place us at a competitive disadvantage to any of our competitors that have less debt;•limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds;•limit our ability to refinance our existing indebtedness, particularly during periods of adverse credit market conditions when refinancingindebtedness may not be available under interest rates and other terms acceptable to us or at all and•increase our cost of borrowing.We May Have Difficulty Funding Liquidity Needs.We assess our liquidity based on our current expectations regarding sales, operating expenses, capital spending and debt service requirements and otherfunding needs. Our liquidity is affected by, among other things, the performance of our business, our capital expenditure and other investment levels and ourability to repay debt and other long-term obligations out of our operating cash flows or with the proceeds of debt or equity financings.We operate in a capital-intensive industry. We had capital expenditures of $547.1 million in 2018. Servicing our current and future customers requires thatwe incur significant operating expenses and continue to make significant capital expenditures and other investments, which are generally made in advance ofthe related revenues and without firm customer commitments. Ultimately the actual amount of our capital expenditures for 2019 and thereafter may varymaterially and will depend on several factors. These factors include, among others, the amount, timing and implementation of our capital projects, includingthose under review and those not yet planned, the performance of our business, economic and market conditions, the cash needs and investmentopportunities for the business, the need for additional capacity and facilities and the availability of cash flows from operations or financing.In addition, we have a significant level of debt, which requires significant scheduled principal and interest payments in the coming years. The sourcesfunding our operations, including making capital expenditures and other investments and22Table of Contentsservicing principal and interest obligations with respect to our debt, are cash flows from our operations, existing cash and cash equivalents, borrowings underavailable debt facilities, or proceeds from any additional debt or equity financing.The health of the worldwide banking system and capital markets affects our liquidity. If financial institutions that have extended credit commitments to usare adversely affected by the conditions of the U.S., foreign or international banking system and capital markets, they may refuse or be unable to fundborrowings under their credit commitments to us. Volatility in the banking system and capital markets, as well as rising interest rates or adverse economic,political and other global conditions, could also make it difficult or more expensive for us to maintain our existing credit facilities or refinance our debt.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 fluctuationscould impact our decision or ability to utilize the equity markets as a potential source of our funding needs in the future.In addition, there is a risk that we could fail to generate the necessary net income or operating cash flows to meet the funding needs of our business due to avariety of factors, including the other factors discussed in this "Risk Factors" section. If we fail to generate the necessary cash flows or we are unable to accessthe capital markets when needed, our liquidity may be adversely impacted.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 covenantsthat materially limit our ability to take certain actions, including our ability to incur debt, pay dividends and repurchase stock, make certain investments andother payments, enter into certain mergers and consolidations, engage in sale leaseback transactions and encumber and dispose of assets. In addition, certainof our debt agreements contain, and our future debt agreements may contain, financial covenants and ratios.The breach of any of these covenants by us or the failure by us to meet any of the financial ratios or conditions could result in a default under any or all ofsuch indebtedness. If a default occurs under any such indebtedness, all of the outstanding obligations thereunder could become immediately due andpayable, 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 complywith the provisions of the indentures, credit facilities and other agreements governing our outstanding debt and indebtedness we may incur in the future canbe 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 andNegatively Impact Our Financial Condition.Our subsidiary in Korea maintains an unfunded severance plan under which we have an accrued liability of $142.1 million as of December 31, 2018. Theplan covers certain employees that were employed prior to August 1, 2015. In the event of a significant layoff or other reduction in our labor force in Korea,our subsidiary in Korea would be required to make lump-sum severance payments under the plan, which could have a material adverse effect on our liquidity,financial condition and cash flows. See Note 12 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.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. We must annually evaluate ourinternal procedures to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires management and our independent registeredpublic accounting firm to assess the effectiveness of internal control over financial reporting.23Table of ContentsInternal controls may not prevent or detect misstatements because of their inherent limitations, including the possibility of human error, the circumvention oroverriding of controls, fraud or corruption. Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparationand fair presentation of financial statements. In addition, projections of any evaluation of effectiveness of internal controls to future periods are subject to therisk that the internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate.We assess our internal controls and systems on an ongoing basis, and from time-to-time, we update and make modifications to our global enterprise resourceplanning system. We have implemented several significant enterprise resource planning modules and expect to implement additional enterprise resourceplanning modules in the future. In addition, we have implemented new shop floor management systems in certain of our factories. In December 2015, weacquired the operations of J-Devices, and we integrated those operations into our overall internal control over financial reporting. Although we continue tomonitor and assess our internal controls for these systems and operations, there is a risk that deficiencies may occur that could constitute significantdeficiencies 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 penaltiesor shareholder litigation. In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect ouroperating results or financial condition.We Face Warranty Claims, Product Return and Liability Risks, the Risk of Economic Damage Claims and the Risk of Negative Publicity if Our PackagesFail.Our packages are incorporated into a number of end products, and our business is exposed to warranty claims, product return and liability risks, the risk ofeconomic damage claims and the risk of negative publicity if our packages fail.We receive warranty claims from our customers which occur from time to time in the ordinary course of our business. If we were to experience an unusuallyhigh incidence of warranty claims, we could incur significant costs and our business could be adversely affected. In addition, we are exposed to the productand 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 productliability claim. We also may suffer a decline in sales from the negative publicity associated with such a lawsuit or with adverse public perceptions in generalregarding our customers’ products. Further, if our packages are delivered with defects, we could incur additional development, repair or replacement costs orsuffer other economic losses, and our credibility and the market’s acceptance of our packages could be harmed.We Face Risks in Connection with the Continuing Development and Implementation of Changes to, and Maintenance and Security of, Our InformationTechnology Systems.We depend on our information technology systems for many aspects of our business. Our systems may be susceptible to damage, disruptions or shutdownsdue to failures during the process of upgrading, replacing or maintaining software, databases or components thereof, power outages, hardware failures,interruption or failures of third-party provider systems, computer viruses, attacks by computer hackers, telecommunication failures, user errors, malfeasance orcatastrophic events. In addition, security breaches could result in unauthorized disclosure of confidential information. Some of our key software has beendeveloped by our own programmers, and this software may not be easily integrated with other software and systems. From time to time we make additions orchanges to our information technology systems. For example, we have implemented new shop floor systems in certain of our factories, and we are integratingJ-Devices' information technology systems with our existing systems and processes. In addition, in May 2017, we completed our acquisition of Nanium, andcontinue to integrate its information technology systems into our existing systems and processes. We face risks in connection with current and future projectsto install or integrate new information technology systems or upgrade our existing systems. These risks include:•we may face delays in the design and implementation of the system;•the cost of the systems may exceed our plans and expectations and24Table of Contents•disruptions resulting from the implementation or integration of the systems may impact our ability to process transactions and delay shipments tocustomers, impact our results of operations or financial condition or harm our control environment.Our business could be materially and adversely affected if our information technology systems are disrupted or if we are unable to successfully install newsystems or improve, upgrade, integrate or expand upon our existing systems.We Face Risks Trying to Attract, Retain or Replace Qualified Employees to Support Our Operations.Our success depends to a significant extent upon the continued service of our key senior management, sales and technical personnel, any of whom may bedifficult to replace. Competition for qualified employees is intense, and our business could be adversely affected by the loss of the services of any of ourexisting key personnel, including senior management, as a result of competition or for any other reason. We do not have employment agreements with ourkey employees, including senior management or other contracts that would prevent our key employees from working for our competitors in the event theycease working for us. We cannot assure you that we will be successful in our efforts to retain or replace key employees or in hiring and properly trainingsufficient numbers of qualified personnel and in effectively managing our growth. Our inability to attract, retain, motivate and train qualified new personnelcould have a material adverse effect on our business.Difficulties Consolidating and Integrating Our Operations - 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 resulting primarily from existing andfuture facility and operational consolidations, strategic acquisitions, joint ventures and other partnering arrangements. Some of the risks from these activitiesinclude those associated with the following:•increasing the scope, geographic diversity and complexity of our operations;•conforming an acquired company's standards, practices, systems and controls with our operations;•increasing complexity from combining recent acquisitions of an acquired business;•unexpected losses of key employees or customers of an acquired business; other difficulties in the assimilation of acquired operations, technologiesor products and•diversion of management and other resources from other parts of our operations and adverse effects on existing business relationships withcustomers.In connection with these activities, we may:•use a significant portion of our available cash;•issue equity securities, which may dilute the ownership of current stockholders;•incur substantial debt;•incur or assume known or unknown contingent liabilities and•incur large, immediate accounting write offs and face antitrust or other regulatory inquiries or actions.For example, the businesses we have acquired had, at the time of acquisition, multiple systems for managing their own production, sales, inventory and otheroperations. Migrating these businesses to our systems typically is a slow, expensive process requiring us to divert significant resources from other parts of ouroperations. We may continue to face these challenges in the future. For example, in May 2017, we completed the purchase of Nanium, which we are nowintegrating with our existing operations. As a result of the risks discussed above, the anticipated benefits of these or other future acquisitions, consolidationsand partnering arrangements may not be fully realized, if at all, and these activities could have a material adverse effect on our business, financial conditionand results of operations.25Table of ContentsDependence on Materials and Equipment Suppliers - Our Business May Suffer If the Cost, Quality or Supply of Materials or Equipment ChangesAdversely Including Any Disruption that May Occur in the Supply of Certain Materials due to Regulations and Customer Requirements.We obtain from various vendors the materials and equipment required for the packaging and test services performed by our factories. We source most of ourmaterials, including critical materials such as leadframes, laminate substrates and gold wire, from a limited group of suppliers. A disruption to the operationsof one or more of our suppliers could have a negative impact on our business. For example, the severe earthquake and tsunami in Japan in 2011 had asignificant adverse effect on the electronics industry supply chain by impacting the supply of specialty chemicals, substrates, silicon wafers, equipment andother supplies to the electronics industry. In addition, we purchase the majority of our materials on a purchase order basis. Our business may be harmed if wecannot obtain materials and other supplies from our vendors in a timely manner, in sufficient quantities, at acceptable quality or at competitive prices. Someof our customers are also dependent on a limited number of suppliers for certain materials and silicon wafers. Shortages or disruptions in our customers'supply channels could have a material adverse effect on our business, financial condition, results of operations and cash flows. For example, the shortage inthe supply of 28 nanometer wafers to some of our customers in 2012 delayed or otherwise adversely impacted the demand for certain of our advancedpackaging and test services.Rules adopted by the SEC implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act impose diligence and disclosure requirementsregarding the use of certain minerals originating from the conflict zones of the Democratic Republic of Congo and adjoining countries in our products.Industry associations and many of our customers have implemented initiatives to improve transparency and accountability concerning the supply of thesematerials and, in some cases, requiring us to certify that the covered materials we use in our packages do not come from the conflict areas. We may incuradditional costs associated with complying with these requirements and customer initiatives, and we may be required to increase our efforts in the future tocover additional materials and geographic areas. These requirements and customer initiatives could affect the pricing, sourcing and availability of materialsused in the manufacture of semiconductor devices, and we cannot assure you that we will be able to obtain conflict-free materials in sufficient quantities andat competitive prices or that we will be able to verify the origin of all of the materials we use in our manufacturing process. If we are unable to meet theserequirements and customer initiatives, it could adversely affect our business as some customers may move their business to other suppliers. Our reputationcould also be adversely affected.We purchase new packaging and test equipment to maintain and expand our operations. From time to time, increased demand for new equipment may causelead times to extend beyond those normally required by equipment vendors. For example, in the past, increased demand for equipment caused someequipment suppliers to only partially satisfy our equipment orders in the normal time frame or to increase prices during market upturns for the semiconductorindustry. The unavailability of equipment or failures to deliver equipment on a timely basis could delay or impair our ability to meet customer orders. If weare unable to meet customer orders, we could lose potential and existing customers. Generally, we acquire our equipment on a purchase order basis and do notenter into long-term equipment agreements. As a result, we could experience adverse changes in pricing, currency risk and potential shortages in equipmentin a strong market, 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 businessfluctuate. Historically, we have been able to partially offset the effect of commodity price increases through price adjustments to some customers and changesin our product designs that reduce the material content and cost, such as the use of shorter, thinner, gold wire and migration to copper wire. However, wetypically do not have long-term contracts that permit us to impose price adjustments, and market conditions may limit our ability to do so. Significant priceincreases may adversely impact our gross margin in future periods to the extent we are unable to pass along past or future commodity price increases to ourcustomers.Customer Concentration and Loss of Customers - The Loss of Certain Customers or Reduced Orders or Pricing from Existing Customers May Have aSignificant Adverse Effect on Our Operations and Financial Results.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 tothe concentration of market share in the semiconductor industry. Our ten largest customers together accounted for 62% of our net sales for the year endedDecember 31, 2018, and one customer accounted for more than 10% of our consolidated net sales during the period. In addition, we have significantcustomer concentration within26Table of Contentsour end markets. The loss of a significant customer, a business combination among our customers, a reduction in orders or decrease in price from a significantcustomer or disruption in any of our significant strategic partnerships or other commercial arrangements may result in a decline in our sales and profitabilityand could have a material adverse effect on our business, liquidity, results of operations, financial condition and cash flows.The demand for our services from each customer is directly dependent upon that customer’s financial health, level of business activity and purchasingdecisions, the quality and price of our services, our cycle time and delivery performance, the customer's qualification of additional competitors on productswe package or test and a number of other factors. Each of these factors could vary significantly from time to time resulting in the loss or reduction of customerorders. Our business is likely to remain subject to this variability in order levels, and we cannot assure you that our key customers or any other customers willcontinue to place orders with us in the future at the same levels as in past periods.For example, if a key customer decides to purchase wafers from a semiconductor foundry that provides packaging and test services, our business could bereduced if the customer also engages that foundry for related packaging and test services. We cannot assure that customer decisions regarding the purchase ofsemiconductor wafers will not significantly and adversely impact customer demand for our packaging and test services.In addition, from time to time we may acquire or build new facilities, such as K5, or migrate existing business among our facilities. In connection with thesefacility changes, our customers require us to re-qualify the new facilities even though we have already qualified to perform the services at our other facilities.We cannot assure that we will successfully re-qualify or that our customers will not qualify our competitors and move the business for such services.Capital Expenditures - We Make Substantial Investments in Equipment and Facilities To Support the Demand Of Our Customers, Which May AdverselyAffect Our Business If the Demand Of Our Customers Does Not Develop As We Expect or Is Adversely Affected.We make significant investments in equipment and facilities in order to service the demand of our customers. For example, we had capital expenditures of$547.1 million in 2018, $550.9 million in 2017 and $650.0 million in 2016. The amount of our capital expenditures depends on several factors, includingthe performance of our business, our assessment of future industry and customer demand, our capacity utilization levels and availability, our liquidityposition and the availability of financing. Our ongoing capital expenditure requirements may strain our cash and short-term asset balances, and, in periodswhen we are expanding our capital base, we expect that depreciation expense and factory operating expenses associated with our capital expenditures toincrease production capacity will put downward pressure on our gross margin, at least over the near term. From time to time, we also make significant capitalexpenditures based on specific business opportunities with one or a few key customers, and the additional equipment purchased may not be readily usable tosupport other customers. If demand is insufficient to fill our capacity, or we are unable to efficiently redeploy such equipment, our capacity utilization andgross margin could be negatively impacted. Our capital expenditures or cost per square foot may increase as we transition to new or more advancedpackaging and test technologies because, among other things, new equipment used for these technologies is generally more expensive and often our existingequipment cannot be redeployed in whole or part for these technologies.Furthermore, if we cannot generate or raise additional funds to pay for capital expenditures, particularly in some of the advanced packaging and bumpingareas, as well as research and development activities, our growth and future profitability may be adversely affected. Our ability to obtain external financing inthe future is subject to a variety of uncertainties, including:•our future financial condition, results of operations and cash flows;•general market conditions for financing;•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 investments is often significant, and, as a result, we often need to commit to capitalexpenditures 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,27Table of Contentsin the past we have from time to time expended significant capital for additional equipment or facilities for which the anticipated demand did not materializefor 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 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 ableto support their needs. To the extent this occurs, our business, liquidity, results of operations, financial condition and cash flows could be materiallyadversely affected.While we completed the initial phase of construction of K5 in December 2016, there can be no assurance regarding when the facility will be fully utilized, orthat the actual scope, costs, timeline or benefits of the project will be consistent with our expectations.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, goodwill and other intangibles forimpairment when events or changes in circumstances indicate the carrying value may not be recoverable. In addition, we review goodwill for impairmentannually during the fourth quarter of each year. Factors we consider include significant under-performance relative to expected historical or projected futureoperating results, significant negative industry or economic trends and our market capitalization relative to net book value. We may be required in the futureto record a significant charge to earnings in our financial statements during the period in which any impairment of our long-lived assets is determined. Suchcharges 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 from time to time in our reports filed with the SEC, and may be a party to legalproceedings in the future. These proceedings could require significant management time and resources and, if an unfavorable ruling or outcome were to occurin these legal proceedings, there could be a material adverse impact on our business, liquidity, results of operations, financial condition, cash flows and thetrading price of our securities.We Could Suffer Adverse Tax and Other Financial Consequences if There Are Changes in Tax Laws or Taxing Authorities Do Not Agree with OurInterpretation of Applicable Tax Laws, Including Whether We Continue to Qualify for Tax Holidays, or if We Are Required to Establish or AdjustValuation Allowances on Deferred Tax Assets.We earn a substantial portion of our income in foreign countries and our operations are subject to tax in multiple jurisdictions with complicated and variedtax regimes. Tax laws and income tax rates in these jurisdictions are subject to change due to economic and political conditions. In addition, organizationssuch as the Organisation for Economic Co-operation and Development may, from time to time, propose guidelines regarding transfer pricing and otherinternational tax matters relating to multinational companies like Amkor. Changes in U.S. or foreign tax laws arising out of such proposals or otherwise couldhave a material adverse impact on our liquidity, results of operations, financial condition and cash flows.Our tax liabilities are based, in part, on our corporate structure, interpretations of various U.S. and foreign tax laws, including withholding tax, compliancewith tax holiday requirements, application of changes in tax law to our operations and other relevant laws of applicable taxing jurisdictions. From time totime, taxing authorities may conduct examinations of our income tax returns and other regulatory filings. We cannot assure you that the taxing authoritieswill agree with our interpretations, including whether we continue to qualify for tax holidays. If they do not agree, we may seek to enter into settlements withthe taxing authorities. We may also appeal a taxing authority's determination to the appropriate governmental authorities, but we cannot be sure we willprevail. If we do not prevail or if we enter into settlements with taxing authorities, we may have to make significant payments or otherwise record charges (orreduce tax assets) that adversely affect our results of operations, financial condition and cash flows. Additionally, certain of our subsidiaries operate under taxholidays, which will expire in whole or in part at various dates in the future. As those tax holidays expire, we expect that our tax28Table of Contentsexpense will increase as income from those jurisdictions becomes subject to higher statutory income tax rates, thereby reducing our liquidity and cash flow.We monitor on an ongoing basis our ability to utilize our deferred tax assets and whether there is a need for a related valuation allowance. In evaluating ourability to recover our deferred tax assets, in the jurisdiction from which they arise, we consider all available positive and negative evidence, includingscheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations. For most of our foreigndeferred tax assets, we believe that we will have sufficient taxable income to allow us to realize these deferred tax assets. In the event taxable income fallsshort of current expectations, we may need to establish a valuation allowance against such deferred tax assets that, if required, could materially affect ourresults of operations.The Enactment of Recent Tax Reform Could Materially Impact Our Financial Position and Results of OperationsOn December 22, 2017, the Tax Act was signed into law. The Tax Act made significant changes to the U.S. tax code. Changes include a reduction of the U.S.federal corporate tax rate from 35% to 21%, a one-time transition tax on unremitted foreign earnings and profits applicable for our fiscal year endedDecember 31, 2017, limitations on tax deductions for interest expense for the period beginning January 1, 2018, and changes to other existing deductionsand business-related exclusions in future periods. As a result, in the fourth quarter of 2017, we recognized a one-time net tax benefit of approximately $41.6million, primarily due to the release of a valuation allowance against U.S. deferred tax assets that we expected to realize as a result of the change to the U.S.tax law limiting the deductibility of interest expense. We also incurred charges for the one-time transition tax on our unremitted foreign earnings and profitsoffset by the anticipated utilization of foreign tax credits. We were also required to re-measure our deferred tax assets based on the new U.S. federal corporatetax rate of 21%. In 2018, we updated our provisional estimate of the impact of the Tax Act, and recorded a $22.3 million income tax expense to complete theaccounting for the impact of the Tax Act, reducing our estimated net tax benefit of $41.6 million from 2017. Our accounting for the impact of the Tax Act isnow complete in accordance with SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"). However, there is uncertainty in the application of manyaspects of the Tax Act and additional guidance with respect to the Tax Act may affect our estimates and could have a material impact on our income taxexpense.Intellectual Property - Our Business Will Suffer if We Are Not Able to Develop New Proprietary Technology, Protect Our Proprietary Technology andOperate 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, acquireand implement new manufacturing processes and packaging technologies and tools in order to respond to competitive industry conditions and customerrequirements. Technological advances also typically lead to rapid and significant price erosion and may make our existing packages less competitive or ourexisting inventories obsolete. If we cannot achieve advances in packaging design or obtain access to advanced packaging designs developed by others, ourbusiness could suffer.The need to develop and maintain advanced packaging capabilities and equipment could require significant research and development, capital expendituresand acquisitions in future years. In addition, converting to new packaging designs or process methodologies could result in delays in producing new packagetypes, which could adversely affect our ability to meet customer orders and adversely impact our business.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 futureapplications or that, if patents are issued, the rights granted under the patents will provide us with meaningful protection or any commercial advantage. Anypatents we do obtain will eventually expire, may be challenged, invalidated or circumvented and may not provide meaningful protection or othercommercial 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 technologiesmay be breached and may not be adequate to protect our proprietary technologies. There can be no assurance that other countries in which we market ourservices 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 or superior to our own. In addition, many of our patents are subjectto cross licenses, several of which are with our competitors. The semiconductor industry29Table of Contentsis characterized by frequent claims regarding the infringement of patent and other intellectual property rights. If any third party makes an enforceableinfringement claim against us or our customers, we could be required to:•discontinue the use of certain processes or cease to provide the services at issue, which could curtail our business;•pay substantial damages;•develop non-infringing technologies, which may not be feasible or•acquire licenses to such technology, which may not be available on commercially reasonable terms or at all.We may need to enforce our patents or other intellectual property rights, including our rights under patent and intellectual property licenses with thirdparties, or defend ourselves against claimed infringement of the rights of others through litigation, which could result in substantial cost and diversion of ourresources and may not be successful. Furthermore, if we fail to obtain necessary licenses, our business could suffer, and we could be exposed to claims fordamages and injunctions from third parties, as well as claims from our customers for indemnification. In the past, we have been involved in legal proceedingsinvolving the acquisition and license of intellectual property rights, the enforcement of our existing intellectual property rights or the enforcement of theintellectual property rights of others, including settled legal proceedings described in more detail in Note 15 to our Consolidated Financial Statements inPart II, Item 8 of this Annual Report on Form 10-K. Unfavorable outcomes in any legal proceedings involving intellectual property could result in significantliabilities or loss of commercial advantage and could have a material adverse effect on our business, liquidity, results of operations, financial condition andcash flows. The potential impact from the legal proceedings referred to in this Annual Report on Form 10-K on our results of operations, financial conditionand cash flows could change in the future.Packaging and Test Processes Are Complex and Our Production Yields and Customer Relationships May Suffer from Defects in the Services We Provideor if We Do Not Successfully Implement New Technologies.Semiconductor packaging and test services are complex processes that require significant technological and process expertise. Defective packages primarilyresult from:•contaminants in the manufacturing environment;•human error;•equipment malfunction;•changing processes to address environmental requirements;•defective raw materials or•defective plating services.Test is also complex and involves sophisticated equipment and software. Similar to many software programs, these software programs are complex and maycontain programming errors or “bugs.” The test equipment is also subject to malfunction. In addition, the test 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 ourcapacity, change our processing steps or ramp new technologies. In addition, we must continue to develop and implement new packaging and testtechnologies, and expand our offering of packages to be competitive. Our production yields on new packages, particularly those packages which are basedon new technologies, typically are significantly lower than our production yields on our more established packages.Our failure to maintain quality standards or acceptable production yields, if significant and prolonged, could result in loss of customers, increased costs ofproduction, delays, substantial amounts of returned goods and claims by customers relating thereto. Any of these problems could have a material adverseeffect on our business, liquidity, results of operations, financial condition and cash flows.30Table of ContentsIn 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 existing customers, such failure could have a material adverse effect on our business, results ofoperations, financial condition and cash flows.Environmental, Health & Safety Laws and Industry and Customer Initiatives - Future Environmental, Health & Safety Laws and Industry and CustomerSustainability Initiatives Could Place Additional Burdens on Our Manufacturing Operations.The semiconductor packaging process generates byproducts that are subject to extensive governmental regulations. For example, at our foreign facilities weproduce 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 orballs. Environmental, health and safety laws and regulations in places we do business, impose various controls on the use, storage, handling, discharge anddisposal of chemicals used in our production processes and on the factories we occupy and are increasingly imposing restrictions on the materials containedin semiconductor products. For example, the European Union's Restriction of Hazardous Substances in Electrical and Electronic Equipment directive andsimilar laws in other jurisdictions, including China, impose strict restrictions on the placement into the market of electrical and electronic equipmentcontaining lead and certain other hazardous substances. We may become liable under these and other environmental, health and safety laws and regulations,including for the cost of compliance and cleanup of any disposal or release of hazardous materials arising out of our former or current operations, or otherwiseas a result of the existence of hazardous materials on our properties or hazardous substances in the products we manufacture. We could also be held liable fordamages, including fines, penalties and the cost of investigations and remedial actions, we could be subject to revocation of permits negatively affecting ourability to maintain or expand our operations, and we could suffer reputational harm.There has also been an increase in public attention and industry and customer focus on the materials contained in semiconductor products, the environmentalimpact of semiconductor operations and the risk of chemical releases from such operations, climate change, sustainability and related environmentalconcerns. This increased focus on sustainability and the environmental impact of semiconductor operations and products has caused industry groups andcustomers to impose additional requirements on us and our suppliers, sometimes exceeding regulatory standards. These industry and customer requirementsinclude increased tracking and reporting of greenhouse gas emissions, reductions in waste and wastewater from operations, additional reporting on thematerials and components used in the products we manufacture, and the use of renewable energy sources in our factory operations. To comply with theseadditional requirements, we may need to procure additional equipment or make factory or process changes and our manufacturing costs may increase.Our Business and Financial Condition Could be Adversely Affected by Natural Disasters and Other Calamities, Political Instability, Hostilities, or OtherDisruptions.We have significant packaging and test and other operations in China, Japan, Korea, Malaysia, the Philippines, Portugal, Singapore, and Taiwan, which are orcould be subject to natural disasters, such as earthquakes, tsunamis, typhoons, floods, droughts, volcanoes and other severe weather and geological events,and other calamities, such as fire; the outbreak of infectious diseases (such as Ebola, SARS or flu); industrial strikes; breakdowns of equipment; difficulties ordelays in obtaining materials, equipment, utilities and services; political events or instability; acts of war, armed conflict, terrorist incidents and otherhostilities, including any such events that may arise out of increased tensions involving North Korea or in other regions where we have facilities; industrialaccidents and other events, that could disrupt or even shutdown our operations. In addition, our suppliers and customers also have significant operations insuch locations. In the event of such a disruption or shutdown, we may be unable to reallocate production to other facilities in a timely or cost-effectivemanner (if at all) and we may not have sufficient capacity to service customer demands in our other facilities. A natural disaster or other calamity, politicalinstability, the occurrence of hostilities or other event that results in a prolonged disruption to our operations, or the operations of our customers or suppliers,could have a material adverse effect on our business, financial condition, results of operations and cash flows.For example, in April 2016, our Kumamoto factory was damaged by earthquakes in Japan. As a result of these earthquakes, our sales were reduced due to thetemporary disruption in operations. We also incurred earthquake related costs for damaged inventory, buildings and equipment.31Table of ContentsIn 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 inthe preparation of wafers holding semiconductor devices for flip chip packaging.Although we maintain insurance policies for various types of property, casualty and other risks, we do not carry insurance for all the above referred risks, andwith regard to the insurance we do maintain, we cannot assure you that it would be sufficient to cover all of our potential losses. As a result, our business,financial condition, results of operations and cash flows could be adversely affected by natural disasters and other calamities.Mr. James J. Kim and Members of His Family Can Effectively Determine or Substantially Influence The Outcome of All Matters Requiring StockholderApproval.As of December 31, 2018, Mr. James J. Kim, the Executive Chairman of our Board of Directors, Mr. John T. Kim, the Executive Vice Chairman of our Boardof Directors, Ms. Susan Y. Kim, member of our Board of Directors, and members of the Kim family and affiliates owned approximately 141.6 million shares, orapproximately 59%, of our outstanding common stock. The Kim family also has options to acquire approximately 0.4 million shares. If the options areexercised, the Kim family's total ownership would be an aggregate of approximately 142.0 million shares of our outstanding common stock or approximately59% of our outstanding common stock.In June 2013, the Kim family exchanged their convertible notes issued by Amkor for approximately 49.6 million shares of common stock (the "ConvertShares"). The Convert Shares are subject to a voting agreement. The agreement requires the Kim family to vote these shares in a “neutral manner” on allmatters submitted to our stockholders for a vote, so that such 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 familyis not required to vote in a “neutral manner” any 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 our common stock. The voting agreement for the Convert Shares terminates upon the earliest of (i) suchtime as the Kim family no longer beneficially owns any of the 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.Mr. James J. Kim and his family and affiliates, acting together, have the ability to effectively determine or substantially influence matters submitted forapproval by our stockholders by voting their shares or otherwise acting by written consent, including the election of our Board of Directors. There is also thepotential, through the election of members of our Board of Directors, that the Kim family could substantially influence matters decided upon by our Board ofDirectors. This concentration of ownership may also have the effect of impeding a merger, consolidation, takeover or other business consolidation involvingus, 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 anypremium over market price that an acquirer might otherwise pay. Concentration of ownership also reduces the public float of our common stock. There maybe less liquidity and higher price volatility for the stock of companies with a smaller public float compared to companies with broader public ownership.Also, the sale or the prospect of the sale of a substantial portion of the Kim family shares may adversely affect the market price of our stock.Item 1B.Unresolved Staff CommentsNone.32Table of ContentsItem 2.PropertiesOur principal executive offices, which are leased, are located in Tempe, Arizona. The location and size of our manufacturing and research and developmentfacilities are set forth in the table below. All facilities are owned unless otherwise specified. Generally, our facilities are collateral for indebtedness incurredby our subsidiary for the jurisdiction in which the facilities are located. Approximate Facility Size(Square Feet) Owned Leased TotalChina (1)1,325,000 — 1,325,000Japan1,683,000 329,000 2,012,000Korea3,917,000 — 3,917,000Malaysia (1)386,000 — 386,000Philippines (2)763,000 557,000 1,320,000Portugal538,000 — 538,000Taiwan1,005,000 — 1,005,000Total all facilities9,617,000 886,000 10,503,000(1)Land is leased.(2)As a result of foreign ownership restrictions in the Philippines, the land is leased. A portion of the land we lease is owned by realty companies inwhich we own a 40% interest.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 propertiesis substantially being utilized or we have plans to utilize it.Item 3.Legal ProceedingsFrom time to time, we may become involved in various disputes and litigation matters that arise in the ordinary course of our business. These includedisputes and lawsuits related to intellectual property, acquisitions, licensing, contracts, tax, regulatory, employee relations and other matters. For a discussionof “Legal Proceedings,” see Note 15 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.Item 4.Mine Safety DisclosuresNot applicable.PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesLISTING ON THE NASDAQ GLOBAL SELECT MARKETOur common stock is traded on the NASDAQ Global Select Market under the symbol “AMKR”. There were approximately 122 holders of record of ourcommon stock as of February 15, 2019.33Table of ContentsDIVIDEND POLICYSince 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, certainof our debt agreements limit our ability to pay dividends. Refer to the Liquidity and Capital Resources section in Item 7 of this Annual Report on Form 10-K.RECENT SALES OF UNREGISTERED SECURITIESNone.EQUITY COMPENSATION PLANSThe information required by this item regarding equity compensation plans is set forth in Part III, Item 12 of this Annual Report on Form 10-K.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSThe following table provides information regarding repurchases of our common stock during the three months ended December 31, 2018.PeriodTotal Number of SharesPurchased (a)Average Price Paid PerShare ($)Total Number of SharesPurchased as part ofPublicly Announced Plans orPrograms (b)Approximate Dollar Valueof Shares that May Yet BePurchased Under the Plansor Programs ($) (b) October 1 - October 31—$——$91,586,032November 1 - November 305,4246.61—91,586,032December 1 - December 31———91,586,032Total5,424$6.61— (a)Represents shares of common stock surrendered to us to satisfy tax withholding obligations associated with the vesting of restricted shares issued toemployees.(b)Our Board of Directors previously authorized the repurchase of up to $300.0 million of our common stock, $150.0 million in August 2011 and$150.0 million in February 2012, exclusive of any fees, commissions or other expenses. During 2017 and 2018, we made no common stockpurchases, and at December 31, 2018, approximately $91.6 million was available pursuant to the stock repurchase program.34Table of ContentsPERFORMANCE GRAPH (1)(1)The preceding Stock Performance Graph is not deemed filed with the SEC and shall not be incorporated by reference in any of our filings under theSecurities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporationlanguage in any such filing.The following table sets forth the cumulative total returns included in the preceding Stock Performance Graph for the years ended December 31, 2013through 2018. For the Year Ended December 31, 2013 2014 2015 2016 2017 2018Amkor Technology, Inc.$100.00 $115.82 $99.18 $172.10 $163.95 $107.01S&P 500100.00 113.69 115.26 129.05 157.22 150.33PHLX Semiconductor100.00 129.03 120.80 159.29 223.53 203.9135Table of ContentsItem 6.Selected Financial DataThe following selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results ofOperations and our Consolidated Financial Statements in Part II, Item 7 and Item 8, respectively, of this Annual Report on Form 10-K.The selected financial data as of and for the years ended December 31, 2018 and 2017 and for the year ended December 31, 2016 reflects our adoption ofFinancial Accounting Standards Board issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). We havenot adjusted the selected financial data for any other period or as of any other date presented. See Note 2 to our Consolidated Financial Statements in Part II,Item 8 of this Annual Report on Form 10-K.SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA For the Year Ended December 31, 2018 2017 (f) 2016 (g) 2015(g) 2014 (e) (In thousands, except per share data)Income Statement Data: Net sales$4,316,466 $4,207,031 $3,927,849 $2,884,603 $3,129,440Gross profit (a)710,565 761,079 709,891 479,265 552,822Gain on sale of real estate (b)— (108,109) — — —Operating income258,144 405,540 308,587 164,839 221,460Loss on debt retirement (c)1,512 4,835 — 9,560 757Income tax expense (d)56,250 39,791 51,042 28,035 33,845Equity in earnings of J-Devices (e)— — — 14,016 31,007Net income (a) (e)129,565 267,705 178,653 53,893 133,240Net income attributable to Amkor127,092 263,550 175,530 51,098 129,739Net income attributable to Amkor per common share: Basic$0.53 $1.10 $0.74 $0.22 $0.56Diluted$0.53 $1.10 $0.74 $0.22 $0.55 Other Financial Data: Depreciation and amortization$571,961 $581,940 $555,186 $494,200 $464,706Payments for property, plant and equipment547,122 550,943 650,038 537,975 681,120 Balance Sheet Data: Cash and cash equivalents$681,569 $596,364 $549,518 $523,172 $449,946Working capital512,785 325,945 404,035 299,296 497,358Total assets4,495,447 4,508,388 4,092,086 4,026,428 3,633,918Non-current liabilities, including debt1,481,124 1,470,620 1,683,021 1,790,708 1,803,879Total Amkor stockholders’ equity1,830,540 1,696,276 1,383,588 1,200,286 1,114,748(a)In January 2015, we reached a resolution to a patent license dispute and entered into a settlement agreement. During 2014 we recorded charges of $75.3million to cost of sales and $13.7 million to interest expense relating to this patent license dispute.(b)In May 2017, we sold the land and buildings comprising our K1 factory for $142.4 million which resulted in a pre-tax gain of $108.1 million.(c)In July 2017, we recorded a loss on debt retirement of $4.4 million relating to the partial early repayment of our 6.625% Senior Notes due 2021. During2015, we recorded a loss on debt retirement of $8.9 million relating to the early repayment of our 7.375% Senior Notes due May 2018.36Table of Contents(d)In 2017, income tax expense includes an estimated net tax benefit of $41.6 million primarily due to the reversal of a valuation allowance on certain U.S.deferred tax assets as a result of the enactment of the Tax Act. In 2018, we recorded a $22.3 million income tax expense to complete the accounting forthe impact of the Tax Act, reducing our estimated net tax benefit of $41.6 million from 2017. (e)On June 30, 2014, we sold 100% of the shares of our then wholly-owned subsidiary in Japan to J-Devices, our then unconsolidated equity-method jointventure in Japan. Subsequent to June 30, 2014, the results of the divested entity are included in J-Devices' financial results and in our correspondingequity in earnings of J-Devices. We recognized a net gain on the sale of $9.2 million in other (income) expense, net. In addition, J-Devices recognized again on the transaction, which increased our equity in earnings of J-Devices by $8.8 million. The combined net gain we recognized was $18.0 million.(f)On May 22, 2017, we completed the purchase of Nanium. Their financial results have been included in our Consolidated Financial Statements from thedate of acquisition.(g)We increased our investment in J-Devices from 60% to 100% on December 30, 2015 through the exercise of additional options. As a result, ouraccounting for J-Devices changed from the equity method to the consolidation method effective December 30, 2015. Our balance sheet data as ofDecember 31, 2015 reflects the consolidation of J-Devices. We began consolidating the operating results of J-Devices in 2016. We recognized a net lossof $13.5 million in other (income) expense, net in connection with the acquisition in 2015. The net loss resulted from a loss of $29.6 million related tothe release of certain accumulated foreign currency translation adjustments related to J-Devices, offset by a gain of $16.1 million related to the step-up tofair value of our previous investments in J-Devices.Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsOverviewAmkor is one of the world’s leading providers of outsourced semiconductor packaging and test services. Our financial goals are sales growth and improvedprofitability. To achieve these goals, we are focused on generating increased value from our investments in advanced technologies, improving utilization ofexisting assets, growing in a balanced way and selectively growing our scale and scope through strategic investments.We are an industry leader in developing and commercializing cost-effective advanced packaging and test technologies. These advanced technologysolutions provide increased value to our customers. This is particularly true in the mobile communications market, where growth has outpaced thesemiconductor industry rate. Advanced packages are now the preferred choice in both the high-end and the mid-range segments of the smartphone market,which together account for a high portion of mobile phone semiconductor value. The demand for advanced packages is also being driven by second-wavemobile device customers, who are transitioning out of wirebond into wafer-level and flip-chip packages. Our salesof advanced packages into the automotive market are growing as well, largely due to new, data-intensive applications. The high pin count and performancerequirements of these products are driving the use of advanced packages. We believe that our technology leadership and this technology transition createsignificant growth opportunities for us.We typically look for opportunities in the advanced packaging and test area where we can generate reasonably quick returns on investments made forcustomers seeking leading edge technologies. We also focus on developing a second wave of customers to fill the capacity that becomes available whenleading edge customers transition to newer packaging and test equipment and platforms. For example, we are continuing our efforts to expand our sales toChinese and Taiwanese fabless chip companies that make up a significant portion of the growing mid-tier and entry-level segments of the mobile devicemarket. In addition, we are seeking new customers and deepening our engagement with existing customers. This includes an expanded emphasis on theautomotive market where semiconductor content continues to grow and in the analog area for our mainstream wirebond technologies.From time to time, we identify attractive opportunities to grow our customer base and expand the markets we serve. For example, in May 2017, we acquiredNanium, which we believe has strengthened our position in the market for wafer-level fan-out packaging. In December 2015, we completed the acquisition ofJ-Devices, the largest provider of outsourced semiconductor assembly and test services in Japan. J-Devices is primarily focused in the automotive, industrialand consumer end markets. We believe that selective growth through joint ventures, acquisitions and other strategic investments can help37Table of Contentsdiversify our revenue streams, improve our profits, broaden our portfolio of services and continue our technological leadership.Our IDM customers include: Intel Corporation; Renesas Electronics Corporation; STMicroelectronics N.V.; Texas Instruments Incorporated and ToshibaCorporation. Our fabless customers include: Broadcom Limited; Qualcomm Incorporated and Toshiba Memory Corporation. Our contract foundry customersinclude: Samsung Electronics Company Limited and Taiwan Semiconductor Manufacturing Company Limited.As a supplier in the semiconductor industry, our business is cyclical and impacted by broad economic factors. Historically, there has been a strong correlationbetween world-wide gross domestic product levels, consumer spending and semiconductor industry cycles. The semiconductor industry has experiencedsignificant and sometimes prolonged cyclical upturns and downturns in the past. We believe that there is an inventory correction in the smartphone marketcurrently underway in the first quarter of 2019 and that the general semiconductor market is going through a normal cyclical correction. We cannot predictthe timing, strength or duration of any correction, economic slowdown or subsequent economic recovery.Our net sales, gross profit, operating income, cash flows, liquidity and capital resources have historically fluctuated significantly from quarter to quarter as aresult of many factors, including the seasonality of our business, the cyclical nature of the semiconductor industry and other factors discussed in Part 1, Item1A of this Annual Report on Form 10-K.We operate in a capital intensive industry and have a significant level of debt. Servicing our current and future customers requires that we incur significantoperating expenses and continue to make significant capital expenditures, which are generally made in advance of the related revenues and without firmcustomer commitments. We fund our operations, including capital expenditures and debt service requirements, with cash flows from operations, existing cashand cash equivalents, borrowings under available credit facilities and proceeds from any additional financing. Maintaining an appropriate level of liquidityis important to our business and depends on, among other things, the performance of our business, our capital expenditure levels and our ability to repay debtout of our operating cash flows or proceeds from debt or equity financings.2018 Financial SummaryOur net sales increased $109.4 million or 2.6% to $4,316.5 million in 2018 from $4,207.0 million in 2017. The increase was due to higher sales in thecommunications, computing and automotive end markets.Gross profit decreased $50.5 million in 2018 compared to 2017, primarily due to changes in the mix of products sold with higher material content during theperiod.In 2018, we recorded a $22.3 million discrete income tax expense to complete the accounting for the impact of the Tax Act, reducing our estimated net taxbenefit of $41.6 million from 2017.In 2018, our capital expenditures totaled $547.1 million, or 12.7% of net sales compared to $550.9 million, or 13.1% of net sales in 2017. This spending isdue to continued investment in our business and expansion of our production facilities.Net cash provided by operating activities was $663.4 million for the year ended December 31, 2018, compared to $618.3 million for the year endedDecember 31, 2017. This increase was primarily due to changes in working capital.In July 2018, we entered into a ¥26.0 billion term loan agreement and borrowed ¥26.0 billion (US$233.2 million). We used the proceeds from the term loanto repay all of our $200 million of our 6.625% Senior Notes due 2021 in August 2018. This refinancing is expected to generate net annualized interestsavings of approximately $11 million.38Table of ContentsResults of OperationsThe following table sets forth certain operating data as a percentage of net sales for the periods indicated: For the Year Ended December 31 2018 2017 2016Net sales100.0% 100.0% 100.0%Materials38.7% 36.4% 37.1%Labor16.1% 15.6% 15.2%Other manufacturing costs28.7% 29.9% 29.6%Gross margin16.5% 18.1% 18.1%Operating income6.0% 9.6% 7.9%Net income attributable to Amkor2.9% 6.3% 4.5%Net Sales Change 2018 2017 2016 2018 over 2017 2017 over 2016 (In thousands, except percentages)Net sales$4,316,466 $4,207,031 $3,927,849 $109,435 2.6% $279,182 7.1%The increase in net sales in 2018 compared to 2017 was due to higher sales in the communications, computing and automotive end markets.The increase in net sales in 2017 compared to 2016 was due to strong demand across all end markets. The mobile communications market was particularlystrong due to an increase in our content in flagship smartphones and improved sales with Greater China fabless customers. We also experienced growth in theautomotive and computing end markets.Gross Profit and Gross Margin Change 2018 2017 2016 2018 over 2017 2017 over 2016 (In thousands, except percentages)Gross profit$710,565 $761,079 $709,891 $(50,514) $51,188Gross margin16.5% 18.1% 18.1% (1.6)% —%Our cost of sales consists principally of materials, labor, depreciation and manufacturing overhead. Since a substantial portion of the costs at our factories isfixed, there tends to be a strong relationship between our revenue levels and gross margin. Accordingly, relatively modest increases or decreases in revenuecan have a significant effect on margin, depending upon product mix, utilization and seasonality.Gross profit and gross margin for 2018 decreased compared to 2017 primarily due to changes in the mix of products sold with higher material content duringthe period. The decrease was partially offset by the reduction in fixed costs from our 2017 factory consolidation efforts in Japan.Gross profit and gross margin for 2017 increased compared to 2016, primarily due to the increase in net sales. Manufacturing costs increased due to higherunit volumes, increased employee compensation costs, and our factory consolidation efforts in Japan.39Table of ContentsSelling, General and Administrative Expenses Change 2018 2017 2016 2018 over 2017 2017 over 2016 (In thousands, except percentages)Selling, general and administrative$295,239 $297,021 $284,094 $(1,782) (0.6)% $12,927 4.6%Selling, general and administrative expenses decreased in 2018 compared to 2017 primarily due to lower employee compensation costs. Expenses in 2017included net legal proceeds received from a one-time legal settlement in 2017.Selling, general and administrative expenses increased in 2017 compared to 2016 primarily due to higher employee compensation costs, partially offset bynet legal proceeds received.Research and Development Change 2018 2017 2016 2018 over 2017 2017 over 2016 (In thousands, except percentages)Research and development$157,182 $166,627 $117,210 $(9,445) (5.7)% $49,417 42.2%Research and development activities are focused on developing new packaging solutions and test services and improving the efficiency and capabilities ofour existing production processes. The costs related to our technology and product development projects are included in research and development expenseuntil the project moves into production. Once production begins, the costs related to production become part of the cost of goods sold, including ongoingdepreciation for the equipment previously held for research and development activities. Research and development expenses decreased in 2018 over 2017due to projects that moved into production, partially offset by new and ongoing development projects.Research and development expenses increased in 2017 over 2016, due to increases in development activities and the related employee compensation costsand depreciation resulting from continued investments in equipment, primarily associated with our new K5 factory and research and development facility inKorea. The increase was partially offset by projects that moved into production.Other Income and Expense Change 2018 2017 2016 2018 over 2017 2017 over 2016 (In thousands, except percentages)Interest expense, including related party$78,946 $85,554 $84,637 $(6,608) (7.7)% $917 1.1%Foreign currency (gain) loss, net1,451 11,823 (3,592) (10,372) (87.7)% 15,415 >(100)%Other (income) expense, net(8,068) 667 (2,153) (8,735) >100% 2,820 >(100)%Total other expense, net$72,329 $98,044 $78,892 $(25,715) (26.2)% $19,152 24.3%Interest expense decreased in 2018 compared to 2017, primarily due to the redemption of $200 million of our 6.625% Senior Notes due 2021 in July 2017and the remaining $200 million of these same notes in August 2018. The 2018 redemption was funded with proceeds from a term loan with a significantlylower interest rate. We ceased capitalizing interest in connection with the construction of our K5 factory and research and development facility in Korea inthe first quarter of 2016, which resulted in an increase in interest expense in 2017. This increase was partially offset by the early redemption of $200 millionof our 6.625% Senior Notes due 2021 in July 2017.We recorded a foreign currency loss, net in 2018 and 2017. The loss in 2017 was primarily due to the unfavorable exchange rate movements, mainly theKorean Won, and the associated impact on our net monetary exposure at our foreign subsidiaries.40Table of ContentsIn 2016, we recognized net foreign currency gains as a result of favorable exchange rate movements and the associated impact on our net monetary exposureat our foreign subsidiaries.Other (income) expense, net changed between 2018 and 2017, primarily related to gains in our pension plan and lower debt retirement costs incurred in 2018.The early repayment of the 6.625% Senior Notes due 2021 resulted in losses on debt retirement of $0.8 million in 2018 and $4.4 million in 2017.Income Tax Expense Change 2018 2017 2016 2018 over 2017 2017 over 2016 (In thousands, except percentages)Income tax expense$56,250 $39,791 $51,042 $16,459 $(11,251)Effective tax rate30.3% 12.9% 22.2% The majority of our income is earned and taxed in foreign jurisdictions in the Asia Pacific region with applicable tax rates similar to the U.S. federal and statecombined tax rate of approximately 25%. Income tax expense, which includes foreign withholding taxes and minimum taxes, reflects the applicable tax ratesin effect in the various countries where our income is earned and is subject to volatility depending on the relative mix of earnings in each location.The effective tax rate in 2017 includes a net tax benefit of $41.6 million for the provisional estimate of the impact of the Tax Act. The effective tax rate in2018 includes a $22.3 million income tax expense to complete the accounting for the impact of the Tax Act, reducing our estimated net tax benefit of $41.6million from 2017. The components of the one-time benefit include the release of a valuation allowance against U.S. deferred tax assets that we now expect torealize as a result of changes to the U.S. tax law. We also incurred charges for the one-time transition tax on our unremitted foreign earnings and profits offsetby the utilization of net operating loss carryforwards and tax credits. We were also required to remeasure our deferred tax assets based on the new U.S. federaltax rate of 21%.During 2018, 2017 and 2016, our subsidiaries in Korea, Malaysia, the Philippines, Singapore and Taiwan operated under various tax holidays. The taxholiday granted to certain operations in Taiwan expired as of December 31, 2017. The tax holidays granted to our Malaysia operations and certain operationsin the Philippines expired during 2018. As these tax holidays expire, income earned in those jurisdictions will be subject to higher statutory income tax rates,which may cause our effective tax rate to increase.See Note 6 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information about ourincome tax expense.Liquidity and Capital ResourcesWe assess our liquidity based on our current expectations regarding sales, operating expenses, capital spending, debt service requirements and other fundingneeds. Based on this assessment, we believe that our cash flow from operating activities, together with existing cash and cash equivalents and availabilityunder our credit facilities, will be sufficient to fund our working capital, capital expenditure, debt service and other financial requirements for at least the nexttwelve months. Our liquidity is affected by, among other things, volatility in the global economy and credit markets, the performance of our business, ourcapital expenditure levels, other uses of our cash including any purchases of stock under our stock repurchase program, any acquisitions or investments injoint ventures and our ability to either repay debt out of operating cash flow or refinance it at or prior to maturity with the proceeds of debt or equityofferings. There can be no assurance that we will generate the necessary net income or operating cash flows, or be able to borrow sufficient funds, to meet thefunding needs of our business beyond the next twelve months due to a variety of factors, including the cyclical nature of the semiconductor industry andother factors discussed in Part I, Item 1A of this Annual Report on Form 10-K.Our primary source of cash and the source of funds for our operations are cash flows from operations, current cash and cash equivalents, borrowings underavailable credit facilities and proceeds from any additional debt or equity financings. As of December 31, 2018, we had cash and cash equivalents of $681.6million. Included in our cash balance as of December 31, 2018, is $603.0 million held offshore by our foreign subsidiaries. We have the ability to access cashheld offshore by our41Table of Contentsforeign subsidiaries primarily through the repayment of intercompany debt obligations. Due to the changes in the U.S. tax law under the Tax Act,distributions of cash to the U.S. generally will not be subject to U.S. federal income tax. If we were to distribute this offshore cash to the U.S. as dividendsfrom our foreign subsidiaries, we may be subject to foreign withholding and state income taxes of approximately $25.8 million.In July 2018, the senior secured revolving credit facility of Amkor Technology, Inc. was terminated and replaced by a new facility entered into by oursubsidiary, Amkor Technology Singapore Holding Pte, Ltd. ("the Singapore Revolver"), and guaranteed by Amkor Technology, Inc. The availability for theSingapore Revolver is based on the amount of eligible accounts receivable. As of December 31, 2018, we had availability of $250.0 million under theSingapore Revolver, with no outstanding standby letters of credit. We refer you to Note 11 to our Consolidated Financial Statements in Part II, Item 8 of thisAnnual Report on Form 10-K for additional information. As of December 31, 2018, our foreign subsidiaries had $299.0 million available to be drawn undersecured revolving credit facilities, including the Singapore Revolver, and $70.6 million available to be borrowed under secured term loan credit facilities forworking capital purposes and capital expenditures.As of December 31, 2018, we had $1,332.3 million of debt. Our scheduled principal repayments on debt include $114.6 million due in 2019, $323.3 milliondue in 2020, $58.3 million due in 2021, $581.7 million due in 2022, $239.0 million due in 2023 and $17.2 million due thereafter. We were in compliancewith all debt covenants at December 31, 2018, and we expect to remain in compliance with these covenants for at least the next twelve months.In August 2018, we redeemed all $200 million of our 6.625% Senior Notes due 2021. The redemption of the Notes was funded with proceeds from our ¥26.0billion (US$233.2 million) term loan agreement entered into in July 2018 by J-Devices Corporation and guaranteed by Amkor Technology, Inc. Thisrefinancing is expected to generate net annualized interest savings of approximately $11 million. We refer you to Note 11 to our Consolidated FinancialStatements in Part II, Item 8 of this Annual Report on Form 10-K for additional information.For certain accounts receivable, we use non-recourse factoring arrangements with third party financial institutions to manage our working capital and cashflows. Under this program, we sell receivables to a financial institution for cash at a discount to the face amount. Available capacity under these programs isdependent on the level of our trade accounts receivable eligible to be sold, the financial institutions' willingness to purchase such receivables and the limitsprovided by the financial institutions. These factoring arrangements can be reduced or eliminated at any time due to market conditions and changes in thecredit worthiness of customers. For the year ended December 31, 2018 and 2017, we sold accounts receivable totaling $873.9 million and $611.2 million, netof discounts and fees of $7.0 million and $4.6 million, respectively.In order to reduce our debt and future cash interest payments, we may from time to time repurchase or redeem our outstanding notes for cash or exchangeshares of our common stock for our outstanding notes. Any such transaction may be made in the open market, through privately negotiated transactions orotherwise and is subject to the terms of our debt agreements, market conditions and other factors.Certain debt agreements have restrictions on dividend payments and the repurchase of stock and subordinated securities. These restrictions are determined inpart by calculations based upon cumulative net income or borrowing availability. We have never paid a dividend to our stockholders, and we do not haveany present plans for doing so. From time to time, Amkor Technology, Inc. also guarantees certain debt of our subsidiaries.We operate in a capital-intensive industry. Servicing our current and future customers may require that we incur significant operating expenses and makesignificant investments in equipment and facilities, which are generally made in advance of the related revenues and without firm customer commitments.Our Board of Directors previously authorized the repurchase of up to $300.0 million of our common stock, exclusive of any fees, commissions or otherexpenses. At December 31, 2018, approximately $91.6 million was available to repurchase common stock pursuant to the stock repurchase program. Thepurchase of stock may be made in the open market or through privately negotiated transactions. The timing, manner, price and amount of any repurchaseswill be determined by us at our discretion and will depend upon a variety of factors including economic and market conditions, the cash needs andinvestment opportunities for the business, the current market price of our stock, applicable legal requirements and other factors. We have not purchased anystock under the plan since 2012.42Table of ContentsInvestmentsWe make significant capital expenditures in order to service the demand of our customers, which is primarily focused on investments in advanced packagingand test equipment. In 2018, our capital expenditures totaled $547.1 million or approximately 12.7% of net sales.We expect that our 2019 capital expenditures will be approximately $475 million. Ultimately, the amount of our 2019 capital expenditures will depend onseveral factors including, among others, the timing and implementation of any capital projects under review, the performance of our business, economic andmarket conditions, the cash needs and investment opportunities for the business, the need for additional capacity to service anticipated customer demand andthe availability of cash flows from operations or financing. In addition, we are subject to risks associated with our capital expenditures, including those discussed in Part I, Item 1A of this Annual Report on Form 10-Kunder the caption "Capital Expenditures - We Make Substantial Investments in Equipment and Facilities To Support the Demand Of Our Customers, WhichMay Adversely Affect Our Business If the Demand Of Our Customers Does Not Develop As We Expect or Is Adversely Affected."Cash FlowsNet cash provided by (used in) operating, investing and financing activities for each of the three years ended December 31, 2018 was as follows: For the Year Ended December 31 2018 2017 2016 (In thousands)Operating activities$663,410 $618,267 $729,402Investing activities(537,383) (454,832) (589,427)Financing activities(40,623) (124,886) (112,179)Operating activities: Our cash flow provided by operating activities for the year ended December 31, 2018, increased by $45.1 million compared to the yearended December 31, 2017, primarily due to changes in working capital. Our cash flow provided by operating activities for the year ended December 31,2017, decreased by $111.1 million compared to the year ended December 31, 2016, primarily due to changes in working capital, partially offset by highersales and gross profit.Investing activities: Our cash flow used in investing activities are principally for payments for property, plant and equipment, which was comparable to theprior year. The net cash used in investing activities for the year ended December 31, 2017, also included a payment for the acquisition of Nanium and receiptof the remaining proceeds for the sale of the K1 factory in Korea.Financing activities: The net cash used in financing activities for the year ended December 31, 2018 was primarily driven by the full redemption of our6.625% Senior Notes due 2021 and net repayments in China and Korea, partially offset by the net borrowings in Japan. The net cash used in financingactivities during 2017 was primarily driven by the partial redemption of our 6.625% Senior Notes due 2021, partially offset by the net borrowings in Chinaand Japan.We provide the following supplemental data to assist our investors and analysts in understanding our liquidity and capital resources. We define free cashflow as net cash provided by operating activities less payments for property, plant and equipment, plus proceeds from the sale of and insurance recovery forproperty, plant and equipment, if applicable. Free cash flow is not defined by U.S. GAAP. We believe free cash flow to be relevant and useful information toour investors because it provides them with additional information in assessing our liquidity, capital resources and financial operating results. Ourmanagement uses free cash flow in evaluating our liquidity, our ability to service debt and our ability to fund capital expenditures. However, free cash flowhas certain limitations, including that it does not represent the residual cash flow available for discretionary expenditures since other, non-discretionaryexpenditures, such as mandatory debt service, are not deducted from the measure. The amount of mandatory versus discretionary expenditures can varysignificantly43Table of Contentsbetween periods. This measure should be considered in addition to, and not as a substitute for, or superior to, other measures of liquidity or financialperformance prepared in accordance with U.S. GAAP, such as net cash provided by operating activities. Furthermore, our definition of free cash flow may notbe comparable to similarly titled measures reported by other companies. For the Year Ended December 31 2018 2017 2016 (In thousands)Net cash provided by operating activities$663,410 $618,267 $729,402Payments for property, plant and equipment(547,122) (550,943) (650,038)Proceeds from sale of and insurance recovery for property, plant and equipment4,212 141,530 60,801Free cash flow$120,500 $208,854 $140,165Contractual ObligationsThe following table summarizes our contractual obligations at December 31, 2018, and the effect such obligations are expected to have on our liquidity andcash flow in future periods. Payments Due for Year Ending December 31, Total 2019 2020 2021 2022 2023 Thereafter (In thousands)Total debt$1,334,129 $114,579 $323,346 $58,346 $581,723 $238,985 $17,150Scheduled interest payment obligations (1)219,898 60,951 52,398 46,786 46,027 11,650 2,086Purchase obligations (2)75,061 69,813 1,333 1,075 1,044 776 1,020Operating lease obligations120,787 32,461 24,630 17,676 10,942 9,008 26,070Capital lease obligations (3)21,412 6,430 4,555 4,748 936 936 3,807Severance obligations (4)142,126 13,179 11,939 10,855 9,837 8,945 87,371Total contractual obligations$1,913,413 $297,413 $418,201 $139,486 $650,509 $270,300 $137,504(1)Represents interest payment obligations calculated using stated coupon rates for fixed rate debt and interest rates applicable at December 31, 2018,for variable rate debt.(2)Represents off-balance sheet purchase obligations for capital expenditures and long-term supply contracts outstanding at December 31, 2018.(3)Represents future minimum lease payments including interest payments.(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, 2018,include:•$55.1 million of foreign pension plan obligations, for which the timing and actual amount of impact on our future cash flow is uncertain.•$30.6 million net liability associated with unrecognized tax benefits. Due to the uncertainty regarding the amount and the timing of any future cashoutflows 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.Off-Balance Sheet ArrangementsAs of December 31, 2018, we had no off-balance sheet guarantees or other off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SECRegulation S-K.44Table of ContentsOther ContingenciesWe refer you to Note 15 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for a discussion of our contingenciesrelated to litigation and other legal matters.Critical Accounting Policies and Use of EstimatesWe have identified the policies below as critical to our business operations and the understanding of our results of operations. A summary of our significantaccounting policies used in the preparation of our Consolidated Financial Statements appears in Note 1 to our Consolidated Financial Statements included inPart II, Item 8 of this Annual Report on Form 10-K. Our preparation of this Annual Report on Form 10-K requires us to make estimates and assumptions thataffect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements and the reportedamounts 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 estimates and policies, which have been reviewed with the Audit Committee of our Board of Directors, affectour more significant judgments and estimates used in the preparation of our Consolidated Financial Statements.Acquisitions. We account for businesses we acquire using the acquisition method of accounting and record the underlying net assets at their respectiveacquisition-date fair values. The accounting for acquisitions requires us to make significant estimates and assumptions, including those with respect to futurecash flows, discount rates and asset lives, and therefore requires considerable judgment. These determinations affect the amount of depreciation andamortization expense recognized in future periods. Our estimates of fair value are based upon assumptions believed to be reasonable; however, they areinherently uncertain and unpredictable.Revenue Recognition. We recognize revenue, net of sales, use, value-added and other similar taxes, as a performance obligation is satisfied in an amountreflecting the consideration to which we expect to be entitled. We apply a five-step approach in determining the amount and timing of revenue to berecognized: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4)allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when the performance obligation is satisfied.Substantially all of our revenue is recognized as services are rendered.Our packaging and test services are our performance obligations to our customers. Our packaging services include wafer bump, probe and assembly. Weprovide packaging and test services to our customers either individually or as part of a combined offering. In a combined offering, we account for theindividual services separately if they are determined to be distinct. We determine a service to be distinct if it is separately identifiable from other services inthe combined offering and if a customer can benefit from the unique service on its own or with other resources that are readily available to the customer.The consideration, including variable consideration, is allocated between the distinct services in a combined offering based upon the stand-alone sellingprices of the individual services. Our services involve a high degree of specialization which are unique based on the design and purpose of the customer’swafers. Accordingly, our negotiated pricing reflects the customized nature of our services and represents a customer-specific stand-alone selling price. Werecognize revenue as services are rendered, which generally occurs over the course of two to three weeks. Services are generally billed at completion of eachindividual packaging or test service or in some instances at the completion of all services in a combined offering.We recognize revenue over time as services are rendered because our services create or enhance the customer’s wafer. We utilize an input method (costincurred plus estimated margin) to determine the amount of revenue to recognize for in-process, but incomplete, customer orders at a reporting date. Duringthe period of providing our services, we generally do not control or take ownership of customers' wafers, nor do we include the cost of the wafer in our costcalculations. We believe that a cost-based input method is the most appropriate manner to measure how we satisfy our performance obligations to customersbecause the effort and costs incurred to package and/or test customer wafers are not linear over the duration of these services.45Table of ContentsShipping and handling costs are accounted for as a cost to fulfill our performance obligations to customers. Accordingly, we record customer payments ofshipping and handling costs as a component of net sales, and the costs incurred for shipping and handling are then charged to cost of sales.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. Thetax returns for years where the statute of limitations remains open in all jurisdictions in which we do business are subject to change upon examination. Webelieve that we have estimated and provided adequate accruals for potential additional taxes and related interest expense that may ultimately result fromsuch examinations. We believe that any additional taxes or related interest over the amounts accrued will not have a material effect on our financialcondition, results of operations or cash flows. However, resolution of these matters involves uncertainties and there can be no assurance that the outcomeswill be favorable. In addition, changes in the mix of income from our foreign subsidiaries, expiration of tax holidays or changes in tax laws or regulationscould result in increased effective tax rates in the future.Additionally, we monitor on an ongoing basis our ability to utilize our deferred tax assets and whether there is a need for a related valuation allowance. Inevaluating our ability to recover our deferred tax assets in the jurisdictions from which they arise, we consider all available positive and negative evidence,including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and results of recent operations. For most ofour foreign deferred tax assets, we consider it more likely than not that we will have sufficient taxable income to allow us to realize these deferred tax assets.However, in the event taxable income falls short of current expectations, we may need to establish a valuation allowance against such deferred tax assets. Wehave valuation allowances on select deferred tax assets in certain foreign jurisdictions. In prior years, we maintained a valuation allowance on all of our U.S.net deferred tax assets, including our U.S. net operating loss carryforwards. During the fourth quarter of 2017, we determined it was more likely than not thatwe will have sufficient taxable income to allow us to realize a substantial portion of our U.S. deferred tax assets. Our evaluation considered, among otherfactors, the one-time transition tax, the new Global Intangible Low-Taxed Income (“GILTI”) provision, and limitations on the deductibility of interestexpense in connection with the Tax Act.ASC 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment even though the effectivedate for most provisions is for tax years beginning after December 31, 2017. Given the significance of the Tax Act, the SEC staff issued Staff AccountingBulletin No. 118 ("SAB 118"), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used whenaccounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared andanalyzed the information necessary to finalize its accounting. During the measurement period, which ended during the fourth quarter of 2018, impacts of thelaw are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognizedand adjusted as information becomes available, prepared or analyzed.For the year ended December 31, 2017, we reported provisional amounts for the income tax effects of the Tax Act for which the accounting was incomplete,but a reasonable estimate could be determined. During the quarter ended December 31, 2018 we updated our provisional estimate of the impact of the TaxAct. Our accounting for the impact of the Tax Act is now complete in accordance with SAB 118.Valuation of Inventory. We order raw materials based on customers’ forecasted demand. If our customers change their forecasted requirements and we areunable to cancel our raw materials order or if our vendors require that we order a minimum quantity that exceeds the current forecasted demand, we willexperience 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 inproduction. However, we may not be successful in recovering the cost from our customers or be able to use the inventory in production and, accordingly, ifwe 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 thecarrying 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 ismade that the inventory will not be utilized in production or is not saleable, it is written-off.Inventories consist of raw materials and purchased components, and are stated at the lower of cost and net realizable value. Cost is principally determined bystandard cost or the weighted moving average method, both of which approximate actual cost. For inventory valued using the standard cost method, wereview and set our standard costs as needed, but at a minimum on an annual basis.46Table of ContentsValuation of Long-lived Assets. We review long-lived assets, which include property, plant and equipment and goodwill, for impairment whenever events orchanges in circumstances indicate that the carrying amount may not be recoverable. Factors we consider important which could trigger an impairment reviewinclude the following:•significant under-performance relative to expected historical or projected future operating results;•significant changes in the manner of our use of the asset;•significant negative industry or economic trends and•our market capitalization relative to net book value.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 theundiscounted cash flows expected to result from the use and eventual disposition of the asset group. If such asset group is considered to be impaired, theimpairment 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 arecarried at the lower of cost or fair value less the costs of disposal.We review goodwill for impairment annually during the fourth quarter of each year and whenever events or changes in circumstances indicate that animpairment may exist. Impairment losses are recorded when the carrying amount of the reporting unit exceeds its fair value. Recently Adopted and Recently Issued StandardsFor information regarding recently adopted and recently issued accounting standards, see Note 2 to our Consolidated Financial Statements included in PartII, Item 8 of this Annual Report on Form 10-K.Item 7A.Quantitative and Qualitative Disclosures about Market RiskMarket Risk SensitivityWe are exposed to market risks, primarily related to foreign currency and interest rate fluctuations. In the normal course of business, we employ establishedpolicies and procedures to manage the exposure to fluctuations in foreign currency values and changes in interest rates.Foreign Currency RiskThe U.S. dollar is our reporting and functional currency for our subsidiaries, except for J-Devices, where the Japanese Yen is the functional currency. In orderto reduce our exposure to foreign currency gains and losses, we generally use natural hedging techniques to reduce foreign currency rate risk. On a limitedbasis, we use forward contracts to mitigate foreign currency risk of certain monetary liabilities denominated in foreign currencies. We have foreign currency exchange rate risk associated with the remeasurement of monetary assets and liabilities on our Consolidated Balance Sheets thatare denominated in currencies other than the functional currency. We performed a sensitivity analysis of our foreign currency exposure as of December 31,2018, to assess the potential impact of fluctuations in exchange rates for all foreign denominated assets and liabilities. Assuming that all foreign currenciesappreciated 10% against the U.S. dollar, taking into account our foreign currency forward contracts, our income before taxes as of December 31, 2018 wouldhave been approximately $17 million lower, due to the remeasurement of monetary assets and liabilities. We have a significant net monetary liability at oursubsidiary in Korea, principally related to our Korean severance plan.In addition, we have foreign currency exchange rate exposure on our results of operations. For the year ended December 31, 2018, approximately 78% of ournet sales were denominated in U.S. dollars. Our remaining net sales were principally denominated in Japanese Yen for local country sales. For the year endedDecember 31, 2018, approximately 51% of our cost of sales and operating expenses were denominated in U.S. dollars and were largely for raw materials andcosts associated with property, plant and equipment. The remaining portion of our cost of sales and operating expenses was principally denominated in theAsian currencies where our production facilities are located and largely consisted of labor. To the extent47Table of Contentsthat the U.S. dollar weakens against these Asian-based currencies, similar foreign currency denominated income and expenses in the future will result inhigher sales, higher cost of sales and operating expenses, with cost of sales and operating expenses having the greater impact on our financial results.Similarly, our sales, cost of sales and operating expenses will decrease if the U.S. dollar strengthens against these foreign currencies. We performed asensitivity analysis of our foreign currency exposure as of December 31, 2018, to assess the potential impact of fluctuations in exchange rates for all foreigndenominated sales and operating expenses. Assuming that all foreign currencies appreciated 10% against the U.S. dollar, our operating income for the yearended December 31, 2018 would have been approximately $117 million lower.There are inherent limitations in the sensitivity analysis presented, primarily the assumption that foreign exchange rate movements across multiplejurisdictions would change instantaneously in an equal fashion. As a result, the analysis is unable to reflect the potential effects of more complex market orother changes that could arise which may positively or negatively affect our results of operations.Our Consolidated Financial Statements are impacted by changes in exchange rates at the entity where the local currency is the functional currency. The effectof foreign exchange rate translation for these entities was a gain of $4.9 million and $11.1 million for the years ended December 31, 2018 and 2017,respectively, and was recognized as an adjustment to equity through other comprehensive income (loss).Interest Rate RiskWe have interest rate risk with respect to our debt. Our fixed and variable rate debt includes foreign borrowings and revolving credit facilities. Our fixed ratedebt also consists of senior notes. Changes in interest rates have different impacts on the fixed and variable rate portions of our debt portfolio. A change ininterest rates on the fixed portion of the debt portfolio impacts the fair value of the debt instrument but has no impact on interest expense or cash flows. Achange in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows but does not generally impact the fair valueof the instrument.The table below presents the interest rates, maturities and fair value of our fixed and variable rate debt as of December 31, 2018: 2019 2020 2021 2022 2023 Thereafter Total Fair Value ($ in thousands)Fixed rate debt$58,347 $178,346 $58,346 $578,303 $35,555 $— $908,897 $905,495Average interest rate1.2% 2.9% 1.2% 5.9% 1.3% —% 4.5% Variable rate debt$56,232 $145,000 $— $3,420 $203,430 $17,150 $425,232 $424,503Average interest rate3.6% 4.5% —% 4.6% 5.4% 4.6% 4.8% Total debt maturities$114,579 $323,346 $58,346 $581,723 $238,985 $17,150 $1,334,129 $1,329,998For information regarding the fair value of our long-term debt, see Note 14 to our Consolidated Financial Statements in Part II, Item 8 of this Annual Reporton Form 10-K.48Table of ContentsItem 8.Financial Statements and Supplementary DataWe present the information required by Item 8 of Form 10-K here in the following order: PageReport of Independent Registered Public Accounting Firm 50Consolidated Statements of Income — Years ended December 31, 2018, 2017 and 2016 52Consolidated Statements of Comprehensive Income — Years ended December 31, 2018, 2017 and 2016 53Consolidated Balance Sheets — December 31, 2018 and 2017 54Consolidated Statements of Stockholders’ Equity — Years ended December 31, 2018, 2017 and 2016 55Consolidated Statements of Cash Flows — Years ended December 31, 2018, 2017 and 2016 56Notes to Consolidated Financial Statements 57Schedule II — Valuation and Qualifying Accounts 8649Table of ContentsReport of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of Amkor Technology, Inc.Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of Amkor Technology, Inc. and its subsidiaries (the "Company") as of December 31, 2018and 2017, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in theperiod ended December 31, 2018, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the periodended December 31, 2018 appearing under Item 8 (collectively referred to as the “consolidated financial statements”). We also have audited the Company'sinternal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO).In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 inconformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework(2013) issued by the COSO.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for revenues from contracts withcustomers in 2018.Basis for OpinionsThe Company’s management is responsible for these consolidated financial statements, 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 FinancialReporting appearing under Item 9A. Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company’sinternal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting OversightBoard (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.50Table of ContentsDefinition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention ortimely 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 ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ PricewaterhouseCoopers LLPPhoenix, ArizonaFebruary 22, 2019We have served as the Company’s auditor since 2000. 51Table of ContentsAMKOR TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF INCOME For the Year Ended December 31, 2018 2017 2016 (In thousands, except per share data)Net sales$4,316,466 $4,207,031 $3,927,849Cost of sales3,605,901 3,445,952 3,217,958Gross profit710,565 761,079 709,891Selling, general and administrative295,239 297,021 284,094Research and development157,182 166,627 117,210Gain on sale of real estate— (108,109) —Total operating expenses452,421 355,539 401,304Operating income258,144 405,540 308,587Interest expense78,946 83,839 79,668Interest expense, related party— 1,715 4,969Other (income) expense, net(6,617) 12,490 (5,745)Total other expense, net72,329 98,044 78,892Income before taxes185,815 307,496 229,695Income tax expense56,250 39,791 51,042Net income129,565 267,705 178,653Net income attributable to noncontrolling interests(2,473) (4,155) (3,123)Net income attributable to Amkor$127,092$263,550 $175,530Net income attributable to Amkor per common share: Basic$0.53 $1.10 $0.74Diluted$0.53 $1.10 $0.74Shares used in computing per common share amounts: Basic239,329 238,937 237,416Diluted239,741 239,651 238,034The accompanying notes are an integral part of these statements.52Table of ContentsAMKOR TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Year Ended December 31, 2018 2017 2016 (In thousands)Net income$129,565 $267,705 $178,653Other comprehensive income (loss), net of tax: Adjustments to unrealized components of defined benefit pension plans(3,644) 5,165 2,563Foreign currency translation4,937 11,092 5,783Total other comprehensive income (loss)1,293 16,257 8,346Comprehensive income130,858 283,962 186,999Comprehensive income attributable to noncontrolling interests(2,473) (4,155) (3,123)Comprehensive income attributable to Amkor$128,385 $279,807 $183,876The accompanying notes are an integral part of these statements.53Table of ContentsAMKOR TECHNOLOGY, INC.CONSOLIDATED BALANCE SHEETS December 31, 2018 2017 (In thousands,except per share data)ASSETS Current assets: Cash and cash equivalents$681,569 $596,364Restricted cash2,589 2,000Accounts receivable, net of allowances of $677 and $803, respectively724,456 798,264Inventories230,589 213,649Other current assets32,005 33,727Total current assets1,671,208 1,644,004Property, plant and equipment, net2,650,448 2,695,065Goodwill25,720 25,036Restricted cash3,893 4,487Other assets144,178 139,796Total assets$4,495,447 $4,508,388 LIABILITIES AND EQUITY Current liabilities: Short-term borrowings and current portion of long-term debt$114,579 $123,848Trade accounts payable530,398 569,085Capital expenditures payable255,237 294,258Accrued expenses258,209 330,868Total current liabilities1,158,423 1,318,059Long-term debt1,217,732 1,240,581Pension and severance obligations184,321 182,216Other non-current liabilities79,071 47,823Total liabilities2,639,547 2,788,679Commitments and contingencies (Note 15) Stockholders’ equity: 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, 285,352 and 285,129 shares issued, and 239,385and 239,184 shares outstanding, respectively285 285Additional paid-in capital1,909,425 1,903,357Retained earnings (accumulated deficit)113,189 (13,903)Accumulated other comprehensive income (loss)23,812 22,519Treasury stock, at cost, 45,967 and 45,945 shares, respectively(216,171) (215,982)Total Amkor stockholders’ equity1,830,540 1,696,276Noncontrolling interests in subsidiaries25,360 23,433Total equity1,855,900 1,719,709Total liabilities and equity$4,495,447 $4,508,388The accompanying notes are an integral part of these statements.54Table of ContentsAMKOR TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Additional Paid-In Capital Retained Earnings(AccumulatedDeficit) AccumulatedOtherComprehensiveIncome (Loss) Total AmkorStockholders'Equity NoncontrollingInterest inSubsidiaries TotalEquity Common Stock Treasury Stock Shares Par Value Shares Cost (In thousands)Balance at December 31,2015282,724 $283 $1,883,592 $(467,747) $(2,084) (45,719) $(213,758) $1,200,286 $17,250 $1,217,536Cumulative effect adjustmentfrom standard adoption— — — 14,764 — — — 14,764 — 14,764Net income— — — 175,530 — — — 175,530 3,123 178,653Other comprehensive income(loss)— — — — 8,346 — — 8,346 — 8,346Treasury stock acquiredthrough surrender ofshares for tax withholding— — — — — (95) (732) (732) — (732)Issuance of stock throughshare-based compensationplans1,755 1 8,246 — — — — 8,247 — 8,247Share-based compensation— — 3,251 — — — — 3,251 — 3,251Subsidiary dividends tononcontrolling interests— — — — — — — — (548) (548)Balance at December 31,2016284,479 $284 $1,895,089 $(277,453) $6,262 (45,814) $(214,490) $1,409,692 $19,825 $1,429,517Net income— — — 263,550 — — — 263,550 4,155 267,705Other comprehensive income(loss)— — — — 16,257 — — 16,257 — 16,257Treasury stock acquiredthrough surrender ofshares for tax withholding— — — — — (131) (1,492) (1,492) — (1,492)Issuance of stock throughshare-based compensationplans650 1 3,123 — — — — 3,124 — 3,124Share-based compensation— — 5,145 — — — — 5,145 — 5,145Subsidiary dividends tononcontrolling interests— — — — — — — — (547) (547)Balance at December 31,2017285,129 $285 $1,903,357 $(13,903) $22,519 (45,945) $(215,982) $1,696,276 $23,433 $1,719,709Net income— — — 127,092 — — — 127,092 2,473 129,565Other comprehensive income(loss)— — — — 1,293 — — 1,293 — 1,293Treasury stock acquiredthrough surrender ofshares for tax withholding— — — — — (22) (189) (189) — (189)Issuance of stock throughshare-based compensationplans223 — 1,050 — — — — 1,050 — 1,050Share-based compensation— — 5,018 — — — — 5,018 — 5,018Subsidiary dividends tononcontrolling interests— — — — — — — — (546) (546)Balance at December 31,2018285,352 $285 $1,909,425 $113,189 $23,812 (45,967) $(216,171) $1,830,540 $25,360 $1,855,900The accompanying notes are an integral part of these statements.55Table of ContentsAMKOR TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2018 2017 2016 (In thousands)Cash flows from operating activities: Net income$129,565 $267,705 $178,653Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization571,961 581,940 555,186Gain on sale of real estate— (108,109) —Amortization of deferred debt issuance costs and premiums1,120 1,235 1,403Deferred income taxes(13,110) (42,189) 1,443Loss on debt retirement1,512 4,835 —Loss (gain) on disposal of fixed assets, net5,310 (2,648) 1,390Share-based compensation5,018 5,145 3,251Proceeds from insurance recovery for property, plant and equipment(1,371) — (15,166)Other, net3,929 (8,143) 2,858Changes in assets and liabilities, net of acquisitions: Accounts receivable80,571 (133,814) (55,184)Inventories(16,310) (36,307) (8,623)Other current assets4,329 (2,473) 1,124Other assets1,986 (458) 1,037Trade accounts payable(43,490) 67,574 48,581Accrued expenses(78,136) 29,424 48,159Pension and severance obligations(4,653) 23,881 1,625Other non-current liabilities15,179 (29,331) (36,335)Net cash provided by operating activities663,410 618,267 729,402Cash flows from investing activities: Payments for property, plant and equipment(547,122) (550,943) (650,038)Proceeds from sale of property, plant and equipment2,841 141,530 45,635Proceeds from insurance recovery for property, plant and equipment1,371 — 15,166Acquisition of business, net of cash acquired— (43,771) —Other investing activities5,527 (1,648) (190)Net cash used in investing activities(537,383) (454,832) (589,427)Cash flows from financing activities: Proceeds from revolving credit facilities— 75,000 125,000Payments of revolving credit facilities(75,000) — (255,000)Proceeds from short-term debt23,341 77,781 49,131Payments of short-term debt(46,631) (70,236) (49,500)Proceeds from issuance of long-term debt596,226 223,976 46,000Payments of long-term debt(535,738) (405,269) (32,078)Payments of long-term debt, related party— (17,837) —Payments of capital lease obligations(3,930) (5,340) (2,543)Payment of deferred consideration for purchase of facility— (3,890) —Proceeds from issuance of stock through share-based compensation plans1,050 3,124 8,247Other financing activities59 (2,195) (1,436)Net cash used in financing activities(40,623) (124,886) (112,179)Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash(204) 8,807 351Net increase in cash, cash equivalents and restricted cash85,200 47,356 28,147Cash, cash equivalents and restricted cash, beginning of period602,851 555,495 527,348Cash, cash equivalents and restricted cash, end of period$688,051 $602,851 $555,495Supplemental disclosures of cash flow information: Cash paid during the period for: Interest$77,575 $83,808 $86,777Income taxes63,080 61,878 32,174Non-cash investing and financing activities: Property, plant and equipment included in capital expenditures payable256,070 294,912 146,080Equipment acquired through capital lease17,163 929 6,358The accompanying notes are an integral part of these statements.56Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements1.Description of Business and Summary of Significant Accounting PoliciesDescription of BusinessAmkor is one of the world’s leading providers of outsourced semiconductor packaging and test services. Amkor pioneered the outsourcing of semiconductorpackaging and test services through a predecessor corporation in 1968, and over the years we have built a leading position by:•Designing and developing innovative packaging and test technologies;•Offering a broad portfolio of cost-effective solutions and services;•Focusing on strategic end markets that offer solid growth potential;•Cultivating long-standing relationships with our customers, which include many of the world’s leading semiconductor companies;•Collaborating with customers, original equipment manufacturers ("OEMs") and equipment and material suppliers;•Developing a competitive cost structure with disciplined capital investment;•Building expertise in high-volume manufacturing processes and developing a reputation for high quality and solid execution and•Providing a geographically diverse operating base, with research and development, engineering support and production capabilities at variousfacilities throughout China, Japan, Korea, Malaysia, the Philippines, Portugal and Taiwan.Basis of PresentationOur Consolidated Financial Statements include the accounts of Amkor Technology, Inc. and our subsidiaries (“Amkor”). Our Consolidated FinancialStatements reflect the elimination of all significant inter-company accounts and transactions. Effective January 1, 2018, we adopted Accounting StandardsUpdate (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), using the full retrospective transition method as discussed in Note 2. Allamounts and disclosures set forth in this Form 10-K reflect these changes as of the applicable dates and for the applicable periods. On May 22, 2017, wecompleted the purchase of Nanium, S.A. ("Nanium"). Nanium's financial results have been included in our Consolidated Financial Statements from the date ofacquisition (Note 3). Our investments in variable interest entities in which we are the primary beneficiary are consolidated. We reflect the remaining portionof variable interest entities and foreign subsidiaries that are not wholly owned as noncontrolling interests.The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates andassumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, includingthose related to acquisitions, revenue recognition, income taxes, inventory, long lived assets and contingencies. These estimates are based on management’sbest knowledge of current events, historical experience, actions that we may undertake in the future and on various other assumptions that are believed to bereasonable under the circumstances. As a result, actual results could differ materially from these estimates and assumptions.57Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)Consolidation of Variable Interest EntitiesWe have variable interests in certain Philippine realty corporations in which we have a 40% ownership. We lease land and buildings in the Philippines fromthese entities and we are the primary beneficiary of these arrangements. As of December 31, 2018, the combined book value of the assets and liabilitiesassociated with these Philippine realty corporations included in our Consolidated Balance Sheet was $17.0 million and $0.2 million, respectively. Theimpact of consolidating these variable interest entities on our Consolidated Statements of Income was not significant, and other than our lease payments, wehave not provided any significant assistance or other financial support to these variable interest entities for the years ended December 31, 2018, 2017 or2016. The creditors of the Philippine realty corporations have no recourse to our general credit.Foreign Currency TranslationThe U.S. dollar is the functional currency of our subsidiaries other than J-Devices, and the foreign currency asset and liability amounts at these subsidiariesare remeasured into U.S. dollars at end-of-period exchange rates, except for nonmonetary items which are remeasured at historical rates. Foreign currencyincome and expenses are remeasured at daily exchange rates, except for expenses related to balance sheet amounts which are remeasured at historicalexchange rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in other(income) expense, net in the period in which they occur.The Japanese Yen is the functional currency of J-Devices. The asset and liability amounts of J-Devices are translated into U.S. dollars at end-of-periodexchange rates. Income and expenses are translated into U.S. dollars at average exchange rates in effect during the period. The resulting translationadjustments are reported as a component of accumulated other comprehensive income in the stockholders’ equity section of the balance sheet. Assets andliabilities denominated in a currency other than the functional currency are remeasured into the functional currency prior to translation into U.S. dollars, andthe resulting transaction exchange gains or losses are included in other expense (income) in the period in which they occur.Risks and ConcentrationsThe semiconductor industry is characterized by rapid technological change, competitive pricing pressures and cyclical market patterns. Our financial resultsare affected by a wide variety of factors, including general economic conditions worldwide, economic conditions specific to the semiconductor industry, thetimely implementation of new package and test technologies, the ability to safeguard patents and intellectual property in a rapidly evolving market andreliance on materials and equipment suppliers. In addition, the semiconductor market has historically been cyclical and subject to significant economicdownturns at various times. Our profitability and ability to generate cash from operations is principally dependent upon demand for semiconductors, theutilization of our capacity, semiconductor package mix, the average selling price of our services, our ability to manage our capital expenditures and ourability to control our costs including labor, material, overhead and financing costs.A significant portion of our revenues is concentrated with a small group of customers (Note 16). The loss of a significant customer, a business combinationamong customers, a reduction in orders or decrease in price from a significant customer or disruption in any of our significant strategic partnerships or othercommercial arrangements could have a material adverse effect on our business, liquidity, results of operations, financial condition and cash flows.Financial instruments, for which we are subject to credit risk, consist principally of accounts receivable and cash and cash equivalents. With respect toaccounts receivable, we mitigate our credit risk by selling primarily to well-established companies, performing ongoing credit evaluations and makingfrequent contact with customers. In addition, we may utilize non-recourse factoring to mitigate credit risk when considered appropriate. We have historicallymitigated our credit risk with respect to cash and cash equivalents through diversification of our holdings into various high quality money market funds andbank deposit accounts. At December 31, 2018, our cash and cash equivalents were maintained in various U.S. and foreign bank operating and time depositaccounts and invested in U.S. money market funds.58Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)Contingencies and LitigationWe may be subject to certain legal proceedings, lawsuits and other claims, as discussed in Note 15. We accrue for a loss contingency, including legalproceedings, lawsuits, pending claims and other legal matters, when we conclude that the likelihood of a loss is probable and the amount of the loss can bereasonably estimated. When the reasonable estimate of the loss is within a range of amounts, and no amount in the range constitutes a better estimate thanany other amount, we accrue for the amount at the low end of the range. We adjust our accruals from time to time as we receive additional information, but theloss we incur may be significantly greater than or less than the amount we have accrued. We disclose loss contingencies if we believe they are material andthere is at least a reasonable possibility that a loss has been incurred. Attorney fees related to legal matters are expensed as incurred.Cash and Cash EquivalentsWe consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Our cash and cash equivalents aremaintained in various U.S. and foreign bank operating and time deposit accounts and invested in U.S. money market funds.Restricted CashRestricted cash, current, consists of short-term cash equivalents used to collateralize our daily banking services. Restricted cash, non-current, mainly consistsof collateral to fulfill foreign trade compliance requirements.InventoriesInventories consist of raw materials and purchased components, and are stated at the lower of cost and net realizable value. Cost is principally determined bystandard cost or the weighted moving average method, both of which approximate actual cost. We review and set our standard costs as needed, but at aminimum 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 ofour inventories. When a determination is made that the inventory will not be utilized in production or is not saleable, it is written-off.Other Current AssetsOther current assets consist principally of prepaid assets and an investment in government securities by a foreign subsidiary to satisfy local regulatoryrequirements, which is recorded at amortized cost.Property, Plant and EquipmentProperty, plant and equipment are stated at cost. Depreciation is calculated by the straight-line method over the estimated useful lives of depreciable assetswhich are as follows:Land use rights50 to 90 yearsBuildings and improvements10 to 40 yearsMachinery and equipment2 to 7 yearsSoftware and computer equipment3 to 5 yearsFurniture, fixtures and other equipment4 to 10 yearsCost 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 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 theundiscounted cash flows expected to result from the use and eventual59Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)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 amountof 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.GoodwillGoodwill is recorded when the cost of an acquisition exceeds the fair value of the net tangible and identifiable intangible assets acquired. We reviewgoodwill for impairment annually during the fourth quarter of each year and whenever events or changes in circumstances indicate that an impairment mayexist. Impairment losses are recorded when the carrying amount of the reporting unit exceeds its fair value. The balance of goodwill in our ConsolidatedBalance Sheets reflects adjustments for foreign currency translation.Other AssetsOther assets consist principally of deferred tax assets and refundable security deposits.Fair Value MeasurementsWe apply fair value accounting for assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring ornonrecurring 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 mostadvantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. See Note 14 for furtherdiscussion of fair value measurements.Revenue RecognitionWe recognize revenue, net of sales, use, value-added and other similar taxes, as a performance obligation is satisfied in an amount reflecting the considerationto which we expect to be entitled. We apply a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying thecontract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transactionprice to the performance obligations in the contract; and (5) recognizing revenue when the performance obligation is satisfied. Substantially all of ourrevenue is recognized as services are rendered.Our packaging and test services are our performance obligations to our customers. Our packaging services include wafer bump, probe and assembly. Weprovide packaging and test services to our customers either individually or as part of a combined offering. In a combined offering, we account for theindividual services separately if they are determined to be distinct. We determine a service to be distinct if it is separately identifiable from other services inthe combined offering and if a customer can benefit from the unique service on its own or with other resources that are readily available to the customer.The consideration, including variable consideration, is allocated between the distinct services in a combined offering based upon the stand-alone sellingprices of the individual services. Our services involve a high degree of specialization which are unique based on the design and purpose of the customer’swafers. Accordingly, our negotiated pricing reflects the customized nature of our services and represents a customer-specific stand-alone selling price. Werecognize revenue as services are rendered, which generally occurs over the course of two to three weeks. Services are generally billed at completion of eachindividual packaging or test service or in some instances at the completion of all services in a combined offering.We recognize revenue over time as services are rendered because our services create or enhance the customer’s wafer. We utilize an input method (costincurred plus estimated margin) to determine the amount of revenue to recognize for in-process, but incomplete, customer orders at a reporting date. Duringthe period of providing our services, we generally do not control or take ownership of customers' wafers, nor do we include the cost of the wafer in our costcalculations. We believe that a cost-based input method is the most appropriate manner to measure how we satisfy our performance obligations to customersbecause the effort and costs incurred to package and/or test customer wafers are not linear over the duration of these services.60Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)Shipping and handling costs are accounted for as a cost to fulfill our performance obligations to customers. Accordingly, we record customer payments ofshipping and handling costs as a component of net sales, and the costs incurred for shipping and handling are then charged to cost of sales.Unbilled receivables are revenues that have been recognized for performance obligations that have been satisfied, or partially satisfied, in advance of billingthe customer. Revenue may be recognized in advance of billing as our contracts provide us with an unconditional right to consideration for work that isperformed. Total unbilled receivables as of December 31, 2018 and 2017 were $89.3 million and $101.9 million, respectively. These amounts are included inaccounts receivable, net of allowances in our Consolidated Balance Sheets.Research and Development CostsResearch and development expenses include costs attributable to the conduct of research and development programs primarily related to the development ofnew package designs or technologies and improving the efficiency and capabilities of our existing production processes. Such costs include salaries, payrolltaxes, employee benefit costs, materials, supplies, depreciation and maintenance of research equipment, services provided by outside contractors and theallocable portions of facility costs such as rent, utilities, insurance, repairs and maintenance, depreciation and general support services. All costs associatedwith research and development are expensed as incurred.Income TaxesIncome taxes are accounted for using the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the futuretax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respectivetax basis as well as for net operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expectedto 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 andliabilities 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 deferredtax assets for which it is more likely than not that the related tax benefits will not be realized.We monitor on an ongoing basis our ability to utilize our deferred tax assets and whether there is a need for a related valuation allowance. In evaluating ourability to recover our deferred tax assets in the jurisdictions from which they arise, we consider all available positive and negative evidence, includingscheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations. For most of our U.S.and foreign deferred tax assets, we consider it more likely than not that we will have sufficient taxable income to allow us to realize these deferred tax assets.However, in the event taxable income falls short of current expectations, we may need to establish a valuation allowance against such deferred tax assets.ASC 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment even though the effectivedate for most provisions is for tax years beginning after December 31, 2017. Given the significance of the Tax Act, the SEC staff issued Staff AccountingBulletin No. 118 (“SAB 118”), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used whenaccounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared andanalyzed the information necessary to finalize its accounting. During the measurement period, which ended during the fourth quarter of 2018, impacts of thelaw are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognizedand adjusted as information becomes available, prepared or analyzed.For the year ended December 31, 2017, we reported provisional amounts for the income tax effects of the Tax Act for which the accounting was incomplete,but a reasonable estimate could be determined. During the quarter ended December 31, 2018, we updated our provisional estimate of the impact of the TaxAct. Our accounting for the impact of the Tax Act is now complete in accordance with SAB 118.61Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)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 onaudit, based on the technical merits of the position. Related interest and penalties are classified as income taxes in the financial statements.See Note 6 for more information regarding unrecognized income tax benefits.2.New Accounting StandardsRecently Adopted StandardsIn May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which was subsequently amended and clarified. Thestandard is based on the principle that revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects theconsideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about thenature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and changes injudgments. The standard permits the use of either full retrospective or modified retrospective methods of adoption.Effective January 1, 2018, we adopted the requirements of Topic 606 using the full retrospective transition method. The new standard resulted in a change tothe timing of revenue recognition, whereby revenue is recognized "over time" as services are performed rather than at a "point in time," generally uponshipment. The new standard also resulted in an increase in accounts receivables, net and a related decrease in inventories and deferred revenues. Inaccordance with Topic 606, we applied the following principles in connection with the adoption of the new standard:•We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.•We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception,that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service willbe one year or less.•We exclude sales, use, value-added and similar taxes from the transaction price, without performing a jurisdiction-by-jurisdiction assessment.The adoption of the standard impacted our previously reported results as follows: For the Year Ended December 31, 2017 AsPreviously Reported New AccountingPronouncementAdjustment As Adjusted (In thousands, except per share data)Income Statement: Net sales$4,186,497 $20,534 $4,207,031Cost of sales3,429,224 16,728 3,445,952Gross Profit757,273 3,806 761,079Income tax expense38,982 809 39,791Net income264,888 2,817 267,705Net income attributable to Amkor260,706 2,844 263,550Net income attributable to Amkor per common share - diluted1.09 0.01 1.1062Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued) For the Year Ended December 31, 2016 AsPreviouslyReported New AccountingPronouncementAdjustment As Adjusted (In thousands, except per share data)Income Statement: Net sales$3,893,635 $34,214 $3,927,849Cost of sales3,198,158 19,800 3,217,958Gross Profit695,477 14,414 709,891Income tax expense47,853 3,189 51,042Net income167,304 11,349 178,653Net income attributable to Amkor164,190 11,340 175,530Net income attributable to Amkor per common share - diluted0.69 0.05 0.74 December 31, 2017 AsPreviously Reported New AccountingPronouncementAdjustment As Adjusted (In thousands)Balance Sheet: Accounts receivable, net$692,287 $105,977 $798,264Inventories326,492 (112,843) 213,649Other assets146,051 (6,255) 139,796Accrued expenses374,598 (43,730) 330,868Other non-current liabilities46,144 1,679 47,823Accumulated deficit (1)(42,851) 28,948 (13,903)(1)The adjustment to accumulated deficit includes the 2017 and 2016 net income impact for the adoption of Topic 606 of $2.8 million and $11.3million, respectively. The adjustment also includes the cumulative impact to our 2016 beginning accumulated deficit of $14.8 million.The adoption of the standard had no impact on cash provided by or used in operating, investing, or financing activities on our consolidated cash flowstatements.In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Costand Net Periodic Postretirement Benefit Cost. ASU 2017-07 requires that the service cost component of net periodic pension costs be presented in the sameline item as other compensation costs and all other components of net periodic pension costs be presented in the statement of income as nonoperatingexpenses. ASU 2017-07 is effective for reporting periods beginning after December 15, 2017 and applied retrospectively. We adopted ASU 2017-07 onJanuary 1, 2018 and estimated the impact on the prior comparative period information presented in the consolidated financial statements applying theprinciples permitted by the standard. For the years ended December 31, 2017 and 2016, the retrospective application resulted in a $0.6 million and $0.1million reclassification of pension costs from operating income to other (income) expense, net in the Consolidated Statements of Income for the respectiveperiods. Refer to Note 12 for additional information.63Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)Recently Issued StandardsIn February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which was subsequently amended and clarified. ASU 2016-02 requires a dual approachfor lease accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result inthe lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortizationof the right-of-use asset, and for operating leases the lessee would recognize a straight-line lease expense. ASU 2016-02 is effective for reporting periodsbeginning after December 15, 2018 and requires either a modified retrospective transition approach with application in all comparative periods presented, oran alternative transition method, which permits a company to use its effective date as the date of initial application without restating comparative periodfinancial statements. Early adoption is permitted. We plan to adopt this standard in the first quarter of the fiscal year ending December 31, 2019 using thealternative transition method with the effective date as of January 1, 2019. We are in the process of finalizing the impact that this new standard will have onour financial statements and disclosures. We expect the adoption will result in a significant portion of the Company's discounted present value of futureminimum operating lease obligations to be included on our Consolidated Balance Sheets (Note 15). We do not expect it to have a material impact on ourConsolidated Statements of Income.3.AcquisitionsAcquisition of NaniumOn May 22, 2017, we completed the purchase of 100% of the shares of Nanium, a provider of wafer-level fan-out semiconductor packaging solutions. Weallocated the purchase price to the assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. We did not recordgoodwill as a result of the acquisition. 4.Share-Based Compensation PlansOur share-based compensation is measured at fair value and expensed over the service period (generally the vesting period). The amount of compensationexpense to be recognized is adjusted for an estimated forfeiture rate which is based on historical data. For the years ended December 31, 2018, 2017 and2016, we recognized share-based compensation attributable to stock options and restricted shares of $5.0 million, $5.1 million and $3.3 million, respectively,primarily in selling, general and administrative expenses. The corresponding deferred income tax benefits for stock options or restricted shares is $1.0 millionand $2.4 million for 2018 and 2017, respectively. There were no deferred income tax benefits for 2016.Equity Incentive PlanSecond Amended and Restated 2007 Equity Incentive Plan. The Second Amended and Restated 2007 Equity Incentive Plan, (the “2007 Plan”) provides forthe 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 whoprovide services to Amkor and its subsidiaries. The 2007 Plan is effective through 2027 and can be terminated at the discretion of the Board of Directors.There were originally 17.0 million shares of our common stock reserved for issuance under the 2007 Plan and at December 31, 2018 there were 7.8 millionshares available for grant.Stock optionsStock 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 grantedare exercisable pursuant to a one to four year vesting schedule and the term of the options granted is no longer than ten years. Upon option exercise, we mayissue new shares of common or treasury stock.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 onhistorical performance of our stock. We also use historical data to estimate the timing and amount of option exercises and forfeitures within the valuationmodel. The expected term of the options is based on64Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)evaluations of historical and expected future employee exercise behavior and represents the period of time that options granted are expected to beoutstanding. 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 ofgrant.The following table summarizes our stock option activity for the year ended December 31, 2018: Number ofShares(In thousands) Weighted-AverageExercise Priceper Share Weighted-AverageRemainingContractual Term(Years) AggregateIntrinsicValue(In thousands)Outstanding at December 31, 20174,752 $8.86 Granted474 9.40 Exercised(148) 7.10 Forfeited or expired(335) 11.40 Outstanding at December 31, 20184,743 $8.79 7.07 $1,443Fully vested at December 31, 2018 and expected to vestthereafter4,673 $8.77 7.05 $1,443Exercisable at December 31, 20182,634 $8.06 6.05 $1,423The following assumptions were used to calculate the weighted-average fair values of the options granted: For the Year Ended December 31, 2018 2017 2016Expected life (in years)6.0 5.7 6.5Risk-free interest rate2.7% 1.9% 1.5%Volatility42% 43% 48%Dividend yield— — —Weighted-average grant date fair value per option granted$4.17 $4.24 $2.89Total unrecognized compensation expense from stock options was $7.5 million as of December 31, 2018, which is expected to be recognized over aweighted-average period of approximately 2.2 years beginning January 1, 2019.Restricted SharesWe grant restricted shares to directors and employees under the 2007 Plan. Restricted shares granted to directors vest on the earlier of the one yearanniversary of the grant date or the date of the next annual meeting of stockholders. All other restricted shares vest ratably over four years, with 6.25% of theshares vesting in equal quarterly installments such that 100% of the shares will become vested on the fourth anniversary of the award, subject to therecipient’s continued employment with us on the applicable vesting dates. In addition, provided that the restricted shares have not been forfeited earlier, forcertain grants, the restricted shares will vest upon the recipient’s death or disability, or upon a change in control of Amkor. The value of the restricted sharesis 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. Upon vestingof restricted stock awards, we may issue new shares of common or treasury stock.65Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)The following table summarizes our restricted share activity for the year ended December 31, 2018: Number ofShares(In thousands) Weighted- averageGrant DateFair Value(Per Share)Non-vested at December 31, 2017188 $10.15Awards granted35 8.56Awards vested(76) 10.43Awards forfeited— —Non-vested at December 31, 2018147 9.63Total unrecognized compensation cost from restricted shares was $1.1 million as of December 31, 2018, which is expected to be recognized over a weighted-average period of approximately 1.8 years beginning January 1, 2019.5.Other Income and ExpenseOther income and expense consists of the following: For the Year Ended December 31, 2018 2017 2016 (In thousands)Interest income$(4,133) $(3,215) $(1,326)Foreign currency (gain) loss, net1,451 11,823 (3,592)Loss on debt retirement1,512 4,835 —Other (income) expense, net(5,447) (953) (827)Total other (income) expense, net$(6,617) $12,490 $(5,745)6.Income TaxesOn December 22, 2017, the Tax Act was signed into law. The Tax Act reduced the corporate tax rate from 35% to 21%, included a one-time transition tax onunremitted foreign earnings and profits applicable for our fiscal year ended December 31, 2017 and limited tax deductions for periods beginning January 1,2018. In 2017, we recognized a $41.6 million net benefit consisting of the one-time transition tax net of tax credits generated, remeasurement of deferredtaxes, and the release of valuation allowance against U.S. deferred tax assets for the provisional estimate of the impact of the Tax Act. During the quarterended December 31, 2018, we adjusted our provisional estimate of the impact of the Tax Act, primarily in connection with clarifications provided inproposed foreign tax credit regulations issued during 2018, resulting in an income tax expense in the quarter of $22.3 million. Our accounting for the impactof the Tax Act is now complete in accordance with SEC staff issued SAB No. 118.Geographic sources of income (loss) before taxes and equity in earnings of unconsolidated affiliate are as follows:For the Year Ended December 31, 2018 2017 2016 (In thousands)United States$5,535 $26,040 $(10,880)Foreign180,280 281,456 240,575Income before taxes$185,815 $307,496 $229,69566Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)The provision for income taxes includes current federal, state and foreign taxes payable and those deferred because of temporary differences between thefinancial statement and the tax bases of assets and liabilities.The components of the provision (benefit) for income taxes are as follows: For the Year Ended December 31, 2018 2017 2016 (In thousands)Current: Federal$22,003 $— $—State39 11 22Foreign47,318 81,969 49,577 69,360 81,980 49,599Deferred: Federal5,468 (34,787) —State2,993 (4,072) —Foreign(21,571) (3,330) 1,443 (13,110) (42,189) 1,443Income tax expense$56,250 $39,791 $51,042The reconciliation between the U.S. federal statutory income tax rate of 21% for 2018 and 35% for 2017 and 2016 and our income tax expense is as follows: For the Year Ended December 31, 2018 2017 2016 (In thousands)U.S. federal statutory income tax rate$39,021 $107,623 $80,393State taxes, net of federal benefit1,677 2,624 850Foreign income taxed at different rates6,741 (50,243) (19,279)Foreign exchange (loss) gain(3,797) 29,756 (1,127)Change in valuation allowance(12,662) (6,763) (7,903)Adjustments related to prior years267 3,329 (2,648)U.S. tax reform (the Tax Act)22,284 (41,554) —Income tax credits generated(18,106) (7,296) (40,301)Repatriation of foreign earnings and profits387 719 25,604Expiration of net operating losses and credits19,462 166 15,092Other976 1,430 361Income tax expense$56,250 $39,791 $51,042The change in valuation allowance for 2018, 2017 and 2016, excluding the impact of the Tax Act, is primarily the result of changes in net operating loss andtax credit carryforwards for which no tax expense or benefit has been recognized. Prior to 2018, the benefit of foreign income taxed at different rates increasedas foreign income before tax has increased. The decrease in the U.S. federal statutory income tax rate to 21% in 2018 has reduced the impact of foreignincome taxed at different rates than the U.S. rate.67Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)The following is a summary of the components of our deferred tax assets and liabilities: December 31, 2018 2017 (In thousands)Deferred tax assets: Net operating loss carryforwards$13,207 $53,130Income tax credits107,532 23,998Property, plant and equipment38,050 35,479Deferred interest expense5,415 —Accrued liabilities68,402 68,091Receivable31,729 32,719Unrealized foreign exchange loss1,410 1,924Other14,545 12,682Total deferred tax assets280,290 228,023Valuation allowance(118,560) (83,251)Total deferred tax assets net of valuation allowance161,730 144,772Deferred tax liabilities: Property, plant and equipment14,605 15,754Deferred gain11,651 939Unrealized foreign exchange gain1,695 8,383Unbilled receivables9,515 8,217Other5,805 4,566Total deferred tax liabilities43,271 37,859Net deferred tax assets$118,459 $106,913Recognized as: Other assets118,697 111,353Other non-current liabilities(238) (4,440)Total$118,459 $106,913Valuation allowance against deferred tax assets consist of the following: December 31, 2018 2017 (In thousands)Valuation allowance: U.S.$77,580 $43,719Foreign40,980 39,532Total valuation allowance$118,560 $83,251The use of our federal net operating loss carryforward to offset the one-time transition tax required by the Tax Act resulted in a reduction in deferred tax assetsfor net operating loss carryforwards and created deferred tax assets for foreign income tax credit carryforwards. The increase in our valuation allowanceincludes the estimate of the portion of our foreign tax credit carryforwards generated in connection with the one-time transition tax included in the Tax Actprojected to expire unused.68Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)As a result of certain capital investments, export commitments and employment levels, income from operations in Korea, Malaysia, the Philippines,Singapore and Taiwan was subject to reduced income tax rates and, in some cases, was exempt from income taxes. We recognized $1.9 million, $6.2 millionand $5.6 million in tax benefits as a result of the tax holidays in 2018, 2017 and 2016, respectively. The benefit of the tax holidays on diluted earnings pershare was approximately $0.01, $0.03 and $0.02 for 2018, 2017 and 2016, respectively.Our net operating loss carryforwards (“NOLs”) are as follows: December 31, 2018 2017 Expiration (In thousands) U.S. Federal NOLs$25,272 $220,445 2021-2024U.S. State NOLs108,011 121,095 2019-2036Foreign NOLs10,686 2,967 2019-2028We monitor on an ongoing basis our ability to utilize our deferred tax assets and whether there is a need for a related valuation allowance. In evaluating ourability to recover our deferred tax assets in the jurisdictions from which they arise, we consider all available positive and negative evidence, includingscheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations. For most of our foreignnet operating loss carryforwards, we consider it more likely than not that we will not have sufficient taxable income to allow us to realize these deferred taxassets.At December 31, 2017, a portion of our U.S. federal net operating loss carryforward was reserved with a valuation allowance due to an estimate of the netoperating loss carryforward not expected to be realized. At December 31, 2018, a portion of our remaining U.S. federal net operating loss carryforward wasreserved with a valuation allowance due to ownership change limitations from a prior year acquisition as well as certain state net operating loss carryforwardsexpected to expire unused.Our tax credit carryforwards are as follows: December 31, 2018 2017 Expiration (In thousands) U.S. Foreign Tax Credits$84,056 $12,637 2026-2027U.S. Other Tax Credits1,117 7,104 2026-2038Foreign Tax Credits22,359 4,257 2019-2028At December 31, 2018, a portion of our U.S. foreign tax credit carryforward was reserved with a valuation allowance for the amount expected to expireunused.As a result of the deemed repatriation provision of the Tax Act, U.S. income taxes have been provided on approximately $1.1 billion of the undistributedearnings of our foreign subsidiaries at December 31, 2017. The income tax expense from the deemed repatriation was offset by net operating losscarryforwards and income tax credits resulting in a transition tax payable of $21.8 million. Under an election of the Tax Act, the remaining transition tax ispayable over eight years beginning with tax year 2017, with 8% due in each of the first five years, 15% in year six, 20% in year seven, and 25% in year eight.We have not provided foreign withholding taxes or state income taxes on the undistributed earnings of our foreign subsidiaries, over which we havesufficient 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 foreign withholding tax if they are remitted as dividends. We estimate that repatriation of these foreign earningswould generate withholding taxes and state income taxes of approximately $91.8 million.69Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)We operate in and file income tax returns in various U.S. and foreign jurisdictions which are subject to examination by tax authorities. We have tax returnsthat are open to examination in various jurisdictions for tax years 2012-2018. The open years contain matters that could be subject to differinginterpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions and tax credits. There can be no assurancethat the outcome of examinations will be favorable. Our unrecognized tax benefits are subject to change as examinations of specific tax years are completedin the respective jurisdictions. Current examinations include our 2012 and 2013 Philippine income tax returns, and 2014-2016 Singapore tax returns.A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows: For the Year Ended December 31, 2018 2017 2016 (In thousands)Balance at January 1$27,211 $23,149 $23,332Additions based on tax positions related to the current year401 1,419 1,822Additions for tax positions of prior years636 2,661 689Reductions for tax positions of prior years(2,958) (1) (2,589)Reductions from lapse of statutes of limitations(22) (17) (105)Balance at December 31$25,268 $27,211 $23,149The net decrease in our unrecognized tax benefits was $1.9 million from December 31, 2017 to December 31, 2018. The decrease was primarily related to theclosure of an audit. At December 31, 2018, all of our gross unrecognized tax benefits would reduce our effective tax rate, if recognized. It is reasonablypossible that unrecognized tax benefits related to entity classification and withholding taxes will decrease by up to $2.9 million due to the lapse of statutesof limitations in foreign jurisdictions.The liability related to our unrecognized tax benefits is $25.3 million as of December 31, 2018 and is reported as a component of other non-current liabilities.The unrecognized tax benefits presented in the table above also include positions that have reduced deferred tax assets. The balance of accrued and unpaidinterest and penalties is $5.3 million as of December 31, 2018 and is included as a component of other non-current liabilities in connection with ourunrecognized tax benefits.7.Earnings Per ShareBasic earnings per share (“EPS”) is computed by dividing net income attributable to Amkor common stockholders by the weighted-average number ofcommon shares outstanding during the period. The weighted-average number of common shares outstanding includes restricted shares held by retirementeligible recipients and is reduced for treasury stock.Diluted EPS is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common sharesoutstanding during the period. Dilutive potential common shares include outstanding stock options and unvested restricted shares.70Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)The following table summarizes the computations of basic and diluted EPS: For the Year Ended December 31, 2018 2017 2016 (In thousands, except per share data)Net income available to Amkor common stockholders$127,092 $263,550 $175,530 Weighted-average shares outstanding — basic239,329 238,937 237,416Effect of dilutive securities: Stock options and restricted share awards412 714 618Weighted-average shares outstanding — diluted239,741 239,651 238,034Net income attributable to Amkor per common share: Basic$0.53 $1.10 $0.74Diluted0.53 1.10 0.74The following table summarizes the potential shares of common stock that were excluded from diluted EPS, because the effect of including these potentialshares was anti-dilutive: For the Year Ended December 31, 2018 2017 2016 (In thousands)Stock options and restricted share awards3,662 3,445 1,1358.Factoring of Accounts ReceivableFor certain accounts receivable, we use non-recourse factoring arrangements with third-party financial institutions to manage our working capital and cashflows. Under this program, we sell receivables to a financial institution for cash at a discount to the face amount. As part of the factoring arrangements, weperform certain collection and administrative functions for the receivables sold. For the year ended December 31, 2018 and 2017, we sold accountsreceivable totaling $873.9 million and $611.2 million, net of discounts and fees of $7.0 million and $4.6 million, respectively.71Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)9.Property, Plant and EquipmentProperty, plant and equipment consist of the following: December 31, 2018 2017 (In thousands)Land$222,884 $224,894Land use rights26,845 26,845Buildings and improvements1,523,065 1,384,846Machinery and equipment5,196,930 4,926,432Capital lease machinery and equipment25,874 11,859Software and computer equipment213,440 200,500Furniture, fixtures and other equipment17,204 15,722Construction in progress44,381 104,910Total property, plant and equipment7,270,623 6,896,008Less accumulated depreciation and amortization(4,620,175) (4,200,943)Total property, plant and equipment, net$2,650,448 $2,695,065The following table summarizes our depreciation expense: For the Year Ended December 31, 2018 2017 2016 (In thousands)Depreciation expense$570,304 $580,172 $552,989As part of our plan to consolidate factory operations in Korea, we sold the land and buildings comprising our K1 factory in May 2017 for $142.4 million. Wereceived 10% of the sale price at signing in November 2016 and the balance at closing, at which time we recognized a pre-tax gain of $108.1 million. 10.Accrued ExpensesAccrued expenses consist of the following: December 31, 2018 2017 (In thousands)Payroll and benefits$124,943 $134,785Income taxes payable38,567 56,664Deferred revenue and customer advances16,736 14,740Accrued severance plan obligations (Note 12)13,179 15,190Accrued interest10,302 11,873Accrued settlement costs— 37,783Other accrued expenses54,482 59,833Total accrued expenses$258,209 $330,86872Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)11.DebtShort-term borrowings and long-term debt consist of the following: December 31, 2018 2017 (In thousands)Debt of Amkor Technology, Inc.: Senior notes: 6.625% Senior notes, due June 2021 (1)$— $200,0006.375% Senior notes, due October 2022524,971 524,971Debt of subsidiaries: Amkor Technology Korea, Inc.: $75 million revolving credit facility, foreign currency funding-linked base rate plus 1.60%, due September2018 (2)— 75,000$30 million revolving credit facility, LIBOR plus the applicable bank rate, due October 2019 (3)— —Term loan, LIBOR plus 2.70%, due December 2019— 55,000Term loan, foreign currency funding-linked base rate plus 1.32%, due May 2020 (2)— 150,000Term loan, fixed rate at 3.70%, due May 2020120,000 120,000Term loan, fund floating rate plus 1.60%, due June 2020 (4)125,000 86,000Term loan, LIBOR plus 2.56%, due December 2023 (2)200,000 —Term loan, applicable bank rate plus 1.98%, due December 2028 (4)24,000 —J-Devices Corporation: Short-term term loans, variable rate (5)8,232 30,455Term loans, fixed rate at 0.53%, due April 2018— 6,744Term loan, fixed rate at 0.86%, due June 202231,908 39,933Term loan, fixed rate at 0.60%, due July 20226,838 8,430Term loan, fixed rate at 1.30%, due July 2023 (1)225,180 —Other: $250 million senior secured revolving credit facility, LIBOR plus 1.25%-1.75%, due July 2023 (Singapore)(6)— —Revolving credit facility, TAIFX plus the applicable bank rate, due November 2020 (Taiwan) (7)20,000 20,000Term loan, LIBOR plus 1.80%, due December 2019 (China)48,000 49,000 1,334,129 1,365,533Less: Unamortized premium and deferred debt costs, net(1,818) (1,104)Less: Short-term borrowings and current portion of long-term debt(114,579) (123,848)Long-term debt$1,217,732 $1,240,58173Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)(1)In August 2018, we redeemed all $200 million of our 6.625% Senior Notes due 2021 ("Notes"). In accordance with the terms of the indenturegoverning the Notes, the redemption price was 100% of the principal amount of the Notes, plus accrued and unpaid interest. We recorded a $0.8million charge for the write-off of the associated unamortized debt issuance costs. The redemption of the Notes was funded with proceeds from our¥26.0 billion ($233.2 million) term loan agreement entered into in July 2018 by J-Devices Corporation and guaranteed by Amkor Technology, Inc.Principal is payable in quarterly installments.(2)In June 2018, we extended our $75.0 million credit facility from June 2018 to September 2018 and in September 2018, we replaced it with a $75.0million term loan due September 2021 at LIBOR plus 2.34%.In December 2018, we entered into a $200.0 million term loan agreement to repay this $75.0 million term loan. The remaining proceeds along withcash on hand were used to repay the $141 million outstanding term loan due May 2020. Principal of the new term loan is payable at maturity dateof December 2023.(3)In October 2018, we entered into a revolving credit facility agreement with availability of $30.0 million. Principal will be payable at the maturitydate of October 2019. As of December 31, 2018, $30.0 million was available to be drawn.(4)In May 2015, we entered into a term loan agreement pursuant to which we may borrow up to $150.0 million for capital expenditures. Principal ispayable at maturity in June 2020. Interest is payable quarterly in arrears. In the second quarter of 2018, we borrowed the remaining $64.0 millionavailable under the term loan due June 2020 and repaid $55 million of the term loan due December 2019 and $9 million of the term loan due May2020.In December 2018, we entered into a term loan agreement pursuant to which we may borrow up to $90.0 million for capital expenditures. Weborrowed $24.0 million of this new term loan and used the proceeds along with $1.0 million cash on hand to repay part of the term loan due June2020. Principal of the new term loan is payable in semiannual installments beginning June 2022 and ending at maturity date of December 2028. Asof December 31, 2018, $66.0 million was available to be drawn. In February 2019, we borrowed an additional $30.0 million of this new term loanand used the proceeds to repay $29.0 million of the term loan due June 2020.(5)We entered into various short-term loans which mature semiannually. Principal is payable in monthly installments. As of December 31, 2018, $4.6million was available to be drawn.(6)In July 2018, the senior secured revolving credit facility of Amkor Technology, Inc. was terminated and replaced by a new facility entered into byour subsidiary, Amkor Technology Singapore Holding Pte, Ltd., and guaranteed by Amkor Technology, Inc. We recorded a $0.4 million charge forthe write-off of the associated unamortized debt issuance costs relating to the terminated credit facility. The availability for the new revolvingcredit facility is based on the amount of eligible accounts receivable. As of December 31, 2018, we had availability of $250.0 million under thenew senior secured revolving credit facility with no outstanding standby letters of credit.(7)In November 2015, we entered into a $39.0 million revolving credit facility. Principal is payable at maturity. As of December 31, 2018, $19.0million was available to be drawn.Certain of our foreign debt is collateralized by the land, buildings, equipment and accounts receivable in the respective locations. The carrying value of thecollateral exceeds the carrying amount of the debt.Interest RatesInterest is payable semiannually on our senior notes and quarterly or monthly on our other fixed- and variable-rate debt. Refer to the table above for theinterest rates on our fixed-rate debt and to the table below for the interest rates on our variable-rate debt.74Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued) December 31, 2018 2017Amkor Technology Korea, Inc.: $75 million revolving credit facility, foreign currency funding-linked base rate plus 1.60%, due September2018— 4.01%$30 million revolving credit facility, LIBOR plus the applicable bank rate, due October 2019— —Term loan, LIBOR plus 2.70%, due December 2019— 4.02%Term loan, foreign currency funding-linked base rate plus 1.32%, due May 2020— 4.06%Term Loan, fund floating rate plus 1.60%, due June 20204.49% 3.29%Term loan, LIBOR plus 2.56%, due December 20235.38% —Term loan, applicable bank rate plus 1.98%, due December 20284.64% —J-Devices Corporation: Short-term term loans, variable rate0.24% 0.22%Amkor Technology Singapore Holdings Pte, Ltd.: $250 million senior secured revolving credit facility, LIBOR plus 1.25%-1.75%, due July 2023— —Amkor Technology Taiwan Ltd.: Revolving credit facility, TAIFX plus the applicable bank rate, due November 20204.26% 3.18%Amkor Assembly & Test (Shanghai) Co., Ltd.: Term loan, LIBOR plus 1.80%, due December 20194.22% 3.16%Compliance with Debt CovenantsThe debt of Amkor Technology, Inc. is structurally subordinated in right of payment to all existing and future debt and other liabilities of our subsidiaries.From time to time, Amkor Technology, Inc. also guarantees certain debt of our subsidiaries. The agreements governing our indebtedness contain affirmative,negative and financial covenants which restrict our ability to pay dividends and could restrict our operations. We have never paid a dividend to ourstockholders and we do not have any present plans for doing so. We were in compliance with all debt covenants at December 31, 2018 and 2017.Maturities Total Debt (In thousands)Payments due for the year ending December 31, 2019$114,5792020323,346202158,3462022581,7232023238,985Thereafter17,150Total debt$1,334,12975Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)12.Pension and Severance PlansKorean Severance PlanOur subsidiary in Korea maintains an unfunded severance plan that covers certain employees that were employed prior to August 1, 2015. To the extenteligible employees are terminated, our subsidiary in Korea would be required to make lump-sum severance payments on behalf of these eligible employeesfor service provided prior to August 1, 2015. Factors used to determine severance benefits include employees' length of service, seniority and rate of pay. Theemployees' length of service and seniority are fixed as of July 31, 2015. The employees' rate of pay is adjusted to the rate of pay 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 tothe National Pension Plan of the Republic of Korea are deducted from accrued severance benefit liabilities. On August 1, 2015, our subsidiary in Korea begansponsoring a defined benefit pension plan and a defined contribution plan. Existing employees at that time were given the option of choosing either adefined benefit pension plan or a defined contribution plan for their future benefits and new employees since that date are enrolled in a defined contributionplan.The changes to the balance of our accrued severance plan obligations are as follows: For the Year Ended December 31, 2018 2017 2016 (In thousands)Balance at January 1$153,920 $136,396 $143,151Provision of severance benefits1,939 11,714 6,746Severance payments(7,611) (11,787) (9,429)Foreign currency (gain) loss(5,950) 17,597 (4,072)Balance at December 31142,298 153,920 136,396Payments remaining with the National Pension Fund(172) (185) (182)Total accrued severance plan obligations at December 31142,126 153,735 136,214Less current portion of accrued severance plan obligations (Note 10)13,179 15,190 14,053Non-current portion of accrued severance plan obligations$128,947 $138,545 $122,161Foreign Defined Benefit Pension PlansOur subsidiaries in Japan, Korea, Malaysia, the Philippines and Taiwan sponsor defined benefit plans (the “Plans”). Charges to expense are based uponactuarial analyses. The following table summarizes the changes to the Plans’ benefit obligations, fair value of the Plans’ assets and the funded status of thePlans at December 31, 2018 and 2017:76Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued) For the Year Ended December 31, 2018 2017 (In thousands)Change in projected benefit obligation: Projected benefit obligation at January 1$158,466 $131,416Service cost32,913 33,823Interest cost4,867 4,067Benefits paid(6,137) (15,183)Actuarial (gain) loss(5,991) (1,387)Effects of curtailment— 573Settlement(5,055) (2,496)Foreign exchange (gain) loss(3,351) 7,653Projected benefit obligation at December 31175,712 158,466Change in plan assets: Fair value of plan assets at January 1115,725 91,471Actual gain (loss) on plan assets(4,210) 8,559Employer contributions26,899 28,073Settlement(5,055) (2,496)Benefits paid(6,137) (15,183)Foreign exchange gain (loss)(3,852) 5,301Fair value of plan assets at December 31123,370 115,725Funded status of the Plans at December 31$(52,342) $(42,741) December 31, 2018 2017 (In thousands)Amounts recognized in the Consolidated Balance Sheets consist of: Prepaid benefit cost (included in non-current assets)$2,740 $656Accrued benefit liability (included in pension and severance obligations)(55,082) (43,397)Net amount recognized at year end$(52,342) $(42,741)The accumulated benefit obligation as of December 31, 2018 and 2017 was $132.9 million and $113.6 million, respectively.77Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)The following table summarizes, by component, the change in accumulated other comprehensive income (loss), net of tax related to our Plans: Prior ServiceCost Actuarial NetGain (Loss) Total (In thousands)Balance at December 31, 2016$582 $556 $1,138Amortization included in net periodic pension cost21 69 90Net gain (loss) arising during period— 5,075 5,075Adjustments to unrealized components of defined benefit pension plan included in othercomprehensive income (loss)21 5,144 5,165Balance at December 31, 2017603 5,700 6,303Amortization and settlement gain included in net periodic pension cost(1) (1,735) (1,736)Net gain (loss) arising during period— (1,908) (1,908)Adjustments to unrealized components of defined benefit pension plan included in othercomprehensive income (loss)(1) (3,643) (3,644)Balance at December 31, 2018$602 $2,057 $2,659Estimated amortization of cost to be included in 2019 net periodic pension cost$— $(374) $(374)Information for pension plans with benefit obligations in excess of plan assets is as follows: December 31, 2018 2017 (In thousands)Plans with underfunded or non-funded projected benefit obligation: Aggregate projected benefit obligation$135,967 $119,708Aggregate fair value of plan assets80,885 76,313Plans with underfunded or non-funded accumulated benefit obligation: Aggregate accumulated benefit obligation63,274 53,720Aggregate fair value of plan assets20,094 18,970The following table summarizes total pension expense: For the Year Ended December 31, 2018 2017 2016 (In thousands)Components of net periodic pension cost and total pension expense: Service cost$32,913 $33,823 $33,854Interest cost4,867 4,067 3,641Expected return on plan assets(5,640) (4,537) (3,788)Amortization of prior service cost6 30 35Recognized actuarial (gain) loss(147) 84 94Net periodic pension cost31,999 33,467 33,836Curtailment loss— 574 —Settlement (gain) loss(1,639) 383 128Total pension expense$30,360 $34,424 $33,96478Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)The components of net periodic pension cost other than the service cost component are included in other (income) expense, net in our ConsolidatedStatements of Income.The following table summarizes the weighted-average assumptions used in computing the net periodic pension cost and projected benefit obligations: For the Year Ended December 31, 2018 2017 2016Discount rate for determining net periodic pension cost3.2% 3.1% 3.3%Discount rate for determining benefit obligations at December 313.1% 3.2% 3.1%Rate of compensation increase for determining net periodicpension cost3.8% 3.8% 3.9%Rate of compensation increase for determining benefit obligationsat December 313.6% 3.8% 3.8%Expected rate of return on plan assets for determining net periodicpension cost4.9% 4.9% 5.0%The measurement date for determining the Plans’ assets and benefit obligations is December 31, each year. Discount rates are generally derived from yieldcurves constructed from high-quality corporate or foreign government bonds, for which the timing and amount of cash outflows approximate the estimatedpayouts.The expected rate of return assumption is based on weighted-average expected returns for each asset class. Expected returns reflect a combination ofhistorical performance analysis and the forward-looking views of the financial markets and include input from our actuaries. We have no control over thedirection of our investments in our defined benefit plans in Taiwan as the local Labor Standards Law Fund mandates such contributions into a cash accountbalance at the Bank of Taiwan. Our defined benefit pension plan in Malaysia is a non-funded plan, and as such, no asset exists related to this plan. Ourinvestment strategies for our defined benefit plans in Japan, Korea and the Philippines, are based on long-term, sustained asset growth through low to mediumrisk investments. The current rate of return assumption targets are based on asset allocation strategies as follows: Allocation Debt Equity OtherJapan defined benefit plan60% 37% 3%Korea defined benefit plan40% 50% 10%Philippine defined benefit plan33% 63% 4%79Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)The fair value of our pension plan assets, by asset category utilizing the fair value hierarchy as discussed in Note 14, is as follows: December 31, 2018 2017 (In thousands)Cash and cash equivalents (Level 1)$6,640 $1,098Equity securities U.S. securities (Level 1)15,069 16,854Foreign securities (Level 1)10,162 16,826Foreign mutual funds (Level 1)25,236 22,193 50,467 55,873Debt securities U.S. government bonds (Level 1)— 2,188U.S. government bonds (Level 2)1,039 830U.S. corporate bonds (Level 1)— 2,144U.S. corporate bonds (Level 2)29 5Foreign government bonds (Level 1)4,427 5,211Foreign government bonds (Level 2)9,545 6,270Foreign corporate bonds (Level 1)5,713 520Foreign corporate bonds (Level 2)1,951 3,058Foreign treasury notes (Level 1)2,587 4,686Foreign mutual funds (Level 1)11,188 8,787 36,479 33,699Foreign guaranteed investment contracts (Level 2)18,120 14,138Taiwan retirement fund (Level 1)10,451 10,094Other (Level 1)680 584Other (Level 2)533 239Total fair value of pension plan assets$123,370 $115,725The Taiwan retirement fund category of our plan assets represents accounts that our subsidiaries in Taiwan have in a government labor retirement fund in thecustody of the Bank of Taiwan. The accounts earn a minimum guaranteed rate of return and are invested in a mix of cash, domestic and foreign equitysecurities and domestic and foreign debt securities.We expect to make contributions of approximately $23 million during 2019. We closely monitor the funded status of the Plans with respect to legislativerequirements. We intend to make at least the minimum contribution required by law each year.80Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)The estimated future benefit payments related to our foreign defined benefit plans are as follows: Payments (In thousands)2019$7,922202010,369202112,229202214,979202316,3412024 to 2028129,703Defined Contribution PlansWe sponsor defined contribution plans in Korea, Malaysia, Taiwan and the U.S. Total defined contribution expense was $12.2 million, $10.4 million and$8.8 million for 2018, 2017 and 2016, respectively.13.Accumulated Other Comprehensive Income (Loss)The following table reflects the changes in accumulated other comprehensive income (loss), net of tax: Defined BenefitPension Foreign CurrencyTranslation Total (In thousands)Balance at December 31, 2016$1,138 $5,124 $6,262Other comprehensive income (loss) before reclassifications5,075 11,092 16,167Amounts reclassified from accumulated other comprehensive income (loss)90 — 90Other comprehensive income (loss)5,165 11,092 16,257Balance at December 31, 2017$6,303 $16,216 $22,519Other comprehensive income (loss) before reclassifications(1,908) 4,937 3,029Amounts reclassified from accumulated other comprehensive income (loss)(1,736) — (1,736)Other comprehensive income (loss)(3,644) 4,937 1,293Balance at December 31, 2018$2,659 $21,153 $23,812Amounts reclassified out of accumulated other comprehensive income (loss) are included as a component of net periodic pension cost (Note 12) or other(income) expense, net.14.Fair Value MeasurementsThe 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 asfollows: 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 areobservable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-basedvaluation techniques for which all significant assumptions are observable in the market or other inputs that are observable or can be corroborated byobservable market data for substantially the full term of the assets or liabilities; and Level 3, defined as unobservable inputs that are not corroborated bymarket data.81Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)The fair values of cash, accounts receivable, trade accounts payable, capital expenditures payable, and certain other current assets and accrued expensesapproximate carrying values because of their short-term nature. The carrying value of certain other non-current assets and liabilities approximates fair value.Our assets and liabilities recorded at fair value on a recurring basis include cash equivalent money market funds and restricted cash money market funds. Wealso review goodwill for impairment annually during the fourth quarter of each year. Cash equivalent money market funds and restricted cash money marketfunds 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 amaturity date of less than three months when purchased. No restrictions have been imposed on us regarding withdrawal of balances with respect to our cashequivalents as a result of liquidity or other credit market issues affecting the money market funds we invest in or the counterparty financial institutionsholding our deposits. Money market funds are valued using quoted market prices in active markets for identical assets.Recurring fair value measurements consist of the following: December 31, 2018 2017 (In thousands)Cash equivalent money market funds (Level 1)$74,407 $121,627Restricted cash money market funds (Level 1)2,589 2,000We also measure certain assets and liabilities, including property, plant and equipment and goodwill, at fair value on a nonrecurring basis.We measure the fair value of our debt for disclosure purposes. The following table presents the fair value of financial instruments that are not recorded at fairvalue on a recurring basis: December 31, 2018 December 31, 2017 FairValue CarryingValue FairValue CarryingValue (In thousands)Senior notes (Level 1)$526,131 $524,978 $745,943 $723,867Revolving credit facilities and term loans (Level 2)803,867 807,333 639,689 640,562Total financial instruments$1,329,998 $1,332,311 $1,385,632 $1,364,429The estimated fair value of our senior notes is based primarily on quoted market prices reported on or near the respective balance sheet dates. The estimatedfair value of our revolving credit facilities and term loans is calculated using a discounted cash flow analysis, which utilizes market based assumptionsincluding forward interest rates adjusted for credit risk.15.Commitments and ContingenciesWe generally warrant that our services will be performed in a professional and workmanlike manner and in compliance with our customers’ specifications. Weaccrue costs for known warranty issues. Historically, our warranty costs have been immaterial.Legal ProceedingsWe are involved in claims and legal proceedings and may become involved in other legal matters arising in the ordinary course of our business. We evaluatethese 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. Although the outcome of these matters is uncertain, we 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 proceedingson our business, liquidity, results of operations, financial condition or cash flows could change in the future.82Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)Settlement of Patent License LitigationUnder the terms of a January 2015 patent license litigation settlement, Amkor agreed to pay a total of $155.0 million in 16 equal quarterly recurringpayments commencing in the first quarter of 2015 and continuing through the fourth quarter of 2018.At December 31, 2018, we have no remaining liability under this settlement agreement.LeasesFuture minimum lease payments under noncancelable leases are as follows: For the Year Ended December 31 Operating Leases Capital Leases (In thousands)2019$32,461 $6,430202024,630 4,555202117,676 4,748202210,942 93620239,008 936Thereafter26,070 3,807Total future minimum lease payments$120,787 $21,412Rent expense was $43.6 million, $48.1 million and $43.8 million for 2018, 2017 and 2016, respectively.In order to provide packaging and test services, we purchase materials under various long-term supply contracts. Future minimum payments to be made underthese contracts for the period 2019 through 2025 are $10.4 million.16.Business Segments, Customer Concentrations and Geographic InformationWe operate as a single operating segment as managed by our Chief Executive Officer, who is considered our chief operating decision maker ("CODM"). TheCODM bears the ultimate responsibility for, and is actively engaged in, the allocation of resources and the evaluation of our operating and financial results.We have concluded that we have a single operating segment based on the following:•We are managed under a functionally-based organizational structure with the head of each function reporting directly to the CODM;•We assess performance, including incentive compensation, based on consolidated operating performance and financial results;•Our CODM allocates resources and makes other operating decisions based on specific customer business opportunities and•We have an integrated process for the design, development and manufacturing services we provide to all of our customers. We also have centralizedsales and administrative functions.83Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)Net sales by product group consist of the following: For the Year Ended December 31, 2018 2017 2016 (In thousands)Advanced Products$2,118,571 $1,966,483 $1,703,052Mainstream Products2,197,895 2,240,548 2,224,797Total net sales$4,316,466 $4,207,031 $3,927,849(1)Advanced products include flip chip and wafer-level processing and related test services.(2)Mainstream products include wirebond packaging and related test services.Net sales by end market consist of the following: For the Year Ended December 31, 2018 2017 2016Communications (smartphones, tablets, handheld devices)44% 43% 42%Automotive, industrial and other (driver assist, infotainment, safety, performance)26% 26% 26%Computing (datacenter, infrastructure, PC/laptop, storage)18% 18% 18%Consumer (set-top boxes, televisions, connected home, personal electronics, visualimaging)12% 13% 14%Total net sales100% 100% 100%Net sales by region based on customer headquarters location consist of the following: For the Year Ended December 31, 2018 2017 2016 (In thousands)Japan$1,156,797 $1,210,296 $1,162,729Europe, Middle East and Africa605,932 540,126 490,738Asia Pacific (excluding Japan)535,894 837,014 630,837Total foreign countries2,298,623 2,587,436 2,284,304United States2,017,843 1,619,595 1,643,545Total net sales$4,316,466 $4,207,031 $3,927,849One customer accounted for 10.2%, 14.3%, and 15.7% of net sales in 2018, 2017 and 2016, respectively. A second customer accounted for 12.9% of net salesin 2016.84Table of ContentsAMKOR TECHNOLOGY, INC.Notes to Consolidated Financial Statements — (Continued)Property, plant and equipment, net, based on physical location, consist of the following: December 31, 2018 2017 (In thousands)China$472,858 $528,739Japan219,373 246,223Korea1,213,838 1,131,271Malaysia47,491 47,922Philippines270,562 309,425Portugal63,323 64,578Taiwan352,576 356,174Other foreign countries170 216Total foreign countries2,640,191 2,684,548United States10,257 10,517Total property, plant and equipment, net$2,650,448 $2,695,06517. Quarterly Results (unaudited)The following table sets forth our consolidated unaudited financial data for the last eight quarters ended December 31, 2018. We believe that we haveincluded all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of our selected quarterly data. The calculation ofbasic and diluted per share amounts for each quarter is based on the weighted-average shares outstanding for that period; consequently, the sum of thequarters may not necessarily be equal to the full year basic and diluted net income per share. For the Quarter Ended Dec 31, 2018 (c) Sep 30, 2018 Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 (c) Sep 30, 2017 Jun 30, 2017 (a) Mar 31, 2017 (In thousands, except per share data)Net sales$1,081,271 $1,144,192 $1,065,684 $1,025,319 $1,150,478 $1,148,884 $1,008,385 $899,284Gross profit182,370 200,707 169,717 157,771 224,341 223,888 176,616 136,234Operating income (b)75,381 92,703 53,941 36,119 109,018 105,479 172,659 18,384Income tax (benefit) expense28,812 14,326 10,631 2,481 (13,613) 21,263 33,466 (1,325)Net income (loss)28,894 57,292 33,184 10,195 101,185 60,458 120,030 (13,968)Net income (loss) attributable toAmkor28,295 56,662 32,591 9,544 100,059 59,264 119,013 (14,786)Net income (loss) attributable toAmkor per common share: Basic$0.12 $0.24 $0.14 $0.04 $0.42 $0.25 $0.50 $(0.06)Diluted$0.12 $0.24 $0.14 $0.04 $0.42 $0.25 $0.50 $(0.06)(a)In May 2017, we completed the purchase of Nanium. Nanium's financial results have been included in our Consolidated Financial Statements from thedate of acquisition.(b)In May 2017, we sold the land and buildings comprising our K1 factory for $142.4 million which resulted in a pre-tax gain of $108.1 million.(c)In the fourth quarter of 2017, net income includes an estimated net tax benefit of $41.6 million primarily due to the reversal of a valuation allowance oncertain U.S. deferred tax assets as a result of the enactment of the Tax Act. In the fourth quarter of 2018, we recorded a $22.3 million income tax expenseto complete the accounting for the impact of the Tax Act, reducing our estimated net tax benefit of $41.6 million from 2017. 85Table of ContentsSCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS Balance atBeginning ofPeriod Additions(Credited)Charged toExpense Write-offs (a)Other Balance atEnd of Period (In thousands)Deferred tax asset valuation allowance: Year ended at December 31, 2016$168,762 7,189 (15,091) 4,624 $165,484Year ended at December 31, 2017$165,484 (117,121) (489) 35,377 $83,251Year ended at December 31, 2018$83,251 54,421 (19,112) — $118,560(a)Column represents adjustments to the deferred tax asset valuation allowance established as part of the purchase accounting related to Amkor'sacquisition of Nanium in 2017 and adjustments directly through stockholders’ equity for changes in accumulated other comprehensive income (loss)related to our foreign defined benefit pension plans and the adoption of ASU 2016-09 on July 1, 2016.86Table of ContentsItem 9.Changes In and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A.Controls and ProceduresEvaluation of Disclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports to the Securitiesand Exchange Commission (“SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and thatsuch information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, asappropriate, to allow timely decisions regarding required disclosure, based on the definition of “disclosure controls and procedures” in Rule 13a-15(e) andRule 15d-15(e) under the Securities Exchange Act of 1934, as amended. In designing and evaluating the disclosure controls and procedures, managementrecognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving thedesired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosurecontrols and procedures.We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and our Chief FinancialOfficer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2018, and concluded those disclosurecontrols and procedures were effective as of that date.Management’s Report on Internal Control Over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange ActRules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial 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 asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company and (iii) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies and procedures may deteriorate.Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2018, based on the frameworkestablished in Internal Control — Integrated Framework (2013) 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 ofDecember 31, 2018, based on criteria in Internal Control — Integrated Framework (2013) issued by the COSO. The effectiveness of our internal control over financial reporting as of December 31, 2018, has been audited by PricewaterhouseCoopers LLP, an independentregistered public accounting firm, as stated in their report which appears under Item 8 of this Annual Report on Form 10-K.Changes in Internal Control Over Financial ReportingAs previously reported, we are implementing an enterprise resource planning system in a multi-year program in certain of our factories. There have been nochanges in our internal control over financial reporting that occurred during the87Table of Contentsthree months ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financialreporting.Item 9B.Other InformationNone.PART IIIItem 10.Directors, Executive Officers and Corporate GovernanceThe information required by this Item 10, with the exception of information relating to the Code of Business Conduct as disclosed below, is incorporatedherein by reference from the material included under the captions “Election of Directors,” “Executive Officers,” and “Section 16(a) Beneficial OwnershipReporting Compliance” in our definitive proxy statement (to be filed pursuant to Regulation 14A) for our 2019 Annual Meeting of Stockholders.Additionally, our Code of Business Conduct, Code of Ethics for Directors, Corporate Governance Guidelines, and the charters of the Audit Committee,Nominating and Governance Committee and Compensation Committee of our Board of Directors are available and maintained on our website(http://www.amkor.com). We intend to disclose on our website future amendments or waivers of our Code of Business Conduct required to be disclosedpursuant to applicable rules and regulations.Item 11.Executive CompensationThe 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 “Compensation Committee Report” in our definitive proxy statement (to be filedpursuant to Regulation 14A) for our 2019 Annual Meeting of Stockholders.Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item 12, with the exception of the equity compensation plan information presented below, is incorporated herein byreference to our definitive proxy statement (to be filed pursuant to Regulation 14A) for our 2019 Annual Meeting of Stockholders.EQUITY COMPENSATION PLANThe following table summarizes our equity compensation plan as of December 31, 2018: (a)Number ofSecurities to beIssued UponExercise ofOutstandingOptions(In thousands) (b)WeightedAverageExercise Price ofOutstandingOptions (c)Number of SecuritiesRemaining Availablefor Future IssuanceUnder EquityCompensation Plans(Excluding SecuritiesReflected in Column(a)(In thousands)Equity compensation plan approved by stockholders (1)4,743 $8.79 7,849Equity compensation plans not approved by stockholders— — —Total equity compensation plans4,743 7,849(1)As of December 31, 2018, a total of 7.8 million shares were reserved for issuance under the 2007 Plan. Shares available for issuance under our 2007 Plancan be granted pursuant to stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares.88Table of ContentsItem 13.Certain Relationships and Related Transactions, and Director IndependenceThe information required by this Item 13 is incorporated herein by reference from the material included under the captions “Certain Relationships andRelated Transactions” and “Proposal One — Election of Directors” in our definitive proxy statement (to be filed pursuant to Regulation 14A) for our 2019Annual Meeting of Stockholders.Item 14.Principal Accountant Fees and ServicesThe information required by this Item 14 is incorporated herein by reference from the material included under the proposal “Ratification of Appointment ofIndependent Registered Public Accounting Firm” in our definitive proxy statement (to be filed pursuant to Regulation 14A) for our 2019 Annual Meeting ofStockholders.PART IVItem 15.Exhibits and Financial Statement Schedules(a) Financial Statements, Financial Statement Schedules and ExhibitsThe 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 of this Annual Report.The exhibits required by Item 601 of Regulation S-K which are filed with this report or incorporated by reference herein are set forth below. Managementcontracts or compensatory plans or arrangements are identified by an asterisk. Incorporated by Reference FiledHerewithExhibitNumber Exhibit Description Form Period Ending Exhibit Filing Date 2.1 Sales Contract of Commodity Premises between Shanghai WaigaoqiaoFree Trade Zone Xin Development Co., Ltd. and Amkor Assembly &Test (Shanghai) Co., Ltd. dated May 7, 2004. 10-Q 6/30/04 2.3 8/6/04 3.1 Certificate of Incorporation. S-1 3.1 10/6/97 3.2 Certificate of Correction to Certificate of Incorporation. S-1 3.1 4/8/98 3.3 Restated Bylaws as amended on November 5, 2013. 10-K 12/31/13 3.3 2/28/14 4.1 Specimen Common Stock Certificate. S-1/A 4.1 3/31/98 4.2 Indenture, dated September 21, 2012, by and between AmkorTechnology, Inc. and U.S. Bank National Association, as trustee,regarding the 6.375% Senior Notes due 2022. 8-K 4.1 9/21/12 10.1 Form of Indemnification Agreement for directors and officers. S-1/A 10.1 3/31/98 10.2 2009 Voting Agreement, dated as of March 26, 2009, between AmkorTechnology, Inc., James J. Kim and 915 Investments, LP. 8-K 10.1 4/1/09 10.3 Employment Letter Agreement, dated February 27, 2017, betweenAmkor Technology, Inc. and Stephen D. Kelley.* 8-K 10.1 3/3/17 10.4 Form of Stock Option Award Agreement under the Second Amendedand Restated 2007 Equity Incentive Plan.* 10-Q 3/31/17 10.2 5/5/17 10.5 Form of Restricted Stock Award Agreement under the Second Amendedand Restated 2007 Equity Incentive Plan.* 10-Q 3/31/17 10.3 5/5/17 89Table of Contents Incorporated by Reference FiledHerewithExhibitNumber Exhibit Description Form Period Ending Exhibit Filing Date 10.6 Form of Outside Director Stock Option Award Agreement under theSecond Amended and Restated 2007 Equity Incentive Plan.* 10-Q 3/31/17 10.4 5/5/17 10.7 Second Amended and Restated 2007 Equity Incentive Plan* 8-K 10.1 5/5/17 10.8 Amended and Restated Executive Incentive Bonus Plan* 8-K 10.2 5/5/17 10.9 Syndicated Loan Agreement among J-Devices Corporation, SumitomoMitsui Banking Corporation and other financial institutions, dated asof July 13, 2018 (English translation). 8-K 10.1 7/19/18 10.10 Guaranty by Amkor Technology, Inc. in favor of Sumitomo MitsuiBanking Corporation and other financial institutions, dated as of July13, 2018 (English translation). 8-K 10.2 7/19/18 10.11 Loan and Security Agreement, dated as of July 13, 2018, by and amongAmkor Technology Singapore Holding Pte, Ltd., Bank of America, N.A.and other financial institutions. 8-K 10.3 7/19/18 10.12 Guaranty and Security Agreement, dated as of July 13, 2018, by andamong Amkor Technology, Inc., and Bank of America, N.A. 8-K 10.4 7/19/18 21.1 List of subsidiaries of the Registrant. X23.1 Consent of PricewaterhouseCoopers LLP. X31.1 Certification of Stephen D. Kelley, Chief Executive Officer of AmkorTechnology, Inc., Pursuant to Rule 13a-14(a) under the SecuritiesExchange Act of 1934, as amended. X31.2 Certification of Megan Faust, Chief Financial Officer of AmkorTechnology, Inc., Pursuant to Rule 13a-14(a) under the SecuritiesExchange Act of 1934, as amended. X32.1 Certification of Chief Executive Officer and Chief Financial OfficerPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section906 of the Sarbanes-Oxley Act of 2002. X101.INS XBRL Instance Document X101.SCH XBRL Taxonomy Extension Schema Document X101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X101.LAB XBRL Taxonomy Extension Label Linkbase Document X101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X101.DEF XBRL Taxonomy Extension Definition Linkbase Document X* Indicates management compensatory plan, contract or arrangement.Item 16.Form 10-K SummaryNone.90Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report onForm 10-K to be signed, on its behalf by the undersigned, thereunto duly authorized.AMKOR TECHNOLOGY, INC.By: /s/ Stephen D. Kelley Stephen D. KelleyPresident and Chief Executive Officer Date:February 22, 2019POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stephen D. Kelley and MeganFaust, 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 allcapacities, to sign any and all amendments to this Report on Form 10-K, and all documents in connection therewith, with the Securities and ExchangeCommission, 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 thingrequisite 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 andconforming 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 virtuehereof.Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.Name Title Date /s/ Stephen D. Kelley President and Chief Executive Officer February 22, 2019Stephen D. Kelley /s/ Megan Faust Corporate Vice President and Chief Financial Officer February 22, 2019Megan Faust /s/ James J. Kim Executive Chairman February 22, 2019James J. Kim /s/ John T. Kim Executive Vice Chairman February 22, 2019John T. Kim /s/ Susan Y. Kim Director February 22, 2019Susan Y. Kim /s/ Douglas Alexander Director February 22, 2019Douglas Alexander /s/ Roger A. Carolin Director February 22, 2019Roger A. Carolin 91Table of ContentsName Title Date /s/ Winston J. Churchill Director February 22, 2019Winston J. Churchill /s/ MaryFrances McCourt Director February 22, 2019MaryFrances McCourt /s/ Robert R. Morse Director February 22, 2019Robert R. Morse /s/ David N. Watson Director February 22, 2019David N. Watson 92Exhibit 21.1AMKOR TECHNOLOGY, INC.LIST OF SUBSIDIARIESSubsidiary Jurisdiction of Organization Amkor Advanced Technology Taiwan, Inc. TaiwanAmkor Assembly & Test (Shanghai) Co., Ltd. ChinaAmkor Technology Euroservices, S.A.S. FranceAmkor Technology Holding, B.V. NetherlandsAmkor Technology Holding, B.V., Germany (A Branch of a Netherlands Company) GermanyAmkor Technology Korea, Inc. KoreaAmkor Technology Limited Cayman IslandsAmkor Technology Malaysia Sdn. Bhd. MalaysiaAmkor Technology Philippines, Inc. (A Branch of a Singapore Company) PhilippinesAmkor Technology Singapore Investment Pte. Ltd. SingaporeAmkor Technology Singapore Holding Pte. Ltd. SingaporeAmkor Technology Taiwan Ltd. TaiwanAmkor Worldwide Services LLC DelawareATEP - Amkor Technology Portugal, S.A. PortugalGuardian Assets, Inc. DelawareJ-Devices Corporation JapanExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-62891, 333-86161, 333-63430, 333-100814 and333-149376) of Amkor Technology, Inc. of our report dated February 22, 2019, relating to the financial statements, financial statement schedule and theeffectiveness of internal control over financial reporting, which appears in this Form 10‑K./s/ PricewaterhouseCoopers LLPPhoenix, ArizonaFebruary 22, 2019Exhibit 31.1SECTION 302(a) CERTIFICATIONI, Stephen D. Kelley, certify that:1. I have reviewed this Annual Report on Form 10-K of Amkor Technology, Inc.;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 makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisAnnual Report;3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all materialrespects 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 inExchange 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, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes 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 theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; andd) Disclosed in this Annual Report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of this Annual Report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant'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 reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlsover financial reporting./s/ Stephen D. KelleyBy:Stephen D. KelleyTitle: President and Chief Executive OfficerDate:February 22, 2019Exhibit 31.2SECTION 302(a) CERTIFICATIONI, Megan Faust, certify that:1. I have reviewed this Annual Report on Form 10-K of Amkor Technology, Inc.;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 makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisAnnual Report;3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all materialrespects 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 inExchange 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, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes 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 theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; andd) Disclosed in this Annual Report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of this Annual Report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant'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 reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlsover financial reporting./s/ Megan FaustBy:Megan FaustTitle: Corporate Vice President and Chief Financial OfficerDate: February 22, 2019Exhibit 32.1CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICERPURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTEDPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Stephen D. Kelley, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that theAnnual Report of Amkor Technology, Inc. on Form 10-K for the year ended December 31, 2018 fully complies with the requirements of Section 13(a) or15(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 conditionand results of operations of Amkor Technology, Inc./s/ Stephen D. KelleyBy:Stephen D. KelleyTitle: President and Chief Executive OfficerDate:February 22, 2019 I, Megan Faust, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the AnnualReport of Amkor Technology, Inc. on Form 10-K for the year ended December 31, 2018 fully complies with the requirements of Section 13(a) or 15(d) of theSecurities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents in all material respects the financial condition and resultsof operations of Amkor Technology, Inc./s/ Megan FaustBy:Megan FaustTitle: Corporate Vice President and Chief Financial OfficerDate: February 22, 2019

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