US And European Onshoring Will Shrink Core Asian Packaging

Key Takeaways

• Manufacturing onshoring, geopolitical shifts, and rising in-house competition threaten Amkor's core business, revenue stability, and margins.
  
• Heavy investments risk overcapacity and obsolescence if demand or technology adoption stalls, pressuring returns and long-term growth.
  
• Robust demand for advanced packaging and strong strategic positioning drive long-term growth, margin expansion, and resilience, supported by ongoing investment, operational optimization, and solid financial management.

Catalysts

Provides outsourced semiconductor packaging and test services in the United States, Japan, Europe, and the Asia Pacific.

• The anticipated acceleration of semiconductor manufacturing onshoring and regionalization, particularly in the United States and Europe, risks eroding Amkor's core Asian packaging and testing business as key customers seek domestic supply chain security. This realignment could lead to substantial long-term revenue loss from global customers and underutilized assets in Asian factories.
  
• Intensifying geopolitical tensions and shifting export controls, such as unpredictable changes in U.S.-China tech policies, may prompt critical customers to source advanced packaging from alternative suppliers or domestic OSAT providers, undermining Amkor's ability to retain high-value contracts and resulting in volatile earnings streams.
  
• Rising competition from foundries and integrated device manufacturers aggressively ramping in-house advanced packaging capabilities is likely to cannibalize Amkor's addressable market for high-margin technologies like 2.5D and High-Density Fan-Out, compressing both future revenue growth opportunities and net operating margins.
  
• The company's heavy capital investments in advanced packaging expansion-particularly in Korea, Vietnam, and planned Arizona operations-expose Amkor to cyclical overcapacity and prolonged payback periods, which could significantly weaken EBITDA and return on invested capital if industry demand falters or mass adoption of core packaging technologies stalls.
  
• Advancements in chiplet-based architectures and monolithic system-on-chip solutions threaten to bypass traditional outsourced packaging and test services, potentially rendering key segments of Amkor's technology portfolio less relevant, shrinking its total addressable market and directly pressuring long-term revenue and net profit growth.

Amkor Technology Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Amkor Technology compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Amkor Technology's revenue will grow by 3.6% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 4.8% today to 6.8% in 3 years time.
• The bearish analysts expect earnings to reach $478.3 million (and earnings per share of $1.68) by about August 2028, up from $303.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 13.7x on those 2028 earnings, down from 18.8x today. This future PE is lower than the current PE for the US Semiconductor industry at 29.1x.
• Analysts expect the number of shares outstanding to grow by 0.31% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.5%, as per the Simply Wall St company report.

Amkor Technology Future Earnings Per Share Growth

Risks

• Accelerated adoption of artificial intelligence and high-performance computing is fueling robust demand for advanced packaging solutions, with Amkor reporting its computing segment as the fastest-growing end market (up 18 percent year-over-year in the first half of 2025), which supports future revenue growth and strong earnings visibility.
  
• The ramp of next-generation technologies such as High-Density Fan-Out and 2.5D packages, combined with strategic partnerships and close collaboration with leading semiconductor customers, is resulting in content gains and preferred supplier status, supporting long-term revenue stability and potential margin expansion.
  
• Expansion of manufacturing and test capacity, including significant investments in facilities in Vietnam, Korea, and the forthcoming Arizona site, increases supply chain resilience and positions Amkor to capture greater volumes as onshoring and regionalization trends in semiconductor supply chains create new business opportunities, positively impacting revenue and operating margins.
  
• Successful transitions and optimization of underutilized manufacturing assets, coupled with a track record of effective restructuring-as seen in Japan-enable ongoing cost structure improvements, benefiting gross margin and driving higher net income over the medium to long term.
  
• Strong balance sheet management, with increased liquidity and prudent capital allocation, allows continued investment in advanced technologies, capacity, and shareholder returns, thus laying a foundation for sustainable long-term earnings growth and supporting the share price.

Valuation

• The assumed bearish price target for Amkor Technology is $19.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Amkor Technology's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $19.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $7.0 billion, earnings will come to $478.3 million, and it would be trading on a PE ratio of 13.7x, assuming you use a discount rate of 11.5%.
  
• Given the current share price of $23.13, the bearish analyst price target of $19.0 is 21.7% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.