艾克爾 (AMKR) 2010 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the fourth quarter and full year 2010 Amkor Technology Incorporated earning's conference call.

My name is Alisa, and I'll be your conference operator for today's call.

(Operator Instructions).

Before we begin this call, Amkor would like to remind you that there will be forward-looking statements made during the course of this conference call.

These statements represent the current view of Amkor's Management.

Actual results could vary materially from such statements.

Prior to this conference call, Amkor's fourth quarter and full year 2010 Earnings Release was filed with the SEC on Form 8-K.

The Earnings Release, together with Amkor's other SEC filings, contain information on risk factors, uncertainties and exceptions that could cause actual results to differ materially from Amkor's current expectations.

I would now like to turn the conference over to Mr.

Ken Joyce, Amkor's President and Chief Executive Officer.

Please go ahead, sir.

Thank you, Alisa.

And, good afternoon everyone.

With me today is Joanne Solomon, our Chief Financial Officer.

Today, I'll talk about our full year performance, the associated business drivers and our expectations for the first quarter of 2011.

Joanne will then discuss our financial results for the fourth quarter, and finally, we'll open up the call for your questions.

To start, I'm pleased with our overall performance and the business momentum we generated in 2010.

We delivered both record net sales of $2.9 billion, and record net income of $232 million.

It was a successful year.

That said, we did not finish the year as strong as we had hoped.

Principally because of inventory adjustments by some of our customers in consumer electronics and networking; unfavorable foreign currency movements, and higher gold prices.

It is a true testament to the strength of our business model and the talent and dedication of our team that we were able to deliver record results even in the face of these headwinds.

Our full year net sales grew 35%, and all of our package families and end markets contributed strongly to this growth.

LeadFrame grew 30%, with Automotive, Industrial, and Computing being particularly strong.

Chip Scale Packages were up 36%, driven by demand for Flip Chip and 3D Stacking Technologies, that support wireless data and Smartphones.

Ball Grid Array Packages increased 53%, as demand for gaming and HDTVs, other Consumer electronics and Networking applications grew substantially.

Moving on, our full year gross margin was 23%.

We made excellent progress in commercializing new, advanced packages with higher selling prices, and driving better utilization of our assets.

Pricing pressures were relatively modest and consistent with our expectations.

During the year, we did experience some gross margin pressure that produced results below where we had hoped to be.

The aggressive acceleration in business activity as the recovery gained momentum strained our operating efficiency.

The US dollar depreciated relative to all of our significant foreign currencies and gold prices moved higher during the year.

Also, we saw some inventory contraction that began late in the third quarter.

Despite these challenges, I'm pleased that 2010 was our fifth consecutive year of positive free cash flow.

We remain focused on profitable growth, combined with strong cash flow generation.

We also delivered a strong return on invested capital of 24%, which is more than double our weighted average cost of capital.

One of the corner stones of our business strategy and financial success is technology, leadership and innovation.

For us, this means developing and commercializing the newest and most advanced assembly and test technologies in close collaboration with our customers.

We had some notable successes in 2010, including the development and commercialization of Fine Pitch Copper Pillar Flip Chip with Texas Instruments.

This proprietary technology enables reduced semiconductor chip size and cost and enhanced performance.

It is ideal for hand-held, high performance, low power devices-- precisely the kind of products most in demand with today's global consumers.

To support the rapid ramp of this new interconnect solution, as well as other leading technologies, such as thermal via and various hybrid packages, we added nearly 200,000 square feet to our K4 facility in Gwangju, South Korea, including substantial additional clean room space.

Now, I'd like to talk about 2011.

We are anticipating first-quarter net sales to be down from 8% to 12%, and the corresponding decline in utilization is expected to compress our gross margins.

Two factors are driving our sales outlook.

First is the expected seasonality of gaming and the amplifying impact of our strong position in this market.

Gaming is highly seasonal with substantial volume builds in advance of the holidays.

Second, we also see some carry-over of the inventory adjustments that began late in the third quarter.

As we exit the first quarter, we are anticipating a rebound in customer demand and a year of solid growth, driven primarily by strength in wireless Communications, Consumer electronics and Networking.

We believe our leading customers are well positioned to take advantage of the growth in Smartphones, Tablets and Networking infrastructure, as consumers worldwide are demanding electronic devices that feature ever-greater communication and computing capabilities with high-speed mobile access to data rich content.

To meet the capacity requirements of our leading customers, we are currently planning capital additions of approximately $500 million for 2011.

This spending will be concentrated in the first half of the year, including $135 million in the first quarter.

We believe that our focus on disciplined capital investments, technology leadership, profitable growth, and operational excellence will continue to serve our customers and our shareholders very well.

So, to wrap up, we just completed a record year for Amkor and look forward to a year of solid growth ahead.

And, with that, I'll now turn the call over to Joanne.

Thank you, Ken, and good afternoon, everyone.

To begin, our fourth-quarter net sales of $751 million were a 5% decline sequentially, and were in line with expectation.

Our Chip Scale Packages grew 10%, driven by demand for Smartphones and other wireless devices.

Ball Grid Array packages declined 14%, due to the expected seasonal declines in gaming, and inventory corrections, largely in Networking.

LeadFrame Packages were down 15%, primarily due to inventory corrections, mainly in support of Consumer electronics.

Our sales to integrated device manufacturers, our IBM customers, were 48% in Q4, essentially flat with the third quarter.

We anticipate that the revenue split between our IBM and Fabless customers will remain around 50/50 for the first quarter of 2011.

The pricing environment remains stable with very little price erosion this quarter.

Gross margins for the fourth quarter was 21%, down from 24% in Q3 and also lower than expectation.

We saw a decline in the utilization of our assets, particularly for LeadFrame and Ball Grid Array Packages.

Also impacting gross margin were unfavorable foreign currency exchange rate movements, higher manufacturing costs, and higher gold prices.

In addition to the impact of foreign currency movement to our gross margin, FX also had a significant impact on our non-operating expenses, due to the flow-through of balance sheet revaluations.

In the fourth quarter, we had a $5 million foreign currency loss which was primarily attributable to the appreciation of the Taiwanese dollar and the resulting revaluation of a Taiwan dollar denominated loan.

So, together, with the FX impact on gross margin, we incurred an unfavorable impact from foreign currency movement of approximately $0.04 per share this quarter.

Our other operating expenses of $73 million were consistent with our expectations.

For the first quarter of 2011, we expect operating expenses to remain generally consistent with Q4.

Income taxes were $6 million higher than expected, or $0.02 per diluted share, primarily due to an unanticipated reserve for an uncertain tax position in a foreign jurisdiction.

We expect our effective tax-rate for the first quarter and full year 2011 to be around 10%.

So in total, FX and income taxes had a combined $0.06 negative impact on our earnings per share.

In their absence, our EPS would have been around the midpoint of our previous guidance.

Turning to the balance sheet, in December we called for redemption all $100 million of our outstanding six and a quarter convertible subordinated notes due 2013.

The note holders elected to receive equity in exchange for the notes and we completed the redemption in January through the issuance of 13.4 million shares of Amkor common stock.

These shares were previously included in the diluted share count.

This is just the latest transaction in a series we executed in 2010 to enhance our liquidity, strengthen our balance sheet, reduce our interest expense, and mitigate future refinancing risks.

We ended the quarter with a cash balance of $405 million; total debt of $1.4 billion, and $959 million of net debt.

Adjusting for the January conversion, our net debt would have been down to $859 million.

This includes $250 million of convertible debt that we expect will be converted into equity rather than being paid at maturity.

Moving on to our investing and capital spending activities, we spent $103 million on capital additions in the fourth quarter.

We focused our resources on new capacity for communications, advanced technology initiatives, and expanded facilities.

We invested $505 million in capital additions for the full year for a capital intensity of 17%.

And, consistent with our expectations, 63% of this spending was for assembly capacity; 19% was for tests; 18% was for R&D and infrastructure.

In closing, we are pleased to deliver record net sales and net income for 2010.

We are excited about the prospects for continued growth in 2011 and our balance sheet is strong and getting even stronger.

With that, we will now open the call up for your questions.

(Operator Instructions).

Our first question comes from the line of Timothy Arcuri, with Citigroup.

Please go ahead.

Joanne, if I just sort of assume a modest improvement throughout the rest of this year--I calculate sort of a capital intensity in the 17% to 18% range for this year.

And that's the highest in any sort of up-year, any decent year, the last 5 to 10 years, at least.

Is there some sort of structural change going on where you think that's sort of the new higher capital intensity level, or is there some catch-up spending there?

And then I had a second one as well.

Starting with your question, Tim, historically we have said that our business model operates at a capital intensity between 10% to 14%.

And like last year, we found ourselves above 14% because we had heavy investments in infrastructure and R&D.

Looking towards 2011, we are seeing some additional investments in support of facilities and infrastructure, so we are above the 14% this year.

We're not giving capital intensity guide for the full year other than to say it's above the 14% and that the absolute dollar amount that we're currently expecting is $500 million.

And then I guess just as it relates to your business and as it relates to some of the unrest going on over in North Korea.

Given that that's pretty close to your site there, was there any impact this quarter in your business from that?

Any customers pulled back some business because of that?

And how do you plan to sort of mitigate that risk?

Tim, this is Ken Joyce.

No, we didn't have any impact from that.

I mean, the dispute between the North and the South has been there for some time, and there's not a lot we can really do to mitigate that exposure.

Ken, thanks.

Our next question comes from the line of Satya Kumar, with Credit Suisse.

Please go ahead.

Just want to think about gross margins, sort of on a normalized basis, longer term, it's about 180 basis points lower than guidance in Q4.

If I just look at 2010, you're up 35% so you should have leverage helping you, but three or four quarters in 2010 gross margins are lower than your guidance.

Is there a change in terms of what you're thinking is the right level of gross margins should be on a normalized basis?

Doesn't seem like pricing is really changing here.

Well, I think the key factors when we talk about overall gross margin for us are capacity utilization; the product mix; the manufacturing efficiencies, and the pricing strategy.

And I think looking back on 2010, we had a very aggressive ramp-up.

We had 35% sales growth, so we may not have been as efficient as we were in a stable growth environment.

So as we look out into 2011, I would expect, given once again the mix that we see, the pricing environment that we see, that things would not be significantly different between 2010 and '11.

The only thing I would add, Satya, is FX and gold hit us both very hard this year.

We had significant headwinds coming from FX all year and then obviously very significant here in the fourth quarter.

The Asia-based currencies in the fourth quarter that were in, appreciated about 4%.

Just as a reminder, about 90% of our sales are in US dollars and only 60% of our costs are in US dollars, so we are subject to some fluctuations there.

Going forward, we'll look to cost control and maintain higher utilization levels to continue to get the margin expansion.

Ken, you mentioned that gross margins for the full year are essentially comparable to the 2010 levels, or should we think that a mid-20s average gross margin is still achievable?

I would think that certainly our goal is to get some improvement.

But I think in terms of modeling, I think it would be fair to look at 2010 as a guide for 2011 at this point in time.

Joanne, on the CapEx guidance that you gave, $500 million in CapEx, in a similar vein to the previous caller, could you perhaps give me a sense of what is the delta between the technology CapEx versus capacity CapEx?

How much can you grow 2011 with this CapEx is what I'm trying to get a sense of?

We've always said that any time we're investing for capacity at a 14% that it would drive good, strong growth, and I think that's where we're here this year without giving an absolute percentage.

With respect to the piece of the $500 million that relates to some incremental infrastructure spend, I would say that would be very consistent with what we saw this year in the range of $50 million.

So, a lot of that capital investment is going towards capacity expansion.

The dollar spend is weighted for the first half of the year in support of peak demand in Q3 and Q4.

We should see good growth in Q2 as well as we exit these inventory corrections and --

And if I could squeeze one last one on back to gold and gross margins.

Previously you had mentioned that you could pass along this gold cost to customers, or perhaps your customers weren't that sensitive to gold prices.

Has that metric changed?

And are you thinking any differently about your gold conversion rate with your customers right now?

Okay, we do -- our strategy has been to pass gold costs onto our customers.

That happens in one of two ways.

It's either a direct pass-through, where we'll issue a separate invoice for customers.

That's without a markup so that itself, while we get the cash recovery, it will compress the margin percentage because your sales and your costs are exactly the same number, so that does compress margins.

Second is through a series of price negotiations to adjust prices up for the gold.

That happens over a period of time.

So, in periods where gold is increasing rapidly, there is a catch-up until we can pass through those costs to the customers.

With respect to migration away from gold, we are seeing a migration in both to other technologies including Flip Chip and to Copper Wire.

I think one other follow-up, Satya, in response to your question on the gross margin for 2011.

The other aspect of it is that with the seasonal dip in Q1, and with the inventory correction, our gross margin is going to be really compressed in Q1.

So, we really do have to achieve very strong margins in the second half of the year to come out with that overall blended rate of-- we looked at this rate of 23% that we delivered in 2010.

So that's another point of direction for you.

Thank you.

Our next question comes from the line of Olga Levinzon, with Barclays Capital.

Please go ahead.

Just wanted to gauge, given your current end market and customer mix, can you talk about whether Amkor's total 2011 sales can outpace Semiconductor revenue growth, or whether the current inventory correction will actually pressure that?

Depending on where we look for the overall industry, it's up from single to low double-digits, and we're hoping that we're going to perform certainly in line with the industry, if not a little better.

And then given that you now break out the end markets by revenue and by units, it looks like your blended ASP went up for pretty much each of the categories.

Can you talk about what's driving that and whether this trend is actually sustainable through 2011?

We have a very strong -- really strong growth in the Communications.

And that's in wireless communications, principally, and hand-held.

We have a very solid position in Networking, and in the Consumer end as we talked about.

We believe we have a very dominant position in gaming, although that impacts us a little bit negatively in Q4 and Q1 because of seasonality.

We have a very, very strong position in gaming.

And also in other high-end consumer electronics, whether it's HDTVs or things of that nature.

So, we believe we're really well positioned in the markets related to connectivity, and we see a lot of growth in that area and we believe that's going to bode well for as we move into 2011 and beyond.

And with respect to the calculated average selling prices by both packet type as well as the end market, that's very much driven off of the mix of packages that we're offering.

There is -- given the complexity of these packages increasing, technology is increasing, but the material content in these packages is also increasing.

So that mix does play into higher ASPs.

Given a fairly high capital spending level in 2010 and likely in 2011, is it your current expectation that the capital intensity level or the absolute CapEx for 2012 should come down or is it still kind of uncertain?

I think it's a little early yet for us, in our cycle, to say that at this point in time.

Thank you.

Thanks, Olga.

Our next question comes from the line of Peter Kim with Deutsche Bank.

Please go ahead.

First, I wanted to ask about the capital spending versus utilization.

Looks like your utilization came down in Q4 pretty noticeably, but your capital spending was pretty relatively pretty high, I would imagine.

And it looks like you're saying you're going to be loading up in Q1 and Q2, first half loaded in terms of capital spending.

I just wanted to get an idea about what your expectations for utilization is going forward that would support this kind of spending plan?

Well, we did see some correction in -- as we said, in Q4, on consumer electronics and in Networking.

We were hit with a double whammy in terms of the seasonal impact in Q1.

That's clearly had an impact on bringing utilization down in both periods.

That being said, as we said, we look out, look based on customer forecasts, as we look out through the second quarter of 2011 and beyond, we see good, solid growth.

And that's what we're investing for on behalf of our strategic customers.

So ,we've had-- and in the wireless Communications area the utilization has remained solid, looked solid going forward, and we see a rebound in the areas where we saw the weakness.

So, that's what we're investing for.

That's why we're spending the money to support our strategic customers and we believe the demand is there to support that.

And as a follow-up, your competitors have been talking about US and European customers moving aggressively towards copper.

So when you look at your CapEx plan for 2011, what kind of investments do you think you're going to be making in the copper transition?

And do you believe that, indeed, the US and European customers are aggressively moving towards copper?

The migration to copper wires started and was driven by the most part by low-cost, low-end consumer applications in China and Taiwan.

Many of our customers really don't service that market.

That being said, there has been a migration from some of the low-end, low-end products into some of the more advanced applications.

We're certainly working with our customers in that regard.

It's truly a collaborative effort between ourselves and our customers.

We are seeing and we recognize the challenge as it moves from the low-end, low-cost into the more high-end packages.

We have 20 of our top 20 customers, more than half of them we're in qualification on copper wire.

We've been in high volume production.

So, it depends on how fast our customers want to come forward with that.

But you feel prepared if and when they do want to move heavily into that capacity?

Absolutely.

We're very confident.

We're already in high volume production on some high-end packages, both laminate and wire bond.

So, when it comes to the copper wire, we're very confident as it migrates to the US, to Europe, that we're there to service our customers, and they know that.

Thank you.

Our next question comes from the line of Jake Kemeny, with Morgan Stanley.

Please go ahead.

Do you think you'll be generating free cash flow in 2011?

Certainly our outlook is to have strong cash flow generation.

We're focused on that, and so it depends on where we go, where we see the markets going, how much we'll support our customers on capital investment.

But clearly focused on strong cash flow generation.

And as you look at the CAP structure, how do you feel about any maturities, kind of the maturity profile?

Do you think you need to do any preemptive tenders or any refinancing?

We certainly feel very comfortable with our maturity profile that we have today.

That said, the 2016 notes have an interest rate of 9.25%.

They become callable coming up here June 1st, so we'll take a look at whether we can refinance that at attractive terms.

And then did you say earlier in the call that you expected the other $250 million of converts to eventually be converted into equity in 2011?

Yes, we did say that.

Sorry, sorry.

Not 2011.

The comment we made was that they're in the money and that our expectation is that they would ultimately convert into equity prior to maturity, not giving a specific year.

And in the conversations that you've had with your customers, in terms of the forecasts they've given you.

How much visibility do you think you currently have right now, and how confident do you think your customers are in some of these demand forecasts that they've given you?

Given we're seeing some sort of an inventory correction going on right now.

Well, we feel pretty good.

We have our rolling 6 month forecast that we have with our customers and they're dynamic and they move on.

I think in terms of in talking with our customers, they've been managing their inventories very closely.

As we said in the consumer electronics, we saw a mild let's say mid-course inventory correction, but based on our discussions with our customers, both in the Consumer and in the Networking, they believe that's nearly finished.

And based on the forecast and more important than the forecast is the level of Die Receipts that we get from our customers, are they supporting their forecast.

Yes, they are.

So we're seeing the support.

We're also seeing in certain areas of our Die Banks in the communications area, particularly, we're seeing some build in the Die Bank, so as the wafers are coming out of the foundries they're certainly taking them and getting them ready for production.

So I think Q2 for us looks very real.

Thanks very much.

Our next question comes from the line of Eric Reubel with MTR Securities.

Please go ahead.

Ken, in the past I think you've talked about how the LeadFrame and lower-end packages and when that part of the facility infrastructure is heavily utilized that you can see your best margins.

And I wanted to ask whether or not the move to copper is kind of catching you a little bit?

Maybe not having made that transition as quickly as you may have done-- and whether or not the high CapEx budget this year is sort of a little bit of catch-up to get that and make an investment back in that part of the facility infrastructure?

So you can again play more confidently in the lower end of the market.

Well, overall capacity utilization is very important to achieving our overall gross margin that we report every quarter.

So that's absolutely it.

We have focused our CapEx investments over the last 2 years more on the advanced products or advanced technologies.

But it doesn't mean that we've in any way abandoned our core LeadFrame business and things of that nature.

Once again, when we talk about the investments for copper wire, I think the important thing to remember is that a lot of the original Copper Wire Bonding applications were for low-cost, low-end consumer electronics in China and Taiwan.

And our customers aren't in that market, so I don't think we lost anything there.

We did see a correction in consumer electronics in Q4 but it wasn't related to copper.

It's more related to I guess what you would say the ubiquitous consumer-- when you talk about LeadFrame product, it truly is ubiquitous, it's in everything.

So, we saw some correction going on in that part of the market.

Can you give me a sense of how much of the production, you believe, will be on copper exiting 2011, and how much will be on Flip Chip?

That's really hard to say.

For us, copper right now is a very small percentage of our total revenue.

I would expect that by the time we exit 2011, it will still be a small percentage of our total revenue.

I think in terms of Flip Chip versus the other, Joanne, do you have that handy?

Wire Bond packages today are 65% of our assembly revenues, Flip Chip is 35%, about.

And I wouldn't see a significant shift in that.

Joanne, any more color on sort of the CapEx spend, driven largely toward the first half of the year.

Can you give us any sense of how much could be spent in the first half?

I can give some sense of it.

We are still seeing some extended lead times with select equipment manufacturers so that really has us planning earlier in the year to prepare for a Q3, Q4 peak.

So I don't want -- I'm not ready to give a guide for Q2, but I would say the lion's share of the CapEx, majority, not a lion's share, would be the first half.

Thank you.

And we have a question from the line of Mehdi Hosseini, with Susquehanna International Group.

Please go ahead.

Thanks for taking my question.

I have two follow-ups.

First, Ken, you talked about Die Bank inventories are improving, and you should see a significant uptick in the top line in Q2.

I want to explore more and find out what gives you the confidence that's going to happen?

Is that a reflection of what happened in Chinese New Year or else?

Number two, to what extent should we assume the improvement in utilization rate as more wafers are taken out and [diced] and package tested going forward, specifically on Q2, Q1 into Q2.

Sure.

Well, the Die Banks are not all that meaningful.

It's one statistic.

As I say, a lot of our customers don't put their Die in our Die Banks.

Die Receipts, in other words, receipt-of-the-die versus their forecast is probably a better barometer of where we're going and our customers have been supporting the receipt.

With respect, looking at Q2, we expect a rebound in the gaming market, and that's partially a seasonal as well as the other parts that we should see rebound in gaming.

Communications is -- the hand-held devices I think as -- is still a very strong and robust market, and they're supporting their forecast now.

So that would lead me to believe that the forecast they're giving us for Q2, they're going to continue to support.

And we believe in talking to a number of our customers in the consumer area that this mild inventory correction is nearly complete, and we've heard that from some of our customers.

That's their forecast, and we believe it.

And I have one follow-up and I want to revisit utilization rates.

So, what you're saying, does that imply that you have more confidence in your rolling forecast, or does that mean your rolling forecast has been revised up, and again what is the impact utilization rate and the gross margin Q1 into Q2?

I can start with the gross margin.

Clearly as our utilization rates go higher from the Q1 rates, Q1 test and packaging are in the low 70%s, is our expectation for Q1.

Going forward to Q2, we are seeing some of our lines as Ken mentioned in Support Communications operating at very high levels of utilization.

And as the LeadFrame business comes back we'll start to see those LeadFrame assets being better utilized than they had been here in Q4 and Q1.

BGA which is in support of both Networking and gaming should fill up very quickly here in Q2.

So, that will help the margins clearly from where we're at for Q1 and we'll get back into the 20%s for Q2 would be the expectation.

Setting us up for full year gross margins somewhat consistent with where we ended up for 2010.

And then my follow-up had to do with -- should we assume that you have more confidence in your conversation with customers or is that your rolling forecast that has gone up that gives you the confidence?

I would characterize it as both.

We do get the rolling 6 month forecast that you're referring to.

We're seeing good levels of demand actually coming through the forecast itself, as well as we stay very closely aligned with our customers to understand how they're feeling that the year is shaping up.

That is what's baked into why we're guiding a CapEx number of $500 million.

From what we're hearing from our customers that will be a good year, and we're prepared to meet their demands.

Thank you.

And we have a follow-up question from the line of Timothy Arcuri, with Citigroup.

Please go ahead.

Joanne, I'm just trying to clear something up.

If I look at your utilization numbers, and if I look throughout the year and I just divide your assembly units by your utilization that you report, it seems like your capacity declined this quarter.

If I use your headline, 78% number, is that number skewed by something?

Seems like it ought to be lower like in the low 70%s, for example.

I think what skews the utilization numbers is both Ball Grid Array and LeadFrames are operating at very low utilization levels for the fourth quarter, given the amplified impact of the gaming, which dropped significantly in Q4 and is dropping further here in Q1.

Those assets are largely shared with Networking so that is both a seasonal and a cyclical impact that are impacting utilization of Ball Grid Array.

And just as a reminder, on a revenue basis Ball Grid Array represents about 25% of our overall revenues so that is a significant trend here in Q4 so that would skew the utilization.

With respect to lead frames, that's about 24% of our revenues, and that was operating at very low levels of utilization here in the fourth quarter and continuing into the first quarter, although we're expecting it to exit stronger.

So those two are what's driving the utilization numbers down.

Chip Scale packaging was up 10% in revenue quarter-over-quarter or sorry sequentially.

And so those lines were actually really well utilized, and we had to pull in some capacity to our CapEx to meet the level of demand that we had on those assets in Q4.

Yes, I guess -- okay, maybe I asked kind of a different way.

So what do you think the reported utilization number will be in Q1, based on your guidance?

I believe that the reported utilization number would be in the low 70%s for assembly and test.

So, would it be fair to then to just sort of divide that, all things equal, by your unit shipments?

I'm just trying to figure out how much you're growing capacity and a I can do that fairly easily throughout 2010, and then I get kind of thrown off by Q4.

But in Q1 is the mix a bit more normal where I could divide whatever I think that your units are in Q1 by your reported utilization number, and I can compare that as your overall capacity relative to 2010?

Tim, I can take a look at it to see if that math works.

One of the challenges that we have is that while we expanded our utilization information this quarter to separately break out packaging and test.

Since we don't break out utilization by the product lines, the Chip Scale packaging, Ball Grid Array and LeadFrames, it's going to be hard to do the calculation as you had described.

Because the units are so lopsided to LeadFrames that LeadFrames would -- those units would distort the calculation is my expectation, but I can play with it to see if it starts to make sense.

Just last thing.

Out of our $500 million CapEx in 2011, how much is assembly versus test?

I think the breakout would be very similar to 2010, about 60% assembly, 20% test, and about 20% for R&D and infrastructure.

Thanks, Joanne.

(Operator Instructions).

Our next question is a follow-up question from the line of Satya Kumar with Credit Suisse.

Please go ahead.

Just was wondering when you were referring to the Extended Lead times were you referring to the Wire Bonder equipment?

I think a lot of it is on the Wire Bond side in bringing up some of the more advanced technologies.

And where are these lead times now versus normal?

I would describe them as they're sort of in line with the 2010 normal, not in line with the 2009 normal.

So we had certainly hoped that we were going to go back to prior normal Lead Times, and we're seeing a lot of the Lead Times that we were experiencing in 2010 continuing on in 2011.

And I was wondering if you could comment a little on you how you're thinking about modeling labor costs in 2011?

I know you added some additional labor cost in late Q2.

Is there a way to think absolute dollar basis, how this should track in 2011 over 2010?

As we exited the year, we hired 3,000 people in 2010, and with respect to where we see that going forward, we'll see some growth in labor dollars throughout the year.

I think the best way to model it is for the year.

I would suggest that we would be about the same at a 13% of revenues.

In the short run I would expect Q1 labor dollars to look very similar to Q4 labor dollars.

And t at a high level, do you expect the outsourcing versus insourcing from IDM and OSATs, will that ratio change significantly in 2011?

I think the outsourcing is going to continue to accelerate, particularly in Japan.

There are a lot of opportunities.

We play very well with three of the major players.

As you know, Sony, Panasonic, Toshiba, are all major customers of Amkor in a number of areas.

I think that in both in Europe and the US there are a number of IDMs that are going to continue the outsourcing trend as well as Asia.

So we're very optimistic.

We think there's a lot of opportunity.

We think you're right on target.

They're going to continue to increase the satellite strategy with the IDMs.

So we're looking forward to our share of gains in that particular area.

What should we model as normal price declines for year-over-year or quarter-on-quarter?

We've been doing about 1 to 2% price erosion per quarter in 2010.

While we see some competitive pressures in certain areas, we think that's a reasonable basis to model for 2011.

Q4 we were actually close to breakeven in Q4, but I think a 1 to 2% decline each quarter would be a reasonable modeling assumption.

I just wanted to get -- if I assume that the industry were to grow sort of mid-to-high single digits and outsourcing increases, and that offsets the ASP pressures.

For you to sort of grow in line with the industry you would have to grow double digits sequentially for a couple of quarters in a row.

Would you think that your current forecast that you talked about, that are improving, is that a scenario that could potentially play out as you look at the rest of the year?

When you look at the impact of gaming seasonality, absolutely.

We do see that as how our expectation.

Thank you.

I show no further questions at this time.

Management, please continue.

If there are no further questions, we thank everyone for participating in the call today.

Thank you.

Ladies and gentlemen, that concludes our conference for today.