Amkor Technology Shares Advance Following Apple Partnership Affirmation

Amkor Technology Gains Amid Apple U.S. Manufacturing Strategy Highlight

U.S. equities saw focused movements on Tuesday, with shares of semiconductor packaging and testing company Amkor Technology (NASDAQ:AMKR) advancing significantly following a public endorsement from Apple Inc. (AAPL) CEO Tim Cook.

The Event in Detail

Amkor Technology stock experienced a notable surge in the morning trading session, jumping 4.6% after Apple CEO Tim Cook highlighted the company as a key partner in Apple's U.S. manufacturing strategy. The shares later cooled to close with a 3.6% gain from the previous close. The catalyst for this move was a video clip of Mr. Cook on CNBC, where he explicitly reiterated Amkor's significance as a packaging partner. This public affirmation solidifies Amkor's crucial role in Apple's initiative to move parts of its supply chain to the United States, a process often referred to as "reshoring."

This announcement builds upon Amkor's previously declared $2 billion investment in a new semiconductor packaging facility in Peoria, Arizona, with production slated to commence in early 2028. Apple is a key contributor to this endeavor, planning to invest billions into the facility as part of its broader $100 billion American Manufacturing Program. This program aims to bolster Apple's supply chain and advanced manufacturing operations within the U.S., aligning with the U.S. CHIPS Act policies designed to expand domestic chip production and establish an "end-to-end silicon supply chain in the U.S."

Analysis of Market Reaction

The market's positive reaction reflects strong investor confidence in the collaboration between Apple and Amkor. Mr. Cook's endorsement underscored the strategic importance of Amkor to Apple's long-term domestic manufacturing goals. This development is seen as a significant validation of Amkor's capabilities and its strategic positioning within the U.S. semiconductor industry. By integrating Amkor into its U.S. manufacturing strategy, Apple not only enhances its domestic production capabilities but also strengthens its control over critical segments of the semiconductor supply chain.

Broader Context and Implications

The semiconductor packaging market is projected for robust growth, expanding from $49.88 billion in 2025 to $81.22 billion by 2030, driven by advancements in AI, electric vehicles, and 5G technologies. Amkor's focus on advanced packaging, which accounts for over half of its revenue, positions it to capture a disproportionate share of this expansion. The Arizona facility, strategically located near TSMC's leading-edge wafer fabs, is expected to enhance collaboration and reduce lead times, particularly for advanced packaging solutions like 2.5D/3D interposers critical for AI applications.

Despite the positive news from Apple, Amkor's shares have historically exhibited volatility, experiencing 16 moves greater than 5% over the past year. Furthermore, the company has faced recent headwinds, including reports that Nvidia, a major client, instructed component suppliers, including Amkor, to halt production of its H20 AI chip designed for the Chinese market. This halt, reportedly due to Beijing's security concerns, led to semi-finished semiconductors accumulating at Amkor's facilities, creating potential inventory issues. However, the positive sentiment generated by the Apple partnership largely offset these concerns, especially amid broader market optimism regarding potential Federal Reserve interest rate cuts.

Financially, Amkor reported Q2 2025 revenue of $1.51 billion and an adjusted Earnings Per Share (EPS) of $0.22, surpassing analyst estimates of approximately $0.16. The company forecasts stronger profitability for Q3 2025, with analyst EPS estimates ranging from $0.34 to $0.48. Its communications segment, contributing about 40% of revenue, continues to drive growth, reflecting strong demand in smartphone packaging. However, the company noted a year-on-year decline in gross margin, indicating ongoing cost pressures. Amkor also recently priced $500 million worth of 5.875% senior notes due 2033.

Expert Commentary

Wall Street analysts currently maintain a "Hold" consensus for AMKR, with an average one-year price target of $26.25, suggesting a potential upside of 2.24% from a recent share price of $25.68. GuruFocus's GF Value estimates a fair value of $27.02, implying a 5.22% upside. While Amkor's current valuation, with a P/E ratio of 12x and a PEG ratio of 1.5x, appears undervalued relative to its long-term growth potential, analysts weigh this against short-term risks. These include projected Q2 2025 net income dipping to $17–57 million and gross margins remaining below 14%, alongside significant capital expenditures for the Arizona project, totaling $850 million in 2025.

Looking Ahead

This development signifies a continuing broader market trend towards supply chain resilience and regionalization, driven by geopolitical considerations and the desire for more secure supply chains. This shift could encourage other major technology companies to increase investments in domestic manufacturing and partnerships. For Amkor, the Arizona facility is expected to be a significant driver of revenue growth by 2027, positioning it as a critical supplier in Apple's domestic silicon production. However, challenges such as potential ABF substrate supply crunches and yield issues in advanced technologies like 3D TSV and hybrid bonding could pose delays. The complex and dynamic nature of the semiconductor market, coupled with Amkor's historical volatility and existing challenges like the Nvidia H20 situation, underscores the need for continuous monitoring of the sector.