AMKOR TECHNOLOGY INC, 10-Q, 1999-11-15

AMKOR TECHNOLOGY INC
10-Q, 1999-11-15
SEMICONDUCTORS & RELATED DEVICES

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<PAGE> 1
FORM 10-Q
---------------

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

--------------

Commission File Number: 000-29472

AMKOR TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

--------------------

23-172-2724
(I. R. S. - Employer Identification No.)

1345 Enterprise Drive, West Chester, Pennsylvania 19380
(Address of principal executive officers)

(610) 431-9600
(Registrant's telephone number, including area code)

---------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.

Yes [ X ] No [ ]

The number of outstanding shares of the registrant's Common Stock as of
November 10, 1999 was 124,781,234.
<PAGE> 2
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................... $ 227,587 $ 81,921
Short-term investments ............................ 1,000 205,871
Accounts receivable --
Trade, net of allowance for doubtful
accounts of $5,952 .......................... 109,243 162,405
Due from affiliates ............................ 25,990 3,692
Other .......................................... 5,900 3,933
Inventories ....................................... 85,628 78,651
Other current assets .............................. 16,687 16,642
----------- -----------
Total current assets ...................... 472,035 553,115
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, net .................. 416,111 781,410
----------- -----------
INVESTMENTS ......................................... 25,476 23,741
----------- -----------
OTHER ASSETS:
Due from affiliates ............................... 28,885 29,967
Intangible assets ................................. 26,158 298,334
Other ............................................. 34,932 61,561
----------- -----------
Total other assets ........................ 89,975 389,862
----------- -----------
Total assets .............................. $ 1,003,597 $ 1,748,128
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft .................................... $ 13,429 $ 15,658
Short-term borrowings and current portion of
long-term debt ................................. 38,657 26,139
Trade accounts payable ............................ 96,948 124,188
Due to affiliates ................................. 15,722 38,974
Accrued expenses .................................. 77,004 97,078
Accrued income taxes .............................. 38,892 36,127
----------- -----------
Total current liabilities ................. 280,652 338,164
----------- -----------
LONG-TERM DEBT ...................................... 14,846 10,325
----------- -----------
SENIOR AND SENIOR SUBORDINATED NOTES ................ -- 625,000
----------- -----------
CONVERTIBLE DEBT .................................... 207,000 206,900
----------- -----------
OTHER NONCURRENT LIABILITIES ........................ 10,738 19,422
----------- -----------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

Common stock ...................................... 118 118
Additional paid-in capital ........................ 381,061 382,782
Retained earnings ................................. 109,738 166,271
Accumulated other comprehensive income ............ (556) (854)
----------- -----------
Total stockholders' equity ................ 490,361 548,317
----------- -----------
Total liabilities and stockholders' equity $ 1,003,597 $ 1,748,128
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

2
<PAGE> 3
AMKOR TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------
1998 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET REVENUES ....................................... $1,143,175 $1,371,698
COST OF REVENUES -- including
purchases from ASI .............................. 948,920 1,144,871
---------- ----------
GROSS PROFIT ....................................... 194,255 226,827
---------- ----------
OPERATING EXPENSES:
Selling, general and administrative .............. 87,671 105,499
Research and development ......................... 6,104 8,084
---------- ----------
Total operating expenses ...................... 93,775 113,583
---------- ----------
OPERATING INCOME ................................... 100,480 113,244
---------- ----------
OTHER (INCOME) EXPENSE:
Interest expense, net ............................ 16,503 29,429
Foreign currency (gain) loss ..................... 3,833 151
Other expense, net ............................... 7,092 6,225
---------- ----------
Total other expense ........................... 27,428 35,805
---------- ----------

INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST ............................ 73,052 77,439
PROVISION FOR INCOME TAXES ......................... 16,688 20,906
MINORITY INTEREST .................................. 559 --
---------- ----------
NET INCOME ......................................... $ 55,805 $ 56,533
========== ==========
PRO FORMA DATA (UNAUDITED):
Historical income before income taxes
and minority interest ......................... $ 73,052
Pro forma provision for income taxes ............. 21,188
----------
Pro forma income before minority Interest ........ 51,864
Historical minority interest ..................... 559
----------
Pro forma net income ............................ $ 51,305
==========
PER SHARE DATA:
Basic net income per common share ................ $ .55 $ .48
========== ==========
Diluted net income per common share .............. $ .53 $ .47
========== ==========
Basic pro forma net income per common share ...... $ .50
==========
Diluted pro forma net income per common share .... $ .49
==========

Shares used in computing basic net income per
common share .................................... 102,284 118,090
========== ==========
Shares used in computing diluted net income per
common share .................................... 110,933 134,079
========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

3
<PAGE> 4
AMKOR TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED SEPTEMBER 30,
------------------------
1998 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET REVENUES ....................................... $386,718 $ 501,816
COST OF REVENUES -- including
purchases from ASI .............................. 321,758 404,327
-------- ---------
GROSS PROFIT ....................................... 64,960 97,489
-------- ---------
OPERATING EXPENSES:
Selling, general and administrative .............. 30,017 40,376
Research and development ......................... 2,109 2,990
-------- ---------
Total operating expenses ...................... 32,126 43,366
-------- ---------
OPERATING INCOME ................................... 32,834 54,123
-------- ---------
OTHER (INCOME) EXPENSE:
Interest expense, net ............................ 2,106 16,995
Foreign currency (gain) loss ..................... 130 (253)
Other expense, net ............................... 1,195 2,597
-------- ---------
Total other expense ........................... 3,431 19,339
-------- ---------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST ............................ 29,403 34,784
PROVISION FOR INCOME TAXES ......................... 8,529 8,696
MINORITY INTEREST .................................. -- --
-------- ---------
NET INCOME ......................................... $ 20,874 $ 26,088
======== =========

PER SHARE DATA:
Basic net income per common share ............... $ .18 $ .22
======== =========
Diluted net income per common share .............. $ .17 $ .21
======== =========

Shares used in computing basic net income
per common share ................................... 117,860 118,276
======== =========
Shares used in computing diluted net income
per common share ................................... 133,193 135,626
======== =========
</TABLE>

The accompanying notes are an integral part of these statements.

4
<PAGE> 5
AMKOR TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------
1998 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................................... $ 55,805 $ 56,533
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization ................................ 86,239 123,698
Amortization of deferred debt issuance costs ................. 759 2,513
Provision for accounts receivable ............................ 1,539 --
Provision for excess and obsolete inventory .................. 7,200 3,573
Deferred income taxes ........................................ 6,056 9,684
Equity (gain) loss of investees .............................. -- 1,340
Loss on sale/disposal of fixed assets and investments ........ 1,309 1,788
Minority interest ............................................ 559 --
Changes in assets and liabilities excluding
effects of acquisitions
Accounts receivable .......................................... (13,867) (53,150)
Proceeds from sale/(repurchase of) accounts
Receivable ................................................. (16,500) (2,700)
Other receivables ............................................ (1,630) 1,981
Inventories .................................................. 31,944 3,751
Due to/(from) affiliates, net ................................ (51,191) 38,345
Other current assets ......................................... 5,954 (531)
Other non-current assets ..................................... (4,459) (10,483)
Accounts payable ............................................. (21,543) 29,515
Accrued expenses ............................................. 37,428 21,152
Accrued taxes ................................................ 4,568 (2,765)
Other noncurrent liabilities ................................. 740 (4,287)
--------- ---------
Net cash provided by operating activities ............... 130,910 219,957
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ................... (80,494) (175,806)
Acquisition of K4 ............................................ -- (575,000)
Acquisition of minority interest in AAP ...................... (33,750) --
Acquisition of AKI ........................................... (3,244) --
Acquisition of AAPMC ......................................... -- (2,109)
Sale of property, plant and equipment ........................ 89 --
Proceeds from sale / (purchase) of investments ............... 1,721 (204,774)
--------- ---------
Net cash used in investing activities .................... (115,678) (957,689)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in bank overdrafts and short-term borrowings ........ (170,437) (5,259)
Net proceeds from issuance of 35,250,000 common shares in public
offering, net ............................................... 360,265 --
Proceeds from issuance of stock through ESPP and options ....... -- 1,621
Proceeds from issuance of Anam USA, Inc. debt .................. 522,116 --
Payments of Anam USA, Inc. debt ................................ (658,029) --
Net proceeds from issuance of long-term debt ................... 203,023 603,569
Payments of long-term debt ..................................... (157,659) (7,865)
Distributions to stockholders .................................. (33,100) 0
--------- ---------
Net cash provided by financing activities ................ 66,179 592,066
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............ 81,411 (145,666)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................... 90,917 227,587
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ......................... $ 172,328 $ 81,921
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest ..................................................... $ 19,373 $ 9,675
Income taxes ................................................. $ 6,988 $ 13,666
</TABLE>

The accompanying notes are an integral part of these statements.

5
<PAGE> 6
AMKOR TECHNOLOGY, INC
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

1. INTERIM FINANCIAL STATEMENTS

The consolidated financial statements and related disclosures as of September
30, 1999 and for the three months and nine months ended September 30, 1999 and
1998 are unaudited, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management of the Company, these financial
statements include all adjustments (consisting only of normal recurring
adjustments) necessary for the fair presentation of the results for the interim
periods. These financial statements should be read in conjunction with the
Company's latest annual report as of December 31, 1998 filed on Form 10-K with
the Securities and Exchange Commission. The results of operations for the three
months and nine months ended September 30, 1999 are not necessarily indicative
of the results to be expected for the full year.

2. RECLASSIFICATIONS

Certain previously reported amounts have been reclassified to conform
with the current presentation.

3. ACQUISITIONS

On May 17, 1999, the Company purchased certain assets and liabilities
of Anam Semiconductor Inc.'s ("ASI") packaging and test business located in
Kwangju, Korea ("K4"), excluding cash and cash equivalents, notes and accounts
receivables , intercompany accounts and existing claims against third parties.
The purchase price for K4 was $575,000 in cash plus the assumption of $6,939 of
employee benefit liabilities. The acquisition was accounted for as a purchase.
Accordingly, based on preliminary appraisals, the results of K4 have been
included in the accompanying consolidated financial statements since the date of
acquisition, and goodwill of $283,650 was recorded as of the date of acquisition
and will be amortized on a straight line basis over a 10 year period. Goodwill,
net of amortization, is included in intangible assets in the Company's
consolidated balance sheets at September 30, 1999 Subject to the completion of
our appraisal, a portion of the purchase price may be accounted for as purchased
research and development costs, which would result in a corresponding reduction
to goodwill and a charge to earnings.

This acquisition was financed through a private placement completed by the
Company in May 1999 which raised $603,600, net of debt issuance costs of
$21,400, through the issuance of $425,000 of senior notes and $200,000 in senior
subordinated notes. The senior notes mature in May 2006 and have a coupon rate
of 9.25%. The senior subordinated notes mature in May 2009 and have a coupon
rate of 10.50%. The Company is required to pay interest semi-annually in May and
November for all of the notes. Subsequent to the purchase of K4 and payment of
related offering costs, the Company had approximately $29,714 of proceeds
remaining for working capital. The debt issuance costs have been deferred and
are included, net of amortization, in other non-current assets in the Company's
consolidated balance sheet at September 30, 1999. These deferred costs are
amortized over the life of the related notes.

In connection with the acquisition of K4, the Company has entered into a
transition services agreement with ASI. Pursuant to this agreement, ASI will
continue to provide many of the same non-manufacturing related services to K4
that it provided prior to the acquisition, including transportation and
shipping, human resources, and accounting and general administrative services.
The Company has incurred approximately $2,300 and $3,500 of costs during the
three months and nine months ended September 30, 1999, respectively, for the
transition services provided under this agreement. In addition, the Company has
also

6
<PAGE> 7
AMKOR TECHNOLOGY, INC
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

entered into an intellectual property license agreement with ASI that was
effective upon the closing of the acquisition.

To encourage the investment in K4, the Korean government has granted a tax
holiday on K4's operations which expires in 2009.

The following table displays unaudited pro forma consolidated results of
operations as though the acquisition of K4 had occurred as of the beginning of
the periods presented:

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -----------------------
1998 1999 1998 1999
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues ................................ $388,040 $501,816 $1,151,465 $1,374,927
Net income .................................. 5,641 26,088 13,787 42,202
Pro forma net income ........................ 9,287
Basic net income per common share ........... .05 .22 .13 .36
Diluted net income per common share ......... $ .05 $ .21 .13 $ .36
Basic pro forma net income per common share .09
Diluted pro forma net income per common share $ .09
</TABLE>

The pro forma results include adjustments for goodwill amortization,
depreciation, interest expense on debt issued to finance the purchase of K4, and
income taxes. The pro forma results are not necessarily indicative of the
results the Company would actually have achieved if the acquisition had been
completed as of the beginning of each of the periods presented, nor are they
necessarily indicative of future consolidated results.

On July 1, 1999, the Company acquired the stock of Anam/Amkor Precision Machine
Company, Inc. ("AAPMC"), an affiliate of ASI, for $3,800, which was paid to Anam
Semiconductor, Inc. ("ASI") during June 1999. AAPMC supplies machine tooling
used by the Company at its Philippine operations. As an interim step, during
April 1999, the Company assumed and repaid $5,700 of AAPMC's debt. The
acquisition was financed through available working capital and was accounted for
as a purchase. Accordingly, the results of AAPMC have been included in the
accompanying consolidated financial statements since the date of acquisition and
goodwill of approximately $2,000 was recorded as of the date of acquisition and
will be amortized on a straight line basis over a ten year period. Goodwill, net
of amortization, is included in intangible assets in the Company's consolidated
balance sheets at September 30, 1999. The historical operating results of AAPMC
are not material in relation to the Company's operating results and,
accordingly, have not been included in the pro forma consolidated results above.

4. RISKS AND UNCERTAINTIES

The Company's future results of operations involve a number of risks
and uncertainties. Factors that could affect the Company's future operating
results and cause actual results to vary materially from historical results
include, but are not limited to, dependence on the highly cyclical nature of
both the semiconductor and the personal computer industries, competitive pricing
and declines in average selling prices, dependence on the Company's relationship
with Anam Semiconductor, Inc. ("ASI") (see Note 8), reliance on a small group of
principal customers, timing and volume of orders relative to the Company's
production capacity, availability of manufacturing capacity and fluctuations in
manufacturing yields, availability of financing, competition, dependence on
international operations and sales, dependence on raw material and equipment
suppliers, exchange rate fluctuations, dependence on key personnel, difficulties
in managing growth, enforcement of intellectual property rights, environmental
regulations, fluctuations in quarterly operating results and results of ASI on
an equity basis, assuming we make the $150,000 investment in ASI (see Note 10).

7
<PAGE> 8
AMKOR TECHNOLOGY, INC
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

5. CONCENTRATIONS OF CREDIT RISK

Financial instruments, for which the Company is subject to credit risk, consist
principally of accounts receivable, cash and cash equivalents and short-term
investments. With respect to accounts receivable, the Company has mitigated its
credit risk by selling primarily to well established companies, performing
ongoing credit evaluations and making frequent contact with customers.

During 1999, the Company has invested in high grade municipal bonds, commercial
loans and preferred stocks. These investments are classified in the Company's
consolidated balance sheets either as cash and cash equivalents for securities
that have an underlying maturity date of less than three months, or as
short-term investments for securities that have an underlying maturity date in
excess of three months and are being held for trading purposes ("Trading
Securities"). As of September 30, 1999, the Company held approximately $206,000
in Trading Securities. These investments are carried at fair market value based
on market quotes and recent offerings of similar securities.

The Company has mitigated its credit risk with respect to cash and cash
equivalents, as well as Trading Securities, through diversification of its
portfolio of holdings into various money market accounts, U.S. treasury bonds,
federal mortgage backed securities, and high grade municipal bonds, commercial
loans and preferred stocks. At December 31, 1998 and September 30, 1999, the
Company maintained approximately $35,000 and $246,000, respectively, in high
grade municipal bonds, commercial loans and preferred stocks, with the largest
individual investment balance of approximately $10,000 and $11,500,
respectively.

In addition, at December 31, 1998 and September 30, 1999, the Company maintained
approximately $29,000 and $13,000, respectively, in deposits and certificates of
deposits at foreign owned banks and approximately $4,000 and $22,000,
respectively, in deposits at U.S. banks which exceeded federally insured limits,
of which, approximately $9,000 was maintained in one bank at September 30, 1999.

6. INVENTORIES

Inventories consist of raw materials and purchased components which are used
in the semiconductor packaging process. The Company's inventories are located at
its facilities in the Philippines or at ASI on a consignment basis. Components
of inventories follow:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(unaudited)
<S> <C> <C>
Raw materials and purchased components $77,351 $68,163
Work-in-process ...................... 8,277 10,488
------- -------
$85,628 $78,651
======= =======
</TABLE>

7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
(unaudited)
<S> <C> <C>
Land .................................. $ 2,346 $ 47,578
Building and improvements ............. 142,252 255,748
Machinery and equipment ............... 534,314 793,436
Furniture, fixtures and other equipment 40,502 50,345
Construction in progress .............. 8,282 52,962
-------- ----------
727,696 1,200,069
Less -- Accumulated depreciation
and amortization .................... 311,585 418,659
-------- ----------
$416,111 $ 781,410
======== ==========
</TABLE>

8
<PAGE> 9
AMKOR TECHNOLOGY, INC
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

8. EARNINGS PER SHARE

Statement of Financial Accounting Standards ("SFAS") of No. 128,
"Earnings Per Share," requires dual presentation of basic and diluted earnings
per share on the face of the income statement. Basic EPS is computed using only
the weighted average number of common shares outstanding for the period while
diluted EPS is computed assuming conversion of all dilutive securities, such as
options. The following table presents a reconciliation of the Company's basic
and diluted earnings, weighted average shares and per share amounts for the
three months and nine months ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>
Weighted
Earnings Avg. Shares Per Share
(Numerator) (Denominator) Amount
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings Per Share - Three Months
Ended September 30, 1999
Basic earnings per share $26,088 118,276,000 $0.22
Impact of Convertible Notes 2,225 15,326,000
Dilutive effect of options -- 2,024,000
------- ----------- -----
Diluted earnings per share $28,313 135,626,000 $0.21
======= =========== =====

Earnings Per Share - Three Months
Ended September 30, 1998
Basic earnings per share $20,874 117,860,000 $0.18
Impact of Convertible Notes 1,780 15,333,333
Dilutive effect of options -- --
------- ----------- -----
Diluted earnings per share $22,654 133,193,333 $0.17
======= =========== =====

Earnings Per Share - Nine Months
Ended September 30, 1999
Basic earnings per share $56,533 118,090,000 $0.48
Impact of Convertible Notes 6,474 15,331,000
Dilutive effect of options -- 658,000
------- ----------- -----
Diluted earnings per share $63,007 134,079,000 $0.47
======= =========== =====

Earnings Per Share - Nine Months
Ended September 30, 1998
Basic earnings per share $55,805 102,284,000 $0.55
Impact of Convertible Notes 2,994 8,649,000
Dilutive effect of options -- --
------- ----------- -----
Diluted earnings per share $58,799 110,933,000 $0.53
======= =========== =====

Pro forma Earnings Per Share - Nine Months
Ended September 30, 1998
Basic pro forma earnings per share $51,305 102,284,000 $0.50
Impact of Convertible Notes 2,994 8,649,000
Dilutive effect of options -- --
------- ----------- -----
Diluted pro forma earnings per share $54,299 110,933,000 $0.49
======= =========== =====
</TABLE>

9
<PAGE> 10
AMKOR TECHNOLOGY, INC
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

9. COMPREHENSIVE INCOME

In 1998, the Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income". Comprehensive income includes all changes in
stockholders' equity during a period, except those resulting from investment by
and distributions to shareholders. Components of comprehensive income include
net income, changes in foreign currency translation adjustments and unrealized
holding gains/losses in marketable equity securities. Total comprehensive income
was $26,013 and $20,874 for the three months ended September 30, 1999 and 1998,
respectively, and $56,235 and $56,468 for the nine months ended September 30,
1999 and 1998, respectively.

10. RELATED - PARTY TRANSACTIONS

During the second quarter of 1999, the Company executed a letter with ASI
committing to make an equity investment of $150,000. The Company's investment
would be made through installments of approximately $41,000 in each of 1999,
2000 and 2001 and $27,000 in 2002. The Company's commitment to invest in ASI is
subject to: (1) execution of a definitive stock purchase agreement, (2)
concurrent conversion of debt by the creditor financial institutions, (3) the
Workout (See Note 13) remaining in effect and (4) the supply agreements between
the company and ASI remaining in effect. The Company would purchase the ASI
shares at W5,000 per share. Because the Company's total commitment of $150,000
is in U.S. dollars, the number of shares the Company would purchase will vary
based on the exchange rate of Korean won to U.S. dollars.

In October, the Company acquired 10,000,000 shares of ASI common stock for
approximately $41,600 (W50,000,000). This purchase represented the Company's
first installment of its equity investment in ASI. Subsequent to this purchase
and the concurrent conversion of debt by the creditor financial institutions,
the financial institutions, the Kim family and the Company own approximately
37%, 7% and 19% respectively of the outstanding common stock of ASI.

Upon completion of all conversions of debt by the creditor financial
institutions and all installments of our equity investment pursuant to the
Workout, we expect the relative equity ownership of ASI among the creditor
financial institutions, the Kim family and the company to be approximately 29%,
5% and 43%, respectively, subject to the creditor financial institutions voting
rights(See Note 13). Upon conversion of all of the convertible debt issued to
the creditor financial institutions, which would be permitted beginning one year
after the date of issuance of such debt, the ownership of ASI among the creditor
financial institutions, the Kim family and the company would be approximately
43%, 4% and 34%, respectively, subject to the creditor financial institutions'
voting rights(See Note 13).

11. SEGMENT INFORMATION

The Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," during the fourth quarter of 1998. The
Company has identified two reportable segments (packing and test services and
wafer fabrication services) that are managed separately because the services
provided by each segment require different technology and marketing strategies.

Packaging and Test Services. Through its three factories located in the
Philippines, its Korean factory, K4, as well as the three ASI factories in Korea
under contract, the Company offers a complete and integrated set of packaging
and test services including IC packaging design, leadframe and substrate design,
IC package assembly, final testing, burn-in, reliability testing and thermal and
electrical characterization.

10
<PAGE> 11
AMKOR TECHNOLOGY, INC
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

Wafer Fabrication Services. Through its wafer fabrication services division,
the Company provides marketing, engineering and support services of ASI's deep
submicron CMOS foundry, under a long-term supply agreement.

Sales to Intel Corporation accounted for approximately $70,000 and $88,000
of packaging and test revenues for the three months ended September 30, 1999 and
1998, respectively, and accounted for approximately $213,000 and $240,000 of
packaging and test revenues for the nine months ended September 30, 1999 and
1998, respectively. In addition, Texas Instruments, Inc. accounted for
approximately $6,000 and $9,000 of packaging and test revenues during the three
months ended September 30, 1999 and 1998, respectively, $18,000 and $30,000 of
packaging and test revenues for the nine months ended September 30, 1999 and
1998, respectively, and accounted for 100% of wafer fabrication revenues for all
periods presented.

The accounting policies for segment reporting are the same as those for the
Company's Consolidated Financial Statements. The Company evaluates its operating
segments based on operating income.

Summarized financial information concerning the Company's reportable segments is
shown in the following table. The "Other" column represents corporate assets
which include cash and cash equivalents, short-term investments, non-operating
balances due from affiliates, investment in Taiwan Semiconductor Technology
Corporation, other investments and the elimination of inter-segment balances.

<TABLE>
<CAPTION>
PACKAGING WAFER
AND TEST FABRICATION OTHER TOTAL
-------- ----------- ----- -----
<S> <C> <C> <C> <C>
Three months ended September 30, 1999
Net Revenues ......................... $ 429,687 $ 72,129 -- $ 501,816
Gross Profit ......................... $ 90,276 $ 7,213 -- $ 97,489
Operating Income ..................... $ 49,489 $ 4,634 -- $ 54,123

Three months ended September 30, 1998:
Net Revenues ......................... $ 356,556 $ 30,162 -- $ 386,718
Gross Profit ......................... $ 60,437 $ 4,524 -- $ 64,961
Operating Income ..................... $ 30,534 $ 2,300 -- $ 32,834

Nine months ended September 30, 1999:
Net Revenues ......................... $1,160,106 $211,592 -- $1,371,698
Gross Profit ......................... $ 205,664 $ 21,163 -- $ 226,827
Operating Income ..................... $ 100,290 $ 12,954 -- $ 113,244

Nine months ended September 30, 1998:
Net Revenues ......................... $1,096,945 $ 46,230 -- $1,143,175
Gross Profit ......................... $ 187,320 $ 6,935 -- $ 194,255
Operating Income ..................... $ 99,962 $ 518 -- $ 100,480

As of September 30, 1999:
Total Assets ......................... $1,367,976 $ 38,794 $341,358 $1,748,128

As of December 31, 1998:
Total Assets ......................... $ 655,695 $ 65,941 $281,961 $1,003,597
</TABLE>

11
<PAGE> 12
AMKOR TECHNOLOGY, INC
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

The following table presents property, plant and equipment, net based
on the location of the asset:

<TABLE>
<CAPTION>
PROPERTY, PLANT AND EQUIPMENT
--------------------------------------
DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------
<S> <C> <C>
United States ........................ $ 48,851 $ 47,274
Philippines .......................... 366,717 434,431
Korea ................................ -- 299,265
Other foreign countries .............. 543 440
-------- --------
Consolidated ......................... $416,111 $781,410
======== ========
</TABLE>

12. COMMITMENTS AND CONTINGENCIES

The Company is involved in various claims incidental to the conduct of its
business. Based on consultation with legal counsel, excluding the matter
discussed below, management does not believe that any claims, either
individually or in the aggregate, to which the Company is a party will have a
material adverse effect on the Company's financial condition or results of
operations.

The Company is currently engaged in negotiations regarding amounts due under
a technology license agreement with a third party. To date, this dispute has not
involved the judicial systems. The Company has accrued its estimate of amounts
due under this agreement.However, depending on the results of the negotiations,
the ultimate amount payable could be less than the amount accrued or exceed the
amount accrued by up to $6,000.

13. RISK ASSOCIATED WITH DEPENDENCE ON RELATIONSHIP WITH ASI

In 1998 and the nine months ended September 30, 1999, approximately 67% and
56%, respectively, of the Company's packaging and test net revenues, as well as
100% of the Company's wafer fabrication revenues, were derived from services
performed for the Company by ASI. Effective January 1, 1998, the Company entered
into five-year supply agreements with ASI giving the Company the first right to
market and sell substantially all of ASI's packaging and test services and the
exclusive right to market and sell all of the wafer output of ASI's new wafer
foundry, both of which have negotiable pricing terms. These agreements are
cancelable by either party upon five years prior written notice at any time
after the fifth anniversary of the effective date. The Company's business,
financial condition and operating results have been and will continue to be
significantly dependent on the ability of ASI to effectively provide the
contracted services on a cost-efficient and timely basis. The termination of the
Company's relationship with ASI for any reason, or any material adverse change
in ASI's business resulting from underutilization of its capacity, the level of
its debt and its guarantees of affiliate debt, labor disruptions, fluctuations
in foreign exchange rates, changes in governmental policies, economic or
political conditions in Korea or any other change could have a material effect
on the Company's business, financial condition and results of operations.

ASI's ability to continue to provide services to the Company will depend on
ASI's financial condition and performance. ASI currently has a significant
amount of debt relative to its equity, which debt the Company expects will
continue to increase in the foreseeable future. ASI's business has been severely
affected by the economic crisis in Korea. In late 1997, the Republic of Korea
began to undergo a foreign currency liquidity crisis resulting in significant
adverse economic circumstances and significant depreciation in the value of the
Korean Won against the U.S. dollar. ASI historically operated with a significant
amount of debt relative to its equity. The economic crisis in Korea led to
sharply higher interest rates and significantly reduced opportunities for
refinancing maturing debts. Because ASI maintained a substantial amount of
short-term debt, its inability to refinance this debt created a liquidity crisis
for ASI.

In addition, as of December 31, 1998, ASI was contingently liable under
guarantees in respect to debt of certain affiliates in the aggregate amount of
approximately W668 billion. If any relevant subsidiaries or

12
<PAGE> 13
AMKOR TECHNOLOGY, INC
NOTES TO FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

affiliates of ASI were to fail to make interest or principal payments or
otherwise default under their debt obligations guaranteed by ASI, ASI could be
required under its guarantees to repay such debt, which event could have a
material adverse effect on its financial condition and results of operations.

In response to this situation, in October 1998, ASI announced that it had
applied for and was accepted into the Korean financial restructuring program
known as 'Workout". The Workout program is the result of an accord among Korean
financial institutions to assist in the restructuring of Korean businesses and
does not involve the judicial system.

The Workout , which became effective in April 1999, contained provisions
including those that allowed ASI to defer repayment of principal on certain
loans and capital leases, to defer interest payments on certain loans, to reduce
interest rates on certain loans, and to extend a grace period against the
enforcement of guarantees made by ASI for liabilities of ASI's affiliates.In
addition, the Workout contained provisions for the conversion of certain debt to
equity and other debt instruments, and for the entitlement of the creditor
financial institutions to vote the ASI shares owned by Mr. James Kim and his
family

The creditor financial institutions have the right to terminate or modify
the Workout if ASI does not fulfill the terms of the Workout, including meeting
certain financial targets. In addition, the creditor financial institutions can
modify the terms of the Workout upon agreement of creditor financial
institutions holding at least 75% of the debt restructured under the Workout. If
the creditor financial institutions subsequently terminate the Workout, the
creditor financial institutions could reinstate and enforce the original terms
of ASI's debt, including accelerating ASI's obligations and pursuing ASI's
guarantees of its affiliates' debt. If this were to occur, ASI's and our
businesses would be harmed.

There can be no assurance that ASI will be able to satisfy the terms of the
Workout Agreement. Any inability of ASI to comply with the terms of the Workout
Agreement, generate cash flow from operations sufficient to fund its capital
expenditures and other working capital and liquidity requirements could have a
material adverse effect on ASI's ability to continue to provide services and
otherwise fulfill its obligations to the Company.

14. SUBSEQUENT EVENTS

During October 1999, the Company exchanged 6,290,930 shares of the
Company's common stock for $78,290 of the Company's 5.75% convertible
subordinated notes due May 1, 2003. The fair market value of the shares of
common stock issued in the exchange in excess of the shares required for
conversion were approximately $8,900, which will be expensed during the fourth
quarter of 1999.

13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion contains forward-looking statements within the
meaning of the federal securities laws, including: (1) statements regarding the
anticipated growth in the market for our products, (2) our anticipated capital
expenditures and financing needs, (3) our expected capacity utilization rates,
(4) our belief as to our future operating performance (5) the anticipated
results of the Workout, (6) statements regarding future won/dollar exchange
rates, (7) statements regarding the future of our relationship with ASI, (8) our
anticipated equity investment in ASI, (9) our plan to implement a Year 2000
compliance plan, (10) statements regarding the anticipated growth in demand
during the fourth quarter of 1999, (11) statements regarding the expected pace
of decline in average selling prices, (12) our expectations regarding the future
levels of wafer fabrication revenues, (13) statements regarding our future
effective tax rate, and (14) other statements that are not historical facts.
Because such statements include risks and uncertainties, actual results may
differ materially from those anticipated in such forward-looking statements as a
result of certain factors, including those set forth in the following discussion
as well as in "Risk Factors" and "Business." The following discussion provides
information and analysis of our results of operations for the three months and
nine months ended September 30, 1999 as compared to the three months and nine
months ended September 30, 1998 and our liquidity and capital resources.

OVERVIEW

General Business

Beginning in the first quarter of 1998, a worldwide slowdown in
semiconductor demand, and excess factory capacity, resulted in a rapid
deterioration in average selling prices. At the same time, the Company began its
wafer fabrication services business, which under a supply agreement with ASI,
markets the output of ASI's wafer foundry. While assembly and test revenues were
declining the increase in the wafer fabrication services business was able to
offset most of the assembly and test net revenue decline.

Average selling price erosion peaked in the third quarter of 1998 and the
pace of such erosion has slowed in each successive quarter. Our revenues saw
significant growth during the third quarter of 1999 compared to the previous
quarter. This growth in revenue was the result of a 14% increase in third
quarter 1999 unit volume over the second quarter of 1999. Despite the increase
in unit volumes, third quarter 1999 average selling prices declined 3% compared
to average selling prices in the second quarter of 1999. Based on non-binding
three-month and six-month customer demand forecasts, we expect a strong increase
in demand throughout the remainder of 1999 and through the first half of 2000.
As our capacity utilization increases, we expect a more normalized reduction in
average selling prices.

To meet this expected continued growth in demand, the Company is currently
making capital expenditures to expand its manufacturing capacity and
corresponding investments in human resources. In the near term the Company may
need to expand its existing manufacturing facilities. The Company's gross
margins could be negatively impacted in the short-term as we expand facilities.

ASI's semiconductor wafer foundry has been equipped to produce approximately
17,000 wafers per month. For the last two quarters, the wafer foundry has been
operating at near capacity. Accordingly, we expect revenues from this business
segment to remain at current levels. The Company continues to be dependent upon
one customer for all of its current wafer fabrication revenues. Changes in
demand from this customer could result in significant fluctuations in wafer
fabrication revenues. We expect to begin loading several new customers beginning
in the fourth quarter of the year.

14
<PAGE> 15
Relationship with ASI

Our gross margins are significantly affected by fluctuations in service
charges paid pursuant to our supply agreements with ASI. We have negotiated with
ASI to maintain the current pricing through the end of 1999. During the nine
months ended September 30, 1998 and 1999, we derived approximately 68% and 63%
of our sales, respectively, and approximately 46%, and 42%, respectively, of our
gross profit from services performed for us by ASI. In addition, ASI derives
nearly all of its revenues from services sold by us. In May 1998, we acquired
ASI's K4 factory. As a result, we expect these percentages to decrease in future
periods.

RESULTS OF OPERATIONS

The following table sets forth certain operating data as a percentage of net
revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- --------------
1998 1999 1998 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net revenues ............................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues ........................... 83.2 80.6 83.0 83.5
----- ----- ----- -----
Gross profit ............................. 16.8 19.4 17.0 16.5
----- ----- ----- -----
Operating expenses:
Selling, general and administrative ...... 7.8 8.0 7.7 7.7
Research and development ................. 0.5 0.6 0.5 0.6
----- ----- ----- -----
Total operating expenses .............. 8.3 8.6 8.2 8.3
----- ----- ----- -----
Operating income ........................... 8.5 10.8 8.8 8.2
----- ----- ----- -----
Other (income) expense:
Interest expense, net .................... 0.6 3.4 1.5 2.1
Foreign currency (gain) loss ............. 0.0 0.0 0.3 0.0
Other expense, net ....................... 0.3 0.5 0.6 0.5
----- ----- ----- -----
Total other expense ................... 0.9 3.9 2.4 2.6
----- ----- ----- -----
Income before income taxes, equity in
income (loss) of ASI and minority interest 7.6 6.9 6.4 5.6
Provision for income taxes ................. 2.2 1.7 1.5 1.5
----- ----- ----- -----
Net income ................................. 5.4 5.2 4.9 4.1
Pro forma adjustment for income taxes ...... 0.0 -- 0.4 --
----- ----- ----- -----
Pro forma net (loss) income ................ 5.4% 5.2% 4.5% 4.1%
===== ===== ===== =====
</TABLE>

Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998

Net Revenues. Net revenues for the three months ended September 30, 1999
increased $115.1 million or 29.8% to $501.8 million, compared to net revenues of
$386.7 million for the three months ended September 30, 1998. Assembly and test
net revenues for the three months ended September 30, 1999 increased 20.5% to
$429.7 million compared to $356.6 million for the three months ended September
30, 1998. Wafer fabrication services net revenues for the three months ended
September 30, 1999 increased to $72.1 million compared to $30.2 million for the
same period last year.

Assembly and test unit volumes for the three months ended September 30, 1999
increased approximately 44% compared to the three months ended September 30,
1998. However, these unit volume increases were offset by significant average
selling price erosion. Average selling prices for the third quarter of 1999
decreased by nearly 23% compared to average selling prices in the third quarter
of 1998. Beginning in the second quarter of 1999 the rate of average selling
price erosion slowed. For the quarter ended September 30, 1999 average selling
prices declined by approximately 3% compared to average selling price declines
of 4%, 7% and 9% in the three preceding quarters.

The wafer fabrication services net revenues currently represent full capacity of
ASI's semiconductor wafer foundry. Marketing of the wafer fabrication services
began in January 1998. The significant increase in revenues represents the
production ramp-up of the wafer foundry, which has been producing at near full
capacity since the beginning of 1999.

15
<PAGE> 16
Gross Profit. Gross profit for the three months ended September 30, 1999
increased to $97.5 million or 19.4% of net revenues compared to $65.0 million or
16.8% of net revenues for the three months ended September 30, 1998.
The increase in gross margin percentage was primarily due to:

- The acquisition of our K4 factory in May of 1999. Prior to the
acquisition, our revenues generated from this factory were
derived under our supply agreement with ASI. Accordingly the
gross margins obtained from these sales were below the gross
margins we would normally derive from a comparable company
owned factory.

- Increasing unit volumes permitted better absorption of our
factories' substantial fixed costs resulting in a lower
manufacturing cost per unit and improved gross margins.

These positive effects on our gross margin were offset by:

- Increasing contribution to total revenues from our low margin
wafer fabrication services business. Beginning in 1999, under
the existing supply agreement our contractual gross margins
for this business was reduced to 10% from 15% in 1998.

- Significant average selling price erosion across all product
lines

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended September 30, 1999 increased
to $40.4 million or 8.0% of net revenues from $30.0 million or 7.8% of net
revenues for the three months ended September 30, 1998. The increase in these
costs was due to:

- Increased costs with Company's marketing, sales and wafer
fabrication departments resulting from increased headcount,
and related personnel costs.

- Increased costs at the P3 factory as it continues to increase
production capacity.

- Increased costs related to the consolidation of K4 factory
operations during the second quarter of 1999 and it's general
and administrative expenses, including fees paid to ASI under
the transition services agreement signed by the Company and
ASI in connection with the acquisition of K4.

Research and Development Expenses. Research and development expenses for the
three months ended September 30, 1999 increased to $3.0 million or 0.5% of net
revenues compared to $2.1 million or 0.6% of net revenues for the three months
ended September 30, 1998. Increased research and development expenses resulted
from increased headcount and general development activities, primarily the
expansion of our Chandler, Arizona based research facility.

Other (Income) Expense. Other expense for the three months ended September 30,
1999 increased to $19.3 million or 3.9% of net revenues compared to $3.4 million
or 0.9% of net revenues for the three months ended September 30, 1998. The most
significant factor effecting the increase was the increase in interest expense.
As a result of the Company's acquisition of K4 in May, and the corresponding
issuance of $625 million of senior and subordinated notes, interest expense
increased by $14.9 million compared to the third quarter of 1998.

Income Taxes. The Company's effective tax rate for the three months ended
September 30, 1999 was 25% compared to 29% for the three months ended September
30, 1998. The decrease in the effective tax rate was due to the benefit of the
recently acquired K4 factory operations that are subject to a 10-year tax
holiday in Korea.

16
<PAGE> 17
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998

Net Revenues. Net revenues for the nine months ended September 30, 1999
increased $228.5 million, or 20.0%, to $1,371.7 million from $1,143.2 million
for the nine months ended September 30, 1998. Assembly and test net revenues for
the nine months ended September 30, 1999 increased 5.8% to $1,160.1 million from
$1,096.9 million for the nine months ended September 30, 1998. For the same nine
month periods, wafer fabrication net revenues increased to $211.6 million from
$46.2 million.

The increase in assembly and test net revenues was primarily attributable to
significant increase in unit volumes offset by significant average selling price
erosion across all product lines. The average selling price erosion was most
severe in the second half of 1998 and has slowed during the first half of 1999
due to increases in product demand and decreases in excess factory capacity.
Offsetting this erosion in average selling prices was an overall unit volume
increase of approximately 23%. In addition, changes in the mix of product we are
selling, to more advanced and laminate packages, also provided an offset to
overall price erosion. During the nine months ended September 30, 1999, the
Company's advanced and laminate packages, which have higher average selling
prices than the Company's traditional leadframe products, accounted for 59.3% of
revenues compared to 52.4% for the nine months ended September 30, 1998.

The significant increase in wafer fabrication net revenues represents the
production ramp-up of the wafer foundry, which began operation in January 1998
and was not producing at near full installed capacity until the beginning of
1999.

Gross Profit. Gross profit for the nine months ended September 30, 1999
increased to $226.8 million or 16.5% of net revenues compared to $194.3 million
or 17.0% of net revenues for the nine months ended September 30, 1998.

Gross margins were negatively impacted by:

- Increasing contribution to total revenues from our low margin
wafer fabrication services business. For the nine months ended
September 30, 1999 wafer fabrication services net revenues
represented 15.4% of total net revenues compared to 4.0% of
total net revenues for the nine months ended September 30,
1998. Beginning in 1999, under the existing supply agreement
our contractual gross margins for this business was reduced to
10% from 15% in 1998.

- Significant average selling price erosion across all product
lines

The negative impact on gross margins were offset by:

- Increasing unit volumes during the third quarter of 1999 which
permitted better absorption of our factories' substantial
fixed costs resulting in a lower manufacturing cost per unit
and improved gross margins.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended September 30, 1999 increased
to $105.5 million, or 7.7% of net revenues compared to $87.7 million or 7.7% of
net revenues for the nine months ended September 30, 1998. The increase in these
costs was due to:

- Increased headcount and related personnel costs at the
company's marketing, sales and wafer fabrication departments.

17
<PAGE> 18
- Increased headcount and related personnel costs at the
company's P3 factory, which continues to increase production
capacity.

Research and Development. Research and development expenses for the nine months
ended September 30, 1999 increased to $8.1 million, or 0.6% of net revenues
compared to $6.1 million, or 0.5% of net revenues for the nine months ended
September 30, 1998. Increased research and development expenses resulted from
increased headcount and general development activities, primarily the expansion
of our Chandler, Arizona based research facility.

Other (Income) Expense. Other expenses for the nine months ended September 30,
1999 increased to $35.8 million, or 2.6% of net revenues compared to $27.4
million, or 2.4% of net revenues for the nine months ended September 30, 1998.
The net increase in other expenses was primarily a result of:

- Increase in interest expense of $12.9 million. The net
increase was the result of reduced interest expense resulting
from the application of IPO proceeds in May 1998 against
outstanding debt, offset by increased interest expense
resulting from the May 1999 issuance of high yield notes to
fund the K4 acquisition.

- Decrease in foreign exchange losses of $3.7 million resulting
from the stabilization of the Philippine peso since the first
quarter of 1998.

- Decrease in other expenses as the six months ended June 30,
1998 included non-recurring charges related to bank
refinancing costs and the disposal of the Company's interest
in ASI in February 1998.

Income Taxes. The Company's effective tax rate for the nine months ended
September 30, 1999 and 1998 was 27% and 29%, respectively (after giving effect
to the pro forma adjustment for income taxes). The decrease in the effective tax
rate during the nine months ended September 30, 1999 was due to the benefit of
the recently acquired K4 factory operations that are subject to a 10-year tax
holiday in Korea.

Minority Interest. Minority interest represented ASI's ownership in the
consolidated net income of Amkor/Anam Pilipinas, Inc. ("AAP"). Accordingly, the
Company recorded a minority interest expense in its consolidated financial
statements relating to the minority interest in the net income of AAP. In the
second quarter of 1998, the Company purchased ASI's 40% interest in AAP and, as
a result, the Company now owns substantially all of the common stock of AAP. The
acquisition of the minority interest resulted in the elimination of the minority
interest liability and in additional goodwill amortization of approximately $2.5
million per year.

LIQUIDITY AND CAPITAL RESOURCES

On May 17, 1999 we completed an asset purchase of ASI's newest and largest
packaging and test factory, K4, excluding cash and cash equivalents, notes and
accounts receivables, intercompany accounts and existing claims against third
parties. The purchase price for K4 was $575 million, plus the assumption of
approximately $7 million of employee benefit liabilities. In conjunction with
our proposed purchase of K4, we completed a private placement to raise $625
million in senior and senior subordinated notes. Through our offering on May 6,
1999, we sold $425 million in senior notes and $200 million of senior
subordinated notes. The senior notes mature in May 2006 and have a coupon rate
of 9.25%. The senior subordinated notes mature in 2009, and have a coupon rate
of 10.5%. The Company is required to pay interest semi-annually in May and
November for all of the notes. Subsequent to the purchase of K4 and payment of
related offering costs, the Company had approximately $30.0 million of notes
offering proceeds available for working capital.

18
<PAGE> 19
During the second quarter of 1999, we executed a letter with ASI committing
to make a $150 million equity investment in ASI. Our commitment required that we
invest this amount in installments of approximately $41 million in each of 1999,
2000 and 2001 and $27 million in 2002. Our commitment to invest in ASI is
subject to: (1) execution of a definitive stock purchase agreement, (2)
concurrent conversion of debt by the creditor financial institutions, (3) the
Workout remaining in effect and (4) the supply agreements between our company
and ASI remaining in effect. Under this investment, we will purchase the ASI
shares at W5,000 per share. Because our commitment is in U.S. dollars, the
number of shares we would purchase will vary based on the exchange rate of
Korean won to U.S. dollars. Subsequent to September 30, 1999 we made our initial
investment in ASI. We purchased 10 million shares of common stock at price of
5,000 won per share, or approximately $41.6 million dollars. As a result of this
investment and the conversion of debt to ASI stock by the creditor financial
institutions, we now own approximately 19% of ASI.

Our ongoing primary cash needs are for equipment purchases, factory
expansion and working capital. In addition, we have funded and will continue to
fund our interest in our Taiwan packaging and test joint venture out of
available cash. Based on the September 30, 1999 exchange rate of $1.00 to 31.8
New Taiwan dollars, we are committed to contribute a total of approximately $20
million through the year 2000.

Net cash provided by operating activities in the nine months ended September
30, 1999 and September 30, 1998 was $220 million and $131 million, respectively.
Net cash provided by financing activities in the nine months ended September 30,
1999 and 1998 was $592 million and $66 million, respectively.

We continue to invest significant amounts of capital to increase our
packaging and test services capacity. In the nine months ended September 30,
1999, we made capital expenditures of $176 million excluding the acquisition of
K4.. We intend to spend approximately $225 million in capital expenditures in
1999, primarily for the expansion of our factories. Due to the expected growth
in our business in the year 2000, we believe our capital expenditures in the
year 2000 could exceed our current year capital expenditures.

At September 30, 1999, in addition to the $625 million of senior and senior
subordinated notes sold to purchase K4, our debt consisted of $15.7 million of
borrowings classified as current liabilities, $10.3 million of long-term debt
and capital lease obligations and $207.0 million of 5 -3/4% convertible
subordinated notes due 2003. We had $103.7 million in borrowing facilities with
a number of domestic and foreign banks, of which $80.8 million remained unused.
Certain of the agreements with our banks require compliance with certain
financial covenants, contain other restrictions and are collateralized by our
assets. These facilities are typically revolving lines of credit and working
capital facilities that are renewable annually and bear interest at rates
ranging from 8.0% to 10.75%. Long-term debt and capital lease obligations
outstanding have various expiration dates through April 2004 and bear interest
at rates ranging from 5.8% to 13.8%.

Subsequent to September 30, 1999 the holders of the Company's convertible
subordinated notes exchanged convertible notes with a face value of $78 million
for 6,290,930 shares of common stock. In the fourth quarter 1999, the Company
will incur a non-cash charge of approximately $8.9 million representing the fair
market value of the shares of common stock issued in the exchange in excess of
the shares required for conversion, which represents a premium for early
retirement.

We believe that our existing cash balances, cash flow from operations and
available equipment lease financing will be sufficient to meet our projected
capital expenditures, working capital and other cash requirements for at least
the next twelve months. We may require capital sooner than currently expected.
We cannot assure you that additional financing will be available when we need it
or, if available, that it will be available on satisfactory terms. In addition,
the terms of the senior and senior subordinated notes, recently sold by us,
significantly reduce our ability to incur additional debt. Failure to obtain any
such financing could have a material adverse effect on our company.

19
<PAGE> 20
Foreign Currency Translation Gains and Losses

Our subsidiaries in the Philippines and Korea maintain their accounting
records in U.S. dollars. All sales, the majority of all bank debt and all
significant material and fixed asset purchases of such subsidiaries are
denominated in U.S. dollars. As a result, the exposure of our subsidiaries in
the Philippines Koreas to changes in the Philippine peso/ U.S. dollar exchange
rate and the Korean won/ U.S dollar exchange rate relates primarily to certain
receivables and advances and other assets offset by payroll, pension and local
liabilities. To minimize our foreign exchange risk in the Philippines and Korea,
we selectively hedge our net foreign currency exposure through short-term
forward exchange contracts. To date, our hedging activity has been immaterial.

YEAR 2000 ISSUES

We have been actively engaged in addressing Y2K issues. These issues occur
because many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. As a result,
software that records only the last two digits of the calendar year may not be
able to distinguish whether "00" means 1900 or 2000. This may result in software
failures or the creation of erroneous results.

State of Readiness

To manage our Y2K compliance program, we have divided our efforts into five
program areas:

- - Computing systems, including computer hardware and software;

- - Manufacturing equipment;

- - Facilities;

- - External utilities; and

- - Supply chain, including equipment/inventory vendors, freight forwarders and
other vendors.

For each of these program areas, we are using a five-step approach:

- - Ownership: creating awareness, assigning tasks, providing structured
feedback and updates;

- - Inventory: listing items to be assessed for Y2K readiness;

- - Initial Assessment: prioritizing the inventoried items and assessing their
Y2K readiness, including validation with vendors, and testing where
appropriate;

- - Risk Assessment: evaluating initial assessments and developing action and
contingency plans; and

- - Corrective Action Deployment: implementing corrective actions, verifying
implementation, finalizing and executing contingency plans.

We have implemented a process to monitor and maintain our Y2K compliance. As of
September 30, 1999, we have essentially completed all steps up to and including
the Corrective Action Deployment phase. Currently, there are less than 20
non-critical issues worldwide that we are tracking to conclusion. Computing
Systems, Facilities, and Manufacturing Equipment are under Y2K change management
procedures in order to ensure that these program areas remain Y2K capable. In
addition, we continue to review the status of external utilities, suppliers, and
customers. Contingency plans are routinely reviewed

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and updated. The September 9, 1999 "key date" yielded no issues within the Amkor
environment, and only one minor event was reported at a supplier location in the
Philippines. Year-end "rollover" plans are in the process of being refined to
help ensure that we are properly staffed and equipped to respond to Y2K issues
as they may arise on January 1, 2000. Reporting our worldwide readiness status
to customers, management, employees, and others is part of our rollover
strategy. Structured feedback and progress updates are provided to our senior
management on an ongoing basis. The status for each program area is as follows:

- - Computing Systems: We believe that all critical items within our technical
infrastructure are Y2K capable. Items within our technical infrastructure
include servers, communications equipment, personal computers, operating
systems and standard software.

- - Manufacturing Equipment: Our packaging operations have completed all program
steps and are Y2K capable. Our test operations, consisting of company-owned
and customer-consigned equipment are estimated to be 99% capable, with
corrective action deployment in its final stages. ASI's wafer fabrication
services are estimated to be 99% capable, with one remaining item to be
validated.

- - Facilities: All factory facilities are 100% Y2K capable. Within the U.S. we
are awaiting completion of backup power generation projects for two key
sites, which are in their final phases. We have not received complete Y2K
information on one of our non-critical leased properties, a sales office.

- - External Utilities: We are assessing the on-going Y2K readiness of both
public and private utilities in Korea and the Philippines. These utilities
include electricity, telecommunications, water, sewer, gas and key airports
used to transport products and supplies. Utilities in South Korea have
reported that they are capable at this time, and we are awaiting a formal
announcement from the Philippines in early November. We have developed
contingency plans for all utilities, regardless of their Y2K readiness, and
we will continue to review and update such plans periodically. The first
version of all overseas contingency plans were completed during the second
quarter of 1999.

- - Supply Chain: We continue to assess the on-going Y2K readiness of our supply
chain, with particular attention to direct material suppliers. Most critical
direct material suppliers have been subject to a Y2K compliance audit, and
all are part of a continuing review and re-scoring. We are also monitoring
the readiness of freight forwarders, equipment manufacturers, local
suppliers, banks, and service providers. The initial versions of our
contingency plans for critical suppliers were completed during the first
quarter, and are reviewed and updated periodically. Fourth quarter
purchasing plans are ready for execution per the contingency planning
process. The company is also monitoring the readiness and contingency
planning process of its key customers.

In addition, because ASI is our most significant vendor, we have conducted
regular reviews as to the status of their Y2K compliance program. We believe
that ASI has a similar Y2K program. Unless discussed otherwise above, we believe
that ASI has achieved a similar level of completion and believe that ASI is on
target to meet our timing deadlines.

Costs to Address Y2K Issues

We have highly-automated manufacturing equipment and systems. Such equipment
incorporates personal computers, embedded processors and related software to
control activity scheduling, inventory tracking, statistical analysis and
automated manufacturing. We have devoted a significant portion of our Y2K
efforts on internal systems to prevent disruption to manufacturing operations.

We are evaluating the estimated costs to address Y2K issues using our actual
experience. Based on available information, we believe that we will be able to
manage our Y2K transition without any material long-term adverse effect on our
business or results of operations. We have executed our Y2K compliance effort
within the normal operating budgets of our internal engineering, information
technology, purchasing and other departments. We attribute a small number of
projects directly to Y2K issues, and most software

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upgrades have been covered within our software maintenance contracts. We
attribute the majority of our historical and projected costs to resolve Y2K
issues to the upgrade of equipment in our test operations. We will capitalize
such costs. We have incurred $1 million of expenses related to Y2K issues
through 1998 and are projecting $2 million of expenses in 1999.

Risks of Y2K Issues and Contingency Plans

We continue to assess the Y2K issues relating to our computing systems,
manufacturing equipment, facilities and external utilities and our supply chain.
Currently, we believe that our largest Y2K risk is that entities beyond our
control upon which we are dependent, including external utilities and our supply
chain, fail to adequately address their Y2K issues. We have designed our Y2K
planning process to mitigate worst-case disruptions which could delay product
delivery.

Based on currently available information, we do not believe that the Y2K issues
discussed above will have a material long-term adverse impact on our financial
condition or results of operations. However, we cannot assure you that we will
not be affected by such issues. In addition, we cannot assure you that the
failure of any material supplier, utility provider, customer or other third
party with whom we deal to ensure Y2K compliance will not have a material
adverse effect on our financial condition or results of operations

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FACTORS THAT MAY AFFECT OPERATING RESULTS

In addition to the factors discussed elsewhere in this form 10-Q and in the
Company's Report on Form 10-K for the year ended December 31, 1998 and the
Company's other reports filed with the Securities and Exchange Commission, the
following are important factors which could cause actual results or events to
differ materially from those contained in any forward looking statements made by
or on behalf of the Company.

FLUCTUATIONS IN OPERATING RESULTS

Our operating results have varied significantly from period to period. A
variety of factors could materially and adversely affect our revenues, gross
profit and operating income, or lead to significant variability of quarterly or
annual operating results. These factors include, among others, the cyclical
nature of both the semiconductor industry and the markets addressed by end-users
of semiconductors, the short-term nature of its customers' commitments, timing
and volume of orders relative to our production capacity, changes in capacity
utilization, evolutions in the life cycles of customers' products, rescheduling
and cancellation of large orders, rapid erosion of packaging selling prices,
availability of manufacturing capacity, allocation of production capacity
between our facilities and those of ASI, fluctuations in package and test
service charges paid to ASI, changes in costs, availability and delivery times
of labor, raw materials and components, effectiveness in managing production
processes, fluctuations in manufacturing yields, changes in product mix, product
obsolescence, timing of expenditures in anticipation of future orders,
availability of financing for expansion, changes in interest expense, the
ability to develop and implement new technologies on a timely basis, competitive
factors, changes in effective tax rates, the loss of key personnel or the
shortage of available skilled workers, international political or economic
events, currency and interest rate fluctuations, environmental events, and
intellectual property transactions and disputes. Unfavorable changes in any of
the above factors may adversely affect our business, financial condition and
results of operations. In addition, we increase our level of operating expenses
and investment in manufacturing capacity based on anticipated future growth in
revenues. If our revenues do not grow as anticipated and we are not able to
decrease our expenses, our business, financial condition and operating results
would be materially and adversely affected.

DECLINING AVERAGE SELLING PRICES--THE SEMICONDUCTOR INDUSTRY PLACES DOWNWARD
PRESSURE ON THE PRICES OF OUR PRODUCTS.

Historically, prices for our packaging and test services have declined
over time. Beginning in 1997, a worldwide slowdown in demand for semiconductor
devices led to excess capacity and increased competition. As a result, price
declines in 1998 accelerated more rapidly. We expect that average selling prices
for our packaging and test services will continue to decline in the future. If
we cannot reduce the cost of our packaging and test services to offset a decline
in average selling prices, our future operating results could be harmed.

DEPENDENCE ON THE HIGHLY CYCLICAL SEMICONDUCTOR AND ELECTRONIC PRODUCTS
INDUSTRIES--WE OPERATE OUR BUSINESS IN VOLATILE INDUSTRIES, AND INDUSTRY
DOWNTURNS HARM OUR PERFORMANCE.

Our business is tied to market conditions in the semiconductor
industry, which is highly cyclical. Because our business is and will continue to
be dependent on the requirements of semiconductor companies for independent
packaging, test and wafer fabrication services, any future downturn in the
semiconductor industry or any other industry that uses a significant number of
semiconductor devices, such as the personal computer industry, could have a
material adverse effect on our business. For example, our operating results for
1998 were adversely affected by downturns in the semiconductor market.

DEPENDENCE ON RELATIONSHIP WITH ASI--OUR BUSINESSES ARE CLOSELY RELATED AND
FINANCIAL DIFFICULTIES FACED BY ASI MAY AFFECT OUR PERFORMANCE.

Our business depends on ASI providing semiconductor packaging and test
services and wafer fabrication services on a cost effective and timely basis.
During the nine months ended September 30, 1999, we derived approximately 56% of
our packaging and test net revenues from services performed for us by ASI and
100% of our wafer fabrication net revenues from services performed for us by
ASI.

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If ASI were to significantly reduce or curtail its operations for any
reason, or if our relationship with ASI were to be disrupted for any reason, our
business would be harmed. We may not be able to identify and qualify alternate
suppliers quickly, if at all. In addition, we currently have no other third
party suppliers of packaging and test services and no other qualified third
party suppliers of wafer fabrication services. Our factories in the Philippines
would be able to fill only a small portion of the resulting shortfall in
packaging and test capacity and none of the shortfall in wafer fabrication
capacity.

ASI is currently in weak financial condition and has a significant
amount of debt relative to its equity. In 1998, the report of ASI's independent
auditors on the consolidated financial statements of ASI included explanatory
paragraphs regarding: (1) the significant effect of the Korean economy on ASI's
operations caused in part by currency volatility in the Asia Pacific region, (2)
the filing of an application for reorganization by Anam Engineering and
Construction Co., Ltd., a subsidiary of ASI, which is still pending and (3)
ASI's participation in a financial restructuring program ASI has negotiated with
its creditor financial institutions. This program is known as the "Workout." The
Workout became effective in April 1999. The Workout includes significant debt
repayment from the proceeds from the sale of K4, reduction of interest rates,
extension of debt maturities, further reduction of debt by conversion of debt to
equity and a moratorium until December 31, 2003 on ASI's obligations on
guarantees of its affiliates' debt. As a result of the Workout, we expect ASI's
financial position to improve significantly. The Workout requires a third party
foreign investor to commit to invest $150.0 million in equity of ASI during the
next four years. We have executed a letter with ASI committing to this equity
investment. When we make the first installment of our equity investment in ASI,
ASI's financial results will affect our financial results because we will report
these results in our financial statements using the equity method of accounting.

It is not certain whether the Workout will be sufficient to enable ASI
to continue to provide services to our company at current levels or to obtain
funds for capital expansion. In addition, the Workout requires ASI to meet
certain performance thresholds on an ongoing basis. We cannot assure you that
ASI will be able to meet its performance thresholds. If ASI does not meet these
performance thresholds, the creditor financial institutions have the right to
modify or terminate the Workout. In addition, the creditor financial
institutions can modify the terms of the Workout upon agreement of creditor
financial institutions holding at least 75% of the debt restructured under the
Workout. If the creditor financial institutions subsequently terminate the
Workout, the creditor financial institutions could reinstate and enforce the
original terms of ASI's debt, including accelerating ASI's obligations and
pursuing ASI's guarantees of its affiliates' debt. If this were to occur, ASI's
and our businesses would be harmed.

POTENTIAL CONFLICTS OF INTEREST WITH ASI--MEMBERS OF THE KIM FAMILY OWN
SUBSTANTIAL PORTIONS OF, AND HAVE ACTIVE MANAGEMENT ROLES IN BOTH OUR COMPANY
AND ASI. THIS COULD LEAD TO CONFLICTS OF INTEREST IN OUR BUSINESS DEALINGS WITH
ASI.

Mr. James Kim, the founder of our company and currently our Chairman,
Chief Executive Officer and largest shareholder, is the eldest son of Mr. H. S.
Kim, the founder of ASI. Mr. H. S. Kim is currently the honorary Chairman and a
Director of ASI. Since January 1992, in addition to his other responsibilities,
Mr. James Kim has served as Chairman and a director of ASI. The Kim family,
which collectively owns approximately approximately 7% of the outstanding common
stock of ASI as of November 10, 1999, significantly influences the management of
ASI. Mr. James Kim and members of his family beneficially own approximately
58.8% of our outstanding common stock as of November 10, 1999.

Following our equity investment in ASI, our company will own a
substantial percentage of ASI's outstanding common stock. In addition, the
Workout provides for the conversion of a portion of ASI's debt to equity. Both
our investment in ASI and the conversion of debt to equity will substantially
decrease the Kim family's ownership in ASI. Furthermore, through December 31,
2003, the creditor financial institutions will be entitled to vote the ASI
shares owned by Mr. James Kim and his family. Even though the Kim family's
ownership of ASI will be reduced and the voting rights in their ASI shares
assigned to the creditor financial institutions, we believe that the Kim family
will continue to exercise significant influence over our company and ASI and its
affiliates.

ABSENCE OF BACKLOG--OUR NET REVENUES IN ANY QUARTER DEPEND ON OUR CUSTOMERS'
DEMAND FOR PACKAGING AND TEST SERVICES IN THAT QUARTER, AND WE MAY NOT BE ABLE
TO ADJUST COSTS QUICKLY IF OUR CUSTOMERS' DEMAND DIPS SUDDENLY.

Our packaging and test business does not typically operate with any
material backlog. We expect that in the future our packaging and test net
revenues in any quarter will continue to be substantially dependent upon our
customers' demand in that quarter. None of our customers have committed to
purchase any amount

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of packaging or test services or to provide us with binding forecasts of demand
for packaging and test services for any period. In addition, our customers could
reduce, cancel or delay their purchases of packaging and test services. Because
a large portion of our costs is fixed and our expense levels are based in part
on our expectations of future revenues, we may be unable to adjust costs in a
timely manner to compensate for any revenue shortfall.

CUSTOMER CONCENTRATION--WE GENERATE A LARGE PERCENTAGE OF OUR NET REVENUES FROM
A SMALL GROUP OF CUSTOMERS WHO HAVE NO MINIMUM PURCHASE OBLIGATIONS.

We depend on a small group of customers for a substantial portion of
our net revenues. In 1996, 1997, 1998 and the nine months ended September 30,
1999, we derived 39.2%, 40.1%, 35.3% and 32.0%, respectively, of our net
revenues from sales to our five largest packaging and test customers, with
23.5%, 23.4%, 20.6% and 15.6 % of our net revenues, respectively, derived from
sales to Intel Corporation. In addition, during 1998 and the nine months ended
September 30, 1999, we derived 7.4% and 15.4% of our net revenues, respectively,
from wafer fabrication services, and we derived all of these revenues from Texas
Instruments, Inc. ("Texas Instruments"). Our ability to maintain close,
satisfactory relationships with these customers is important to the ongoing
success and profitability of our business. We expect that we will continue to be
dependent upon a small number of customers for a significant portion of our
revenues in future periods.

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS--WE DEPEND ON OUR FACTORIES IN
KOREA AND THE PHILIPPINES. MANY OF OUR CUSTOMERS' OPERATIONS ARE ALSO LOCATED
OUTSIDE OF THE U.S.

We provide packaging and test services through our three factories
located in the Philippines and our recently acquired factory in Korea, K4. We
source additional packaging and test services from three factories located in
Korea and owned by ASI pursuant to a supply agreement with ASI. We also source
wafer fabrication services from a wafer foundry located in Korea and owned by
ASI. In addition, many of our customers' operations are located outside the U.S.
The following are risks inherent in doing business internationally:

- - regulatory limitations imposed by foreign governments;

- - fluctuations in currency exchange rates;

- - political risks;

- - disruptions or delays in shipments caused by customs brokers or
government agencies;

- - unexpected changes in regulatory requirements, tariffs, customs, duties
and other trade barriers;

- - difficulties in staffing and managing foreign operations; and

- - potentially adverse tax consequences resulting from changes in tax
laws.

In addition to the risks listed above, our operations in Korea and the
Philippines are subject to certain country-specific risks described below.

Risks Associated with Our Operations in Korea

Historically, we have derived a significant percentage of our net
revenues from sales of services performed for us by ASI in Korea. Our operations
in Korea following the acquisition of K4 and ASI's operations are subject to
risks inherent to operating in Korea. While our revenues in Korea will be
denominated in U.S. dollars, our labor costs and some of our operating costs
will be denominated in won. Substantially all of ASI's revenues and a
significant portion of its debt and capital lease obligations are denominated in
U.S. dollars, while its labor and some operating costs are denominated in won.
Fluctuations in the foreign exchange rate will affect both our company's and
ASI's financial results. When we make the first installment of our equity
investment in ASI and report ASI's results in our financial statements using the
equity method of accounting, our financial results will be further affected by
foreign exchange fluctuations.

Beginning in late 1997 and continuing into 1998, Korea experienced
severe economic instability as well as devaluation of the Korean won relative to
the U.S. dollar. The exchange rate as of December 31, 1996 was 884 to $1.00 as
compared to 1,415 to $1.00 as of December 31, 1997 and 1,207 to $1.00 as of
December 31, 1998. The depreciation of the won relative to the U.S. dollar has
increased the cost of importing goods and

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services into Korea. In addition, the value in won of Korea's public and private
sector debt denominated in U.S. dollars and other foreign currencies has also
increased significantly. These developments in turn led to sharply higher
domestic interest rates and reduced opportunities for refinancing or refunding
maturing debts. As a result of these difficulties, financial institutions in
Korea have limited their lending in particular to highly leveraged companies.
Future economic instability in Korea could have a material adverse effect on our
company's and ASI's business and financial condition.

Relations between Korea and the Democratic People's Republic of Korea
("North Korea") have been tense over most of Korea's history. Incidents
affecting relations between the two Koreas continually occur. If the level of
tensions with North Korea increases or changes abruptly, both our company's and
ASI's businesses could be harmed.

Risks Associated with Our Operations in the Philippines

Although the political situation and the general state of the economy
in the Philippines has stabilized in recent years, each has historically been
subject to significant instability. Most recently, the devaluation of the
Philippine peso relative to the U.S. dollar beginning in July 1997 led to
economic instability in the Philippines. Any future economic or political
disruptions or instability in the Philippines could have a material adverse
effect on our business.

Because the functional currency of our operations in the Philippines is
the U.S. dollar, we have recently benefited from cost reductions relating to
peso-denominated expenditures, primarily payroll costs. We believe that any
future devaluations of the Philippine peso will eventually lead to inflation in
the Philippines, which could offset any savings achieved to date.

RISKS ASSOCIATED WITH OUR ACQUISITION OF K4--THE ACQUISITION OF K4 REPRESENTS A
MAJOR COMMITMENT OF OUR CAPITAL AND MANAGEMENT RESOURCES.

Our acquisition of K4 will require our management to devote a
significant portion of its resources to the maintenance and operation of a
factory in Korea. We do not have experience in owning and operating a business
in Korea. It may take time for us to learn how to comply with relevant Korean
regulations, including tax, environmental and employee laws. During the
transition period in which we will integrate K4 into our company, our management
may not have adequate time and attention to devote to other aspects of our
business, and those parts of our business could suffer. In addition, we will
rely on ASI to provide us with financial, human resources and other
administrative services pursuant to a transition services agreement. If ASI
terminates this agreement or fails to provide us with the services we require to
operate K4, our ability to operate K4 profitably could be adversely affected.

We have integrated approximately 1,700 of Korean employees working at
K4 into our workforce, and we may face cultural difficulties until we learn how
to interact with these new employees. If our K4 employees become dissatisfied
working for a U.S. company, they may leave us. If we cannot find new employees
to replace departing ones, our K4 operations could suffer.

MANAGEMENT OF GROWTH--WE FACE CHALLENGES AS WE INTEGRATE NEW AND DIVERSE
OPERATIONS AND TRY TO ATTRACT QUALIFIED EMPLOYEES TO SUPPORT OUR EXPANSION
PLANS.

We have experienced, and may continue to experience, growth in the
scope and complexity of our operations and in the number of our employees. This
growth has strained our managerial, financial, manufacturing and other
resources. Future acquisitions may result in inefficiencies as we integrate new
operations and manage geographically diverse operations.

Although we believe our current controls are adequate, in order to
manage our growth, we must continue to implement additional operating and
financial controls and hire and train additional personnel. We have been
successful in hiring and properly training sufficient numbers of qualified
personnel and in effectively managing our growth. However, we cannot assure you
that we will be able to continue to do so in the future. If we fail to: (1)
properly manage growth, (2) improve our operational, financial and management
systems as we grow or (3) integrate new factories and employees into our
operations, our financial performance could be materially adversely affected.

Our success depends to a significant extent upon the continued service
of our key senior management and technical personnel, any of whom would be
difficult to replace. In addition, in connection with our expansion plans, our
company and ASI will be required to increase the number of qualified engineers
and other employees at our respective factories in the Philippines and Korea.
Competition for qualified employees is intense, and our business could be
adversely affected by the loss of the services of any of our

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existing key personnel. Our inability to attract, retain and motivate qualified
new personnel could have a material adverse effect on our business.

RISKS ASSOCIATED WITH OUR WAFER FABRICATION BUSINESS--OUR WAFER FABRICATION
BUSINESS IS SUBSTANTIALLY DEPENDENT ON TEXAS INSTRUMENTS.

Our wafer fabrication services business, which commenced operations in
January 1998, depends significantly upon Texas Instruments. An agreement with
ASI and Texas Instruments (the "Texas Instruments Manufacturing and Purchasing
Agreement") requires Texas Instruments to purchase from us at least 40% of the
capacity of ASI's wafer foundry, and under certain circumstances, Texas
Instruments has the right to purchase from us up to 70% of this capacity. Texas
Instruments' orders in the first half of 1998 were below required minimum
purchase commitments due to market conditions and issues encountered by Texas
Instruments in the transition of its products to new technology. We cannot
assure you that Texas Instruments will meet its purchase obligations in the
future. If Texas Instruments fails to meet its purchase obligations, our
company's and ASI's businesses could be harmed.

Texas Instruments has transferred certain of its complementary metal
oxide silicon ("CMOS") process technology to ASI, and ASI is dependent upon
Texas Instruments' assistance for developing other state-of-the-art wafer
manufacturing processes. In addition, ASI's technology agreements with Texas
Instruments (the "Texas Instruments Technology Agreements") only cover .25
micron and .18 micron CMOS process technology. Texas Instruments has not granted
ASI a license under Texas Instruments' patents to manufacture semiconductor
wafers for third parties. Moreover, Texas Instruments has no obligation to
transfer any next-generation technology to ASI. Our company's and ASI's
businesses could be harmed if ASI cannot obtain new technology on commercially
reasonable terms or ASI's relationship with Texas Instruments is disrupted for
any reason.

DEPENDENCE ON MATERIALS AND EQUIPMENT SUPPLIERS - OUR BUSINESS MAY SUFFER IF THE
COST OR SUPPLY OF MATERIALS OR EQUIPMENT ADVERSELY CHANGES.

We obtain from vendors the materials and equipment required for both
the packaging and test services performed by our factories and the packaging and
test services performed for us by ASI. We source most of our materials,
including critical materials, such as leadframes and laminate substrates, from a
limited group of suppliers. Furthermore, we purchase all of our materials on a
purchase order basis and have no long-term contracts with any of our suppliers
Our business may be harmed if we cannot obtain materials and other supplies from
our vendors: (1) in a timely manner, (2) in sufficient quantities, (3) in
acceptable quality and (4) at competitive prices.

RAPID TECHNOLOGICAL CHANGE - OUR BUSINESS WILL SUFFER IF WE CANNOT KEEP UP WITH
TECHNOLOGICAL ADVANCES IN OUR INDUSTRY.

The complexity and breadth of both semiconductor packaging and test
service and wafer fabrication are rapidly changing. As a result, we expect that
we will need to offer more advanced package designs and new wafer fabrication
technology in order to respond to competitive industry conditions and customer
requirements. Our success depends upon the ability of our company and ASI to
develop and implement new manufacturing process and package design technologies.
The need to develop and maintain advanced packaging and wafer fabrication
capabilities and equipment could require significant research and development
and capital expenditures in future years. In addition, converting to new package
designs or process methodologies could result in delays in producing new package
types or advanced wafer designs that could adversely affect our ability to meet
customer orders.

Technological advances also typically lead to rapid and significant
price erosion and may make our existing products less competitive or our
existing inventories obsolete. If we cannot achieve advances in package design
and wafer fabrication technology or obtain access to advanced package designs
and wafer fabrication technology developed by others, our business could suffer.

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COMPETITION - WE MUST COMPETE AGAINST LARGE AND ESTABLISHED COMPETITORS IN BOTH
THE PACKAGING AND TEST SEGMENT AND THE WAFER FABRICATION BUSINESS.

The independent semiconductor packaging and test market is very
competitive. This sector is comprised of approximately 40 companies, and
approximately 15 of these had sales of $100 million or more in 1998. We face
substantial competition from established packaging and test service providers
primarily located in Asia, including companies with significant manufacturing
capacity, financial resources, research and development operations, marketing
and other capabilities. Such companies have also established relationships with
many large semiconductor companies that are current or potential customers of
our company. On a larger scale, we also compete with the internal semiconductor
packaging and test capabilities of many of our customers.

The independent wafer fabrication business is also highly competitive.
Our wafer fabrication services compete primarily with independent semiconductor
wafer foundries, including those of Chartered Semiconductor Manufacturing, Inc.,
Taiwan Semiconductor Manufacturing Company, Ltd. and United Microelectronics
Corporation. Each of these companies has significant manufacturing capacity,
financial resources, research and development operations, marketing and other
capabilities and has been operating for some time. Many of these companies have
also established relationships with many large semiconductor companies that are
current or potential customers of our company.

ENVIRONMENTAL REGULATIONS--FUTURE ENVIRONMENTAL REGULATIONS COULD PLACE
ADDITIONAL BURDENS ON THE MANUFACTURING OPERATIONS OF OUR COMPANY OR ASI.

The semiconductor packaging process uses chemicals and gases and
generates byproducts that are subject to extensive governmental regulations. For
example, we produce liquid waste when silicon wafers are diced into chips with
the aid of diamond saws, then cooled with running water. Federal, state and
local regulations in the United States, as well as environmental regulations in
Korea and the Philippines, impose various controls on the storage, handling,
discharge and disposal of chemicals used in our company's and ASI's
manufacturing processes and on the factories occupied by our company and ASI. We
believe that our activities, as well as those of ASI, conform to present
environmental and land use regulations applicable to our respective operations.

Increasingly, however, public attention has focused on the
environmental impact of semiconductor manufacturing operations and the risk to
neighbors of chemical releases from such operations. In the future, applicable
land use and environmental regulations may: (1) impose upon our company or ASI
the need for additional capital equipment or other process requirements, (2)
restrict our company's or ASI's ability to expand our respective operations, (3)
subject our company or ASI to liability or (4) cause our company or ASI to
curtail our respective operations.

PROTECTION OF INTELLECTUAL PROPERTY--WE MAY BECOME INVOLVED IN INTELLECTUAL
PROPERTY LITIGATION.

We currently hold 43 U.S. patents, and we also have 89 pending patents.
We expect to continue to file patent applications when appropriate to protect
our proprietary technologies, but we cannot assure you that we will receive
patents from pending or future applications. However, we believe that our
continued success depends primarily on factors such as the technological skills
and innovation of our personnel rather than on our patents. In addition, any
patents we obtain may be challenged, invalidated or circumvented and may not
provide meaningful protection or other commercial advantage to us.

We may need to enforce our patents or other intellectual property
rights or to defend our company against claimed infringement of the rights of
others through litigation, which could result in substantial cost and diversion
of our resources. If we fail to obtain necessary licenses or if we face
litigation relating to patent infringement or other intellectual property
matters, our business could suffer.

Although we are not currently a party to any material litigation, the
semiconductor industry is characterized by frequent claims regarding patent and
other intellectual property rights. If any third party makes a valid claim
against our company or ASI, our company or ASI could be required to: (1)
discontinue the use of certain processes, (2) cease the manufacture, use, import
and sale of infringing products, (3) pay substantial damages, (4) develop
non-infringing technologies or (5) acquire licenses to the technology we had
allegedly infringed. Our business, financial condition and results of operations
could be materially and adversely affected by any of these negative
developments.

28
<PAGE> 29
In addition, Texas Instruments has granted ASI very limited licenses
under the Texas Instruments Technology Agreements, including a license under
Texas Instruments' trade secret rights to use Texas Instruments' technology in
connection with ASI's provision of wafer fabrication services. However, Texas
Instruments has not granted ASI a license under Texas Instruments' patents to
manufacture semiconductor wafers for third parties. Furthermore, Texas
Instruments has reserved the right to bring infringement claims against
customers of our company or customers of ASI with respect to semiconductor
wafers purchased from our company or ASI. Such customers and others could in
turn subject our company or ASI to litigation in connection with the sale of
semiconductor wafers produced by ASI.

CONTINUED CONTROL BY EXISTING STOCKHOLDERS - MR. JAMES KIM AND MEMBERS OF HIS
FAMILY CAN DETERMINE THE OUTCOME OF ALL MATTERS REQUIRING STOCKHOLDER APPROVAL.

Mr. James Kim and members of his family beneficially own approximately
65.8% of our outstanding common stock. Mr. James Kim's family, acting together,
will therefore effectively control all matters submitted for approval by our
stockholders. These matters could include:

- - the election of all of the members of our Board of Directors

- - proxy contests;

- - approvals of transactions between our company and ASI or other entities in
which Mr. James Kim and members of his family have an interest;

- - mergers involving our company;

- - tender offers; and

- - open market purchase programs or other purchases of our common stock.

YEAR 2000 COMPLIANCE--OUR BUSINESS MAY SUFFER IF OUR YEAR 2000 ("Y2K")
COMPLIANCE PROGRAM FAILS TO RESOLVE ALL Y2K ISSUES.

Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. As a result,
software that records only the last two digits of the calendar year may not be
able to distinguish whether "00" means 1900 or 2000. This may result in software
failures or the creation of erroneous results.

We have implemented a Y2K compliance program to address possible Y2K
issues that may affect our business, and we are involved in the implementation
of a similar Y2K compliance program for ASI. We believe that these programs are
on target to bring our company and ASI into Y2K compliance. However, if these
compliance programs are not successful, or if we encounter unexpected problems,
our business could be harmed. Our operations could also be harmed if any
material supplier, utility provider, customer or other third party with whom we
deal fails to address its own Y2K issues.

For information about the current status of our Y2K readiness and
potential costs, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Issues."

ENFORCEABILITY OF JUDGMENTS IN FOREIGN JURISDICTIONS

Since a large portion of our assets are located outside the U.S., any
judgments obtained in the U.S. against us, including judgments with respect to
the payment of principal, premium, interest, offer price, redemption price or
other amounts payable under the Senior Notes Indenture or the Senior
Subordinated Notes Indenture, may not be collectible within the U.S. If holders
of Senior Notes or holders of Senior Subordinated Notes intend to enforce a
judgment obtained in the U.S. against our company's assets located outside the
U.S., they may be subject to additional procedures which would not be required
for enforcement of such judgment in the U.S.

29
<PAGE> 30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risks, primarily related to foreign
currency and interest rate fluctuations. In the normal course of business, the
Company employs established policies and procedures to manage its exposure to
fluctuations in foreign currency values and changes in interest rates.

FOREIGN CURRENCY RISKS

The company's primary exposures to foreign currency fluctuations is
associated with Philippine peso based transactions and related peso based assets
and liabilities, as well as Korean won based transactions and related won based
assets and liabilities. The Company's objective in managing this foreign
currency exposure is to minimize the risk through minimizing the level of
activity and financial instruments derived in pesos and won. Although the
Company has selectively hedged some of it's currency exposure through short-term
(generally not more than 30 to 60 days) forward exchange contracts, the
Company's hedging activity to date has been immaterial.

At September 30, 1999, the Company's peso based financial instruments primarily
consisted of cash, non-trade receivables, deferred tax assets and liabilities,
non-trade payables, accrued payroll, taxes and other expenses. Based on the
Company's portfolio of peso based assets at September 30, 1999, a 20 % increase
in the Philippine peso to U.S. dollar exchange rate would result in a decrease
of approximately $2 million, in peso based net assets.

At September 30, 1999, the Company's won based financial instruments primarily
consisted of cash, non-trade receivables, non-trade payables, accrued payroll,
taxes and other expenses. Based on the Company's portfolio of won based assets
at September 30, 1999, a 20 % increase in the Korean won to U.S. dollar exchange
rate would result in a decrease of approximately $1 million, in won based net
assets.

INTEREST RATE RISKS

The Company has interest rate risk with respect to its investment in cash and
cash equivalents, use of short-term borrowings and long-term debt, including the
$206.9 million face value of convertible notes, $425 million face value of
Senior Notes and $200 million face value of Senior Subordinated Notes
outstanding. Overall, the Company mitigates its interest rate risks by investing
in short-term investments, which are due on demand or carry a maturity date of
less that three months. In addition, both the Company's short-term borrowings
and long-term debt have variable rates that reflect currently available terms
and conditions for similar borrowings, excluding the convertible notes, senior
debt and senior subordinated debt. As the Company's convertible notes, senior
debt and senior subordinated debt bear fixed rates of interest, the fair value
of these instruments fluctuates with the market interest rates. The fair value
of the Company's convertible notes is also impacted by the market price of the
Company's common stock.

Based on the Company's conservative policies with respect to
investments in cash and cash equivalents, use of variable rate debt, and the
fact the Company currently intends to pay the face value of its senior debt and
senior subordinated debt upon maturity and its convertible note obligation upon
maturity, unless converted, the Company believes that the potential loss in
future earnings due to interest rate fluctuations is not material.

30
<PAGE> 31
The information below summarizes the principal cash flows by expected fiscal
year of maturity and fair values computed using market quotes as of September
30, 1999 for the Company's material fixed rate debt balances consisting of
9-1/4% senior notes due May 2006, 10-1/2% senior subordinated notes due May 2009
and 5-3/4%convertible notes due May 2003(See Note 14 in the Notes to Financial
Statements):

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Fair Market
9/30/00 9/30/01 9/30/02 9/30/03 9/30/04 Thereafter Total Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Senior Notes $0 $0 $0 $0 $0 $425,000 $425,000 $417,563
- ------------------------------------------------------------------------------------------------------------------
Senior Subordinated Notes $0 $0 $0 $0 $0 $200,000 $200,000 $192,000
- ------------------------------------------------------------------------------------------------------------------
Convertible Notes $0 $0 $0 $206,900 $0 $0 $206,900 $272,074
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

EQUITY PRICE RISKS

The Company's convertible notes are convertible into the Company's common stock
at $13.50 per share. As stated above, the Company currently intends to pay the
face value of its convertible note obligation upon maturity, unless converted.
If investors were to decide to convert their investment in convertible debt to
Company common stock, there would be no impact to future earnings of the
Company, other than a reduction in interest expense, unless such conversion were
induced by the Company. See table above for related principal cash flows and
fair market value at September 30, 1999.

31
<PAGE> 32
PART II. OTHER INFORMATION

ITEM 5. OTHER INFORMATION

On October 3, 1999, Mr. Robert E Denham resigned from the Company's board of
directors

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following exhibits are filed as part of this report:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
27.1 Financial Data Schedule.
</TABLE>

- ------------

(b) We filed the following reports on form 8-K during the quarter ended
September 30, 1999:

On August 2, 1999, we filed a report on form 8-K/A as amendment number
2 to form 8-K filed on April 26, 1999 which disclosed our acquisition of Anam
Semiconductor Inc.'s K4 semiconductor packaging and test facility located in
Kwangju Korea.

On August 6, 1999, we filed a report on form 8-K which announced the
Company's second quarter 1999 earnings

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THERETO DULY AUTHORIZED.

Amkor Technology, Inc.
----------------------
(Registrant)

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Kenneth T. Joyce Chief Financial Officer (Principal Financial, Chief November 10, 1999
- -------------------- Accounting Officer and Duly Authorized Officer)
Kenneth T. Joyce
</TABLE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 81,921
<SECURITIES> 205,871
<RECEIVABLES> 175,982
<ALLOWANCES> 5,952
<INVENTORY> 78,651
<CURRENT-ASSETS> 553,115
<PP&E> 1,200,069
<DEPRECIATION> 418,659
<TOTAL-ASSETS> 1,748,128
<CURRENT-LIABILITIES> 338,164
<BONDS> 831,900
0
0
<COMMON> 118
<OTHER-SE> 548,199
<TOTAL-LIABILITY-AND-EQUITY> 1,748,128
<SALES> 501,816
<TOTAL-REVENUES> 501,816
<CGS> 404,327
<TOTAL-COSTS> 447,693
<OTHER-EXPENSES> 19,339
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,995
<INCOME-PRETAX> 34,784
<INCOME-TAX> 8,696
<INCOME-CONTINUING> 26,088
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,088
<EPS-BASIC> .22
<EPS-DILUTED> .21

</TABLE>