AMKOR TECHNOLOGY INC, 10-Q, 2000-11-14

AMKOR TECHNOLOGY INC
10-Q, 2000-11-14
SEMICONDUCTORS & RELATED DEVICES

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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------

FORM 10-Q
----------------

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

[ ] TRANSITION REPORT PURSUANT 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 23-1722724
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)

1345 ENTERPRISE DRIVE
WEST CHESTER, PA 19380
(610) 431-9600
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.001 PAR VALUE
5 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2003
10 1/2% SENIOR SUBORDINATED NOTES DUE 2009
9 1/4% SENIOR NOTES DUE 2006
5% CONVERTIBLE SUBORDINATED NOTES DUE 2007

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 6, 2000 was 152,039,368.
<PAGE> 2
PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)

<S> <C> <C> <C> <C>
Net revenues .................................... $ 648,576 $ 501,816 $ 1,750,423 $ 1,371,698

Cost of revenues -- including purchases from ASI 469,518 396,532 1,316,739 1,132,450
Amortization of goodwill and acquired intangibles 20,179 7,795 41,633 12,421
----------- ----------- ----------- -----------
Total cost of revenues ..................... 489,697 404,327 1,358,372 1,144,871
----------- ----------- ----------- -----------
Gross profit .................................... 158,879 97,489 392,051 226,827
----------- ----------- ----------- -----------

Operating expenses:
Selling, general and administrative ........ 50,257 40,376 139,386 105,499
Research and development ................... 8,838 2,990 17,081 8,084
----------- ----------- ----------- -----------
Total operating expenses ............... 59,095 43,366 156,467 113,583
----------- ----------- ----------- -----------
Operating income ................................ 99,784 54,123 235,584 113,244
----------- ----------- ----------- -----------

Other expense (income):
Interest expense, net ...................... 36,787 16,995 81,644 29,429
Foreign currency loss (gain) ............... 2,015 (253) 4,607 151
Other expense (income), net ................ (613) 2,597 1,425 6,225
----------- ----------- ----------- -----------
Total other expense .................... 38,189 19,339 87,676 35,805
----------- ----------- ----------- -----------
Income before income taxes and equity in loss
of investees ............................... 61,595 34,784 147,908 77,439
Provision for income taxes ...................... 9,239 8,696 24,425 20,906
Equity in loss of investees ..................... (7,185) -- (10,220) --
----------- ----------- ----------- -----------
Net income ...................................... $ 45,171 $ 26,088 $ 113,263 $ 56,533
=========== =========== =========== ===========

Per Share Data:
Basic net income per common share .......... $ 0.30 $ 0.22 $ 0.79 $ 0.48
=========== =========== =========== ===========

Diluted net income per common share ........ $ 0.28 $ 0.21 $ 0.75 $ 0.47
=========== =========== =========== ===========

Shares used in computing basic net income
per common share ......................... 151,831 118,276 143,744 118,090
=========== =========== =========== ===========

Shares used in computing diluted net income
per common share ......................... 158,833 135,626 151,663 134,079
=========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements

2
<PAGE> 3
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................. $ 108,865 $ 98,045
Short-term investments .................................... -- 136,595
Accounts receivable:
Trade, net of allowance for doubtful accounts of $2,443 311,612 157,281
Due from affiliates ................................... 1,540 6,278
Other ................................................. 8,208 6,469
Inventories ............................................... 103,695 91,465
Other current assets ...................................... 29,185 11,117
----------- -----------
Total current assets ............................. 563,105 507,250
----------- -----------
Property, plant and equipment, net ............................. 1,481,196 859,768
----------- -----------
Investments .................................................... 452,022 63,672
----------- -----------
Other assets:
Due from affiliates ....................................... 25,657 27,858
Goodwill and acquired intangibles ......................... 747,186 232,350
Other ..................................................... 165,169 64,191
----------- -----------
Total other assets ............................... 938,012 324,399
----------- -----------
Total assets ..................................... $ 3,434,335 $ 1,755,089
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft ............................................ $ 25,049 $ 16,209
Short-term borrowings and current portion of long-term debt 73,669 6,465
Trade accounts payable .................................... 166,050 122,147
Due to affiliates ......................................... 37,014 37,913
Accrued expenses .......................................... 142,206 88,577
Accrued income taxes ...................................... 44,267 41,587
----------- -----------
Total current liabilities ........................ 488,255 312,898
Long-term debt ................................................. 1,623,933 687,456
Other noncurrent liabilities ................................... 52,350 16,994
----------- -----------
Total liabilities ................................ 2,164,538 1,017,348
----------- -----------

Commitments and contingencies

Stockholders' equity:
Common stock .............................................. 152 131
Additional paid-in capital ................................ 970,880 551,964
Retained earnings ......................................... 302,996 189,733
Receivable from stockholder ............................... (3,276) (3,276)
Accumulated other comprehensive income .................... (955) (811)
----------- -----------
Total stockholders' equity ....................... 1,269,797 737,741
----------- -----------
Total liabilities and stockholders' equity ....... $ 3,434,335 $ 1,755,089
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

3
<PAGE> 4
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL RECEIVABLE OTHER
COMMON STOCK PAID-IN RETAINED FROM COMPREHENSIVE COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS STOCKHOLDER INCOME TOTAL INCOME
------ ------ ------- -------- ----------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Balance at December 31, 1998 ........ 117,860 $118 $381,061 $109,738 $ -- $ (556) $ 490,361
Net income ....................... -- -- -- 56,533 -- -- 56,533 $ 56,533
Unrealized losses on investments,
net of tax ..................... -- -- -- -- -- (298) (298) (298)
-----------
Comprehensive income ............. $ 56,235
===========
Issuance of stock through
employee stock purchase plan and
stock options .................. 419 -- 1,721 -- -- -- 1,721
------- ---- -------- -------- --------- -------- ----------
Balance at September 30, 1999 ....... 118,279 $118 $382,782 $166,271 $ -- $ (854) $ 548,317
======= ==== ======== ======== ========= ======== ==========

Balance at December 31, 1999 ........ 130,660 $131 $551,964 $189,733 $ (3,276) $ (811) $ 737,741
Net income ....................... -- -- -- 113,263 -- -- 113,263 $ 113,263
Unrealized losses on investments,
net of tax ..................... -- -- -- -- -- (144) (144) (144)
-----------
Comprehensive income ............. $ 113,119
===========
Issuance of 20.5 million common
stock shares and 3.9 million
common stock warrants .......... 20,500 21 409,979 -- -- -- 410,000
Issuance of stock through employee
stock purchase plan and stock
options ........................ 445 -- 5,477 -- -- -- 5,477
Debt conversion .................. 248 -- 3,460 -- -- -- 3,460
------- ---- -------- -------- --------- -------- ----------
Balance at September 30, 2000 ....... 151,853 $152 $970,880 $302,996 $ (3,276) $ (955) $1,269,797
======= ==== ======== ======== ========= ======== ==========
</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,
-------------------------
2000 1999
----------- ---------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................... $ 113,263 $ 56,533
Adjustments to reconcile net income to net cash provided
by operating activities --
Depreciation and amortization ...................................... 227,075 123,698
Amortization of deferred debt issuance costs ....................... 4,814 2,513
Debt conversion expense ............................................ 272 --
Provision for excess and obsolete inventory ........................ 3,500 3,573
Deferred income taxes .............................................. 3,353 9,684
Equity in loss of investees ........................................ 10,220 1,340
Loss on sale of fixed assets and investments ....................... 1,355 1,788
Changes in assets and liabilities excluding effects of acquisitions --
Accounts receivable ................................................ (82,628) (53,150)
Repurchase of accounts receivable under securitization agreement ... (71,500) (2,700)
Other receivables .................................................. 1,141 1,981
Inventories ........................................................ (12,453) 3,751
Due to/from affiliates, net ........................................ 6,040 38,345
Other current assets ............................................... (19,237) (531)
Other noncurrent assets ............................................ (9,766) (10,483)
Accounts payable ................................................... 45,956 29,515
Accrued expenses ................................................... 45,414 21,152
Accrued income taxes ............................................... 2,680 (2,765)
Other long-term liabilities ........................................ 10,462 (4,287)
----------- ---------
Net cash provided by operating activities ........................ 279,961 219,957
----------- ---------

Cash flows from investing activities:
Purchases of property, plant and equipment ........................... (402,317) (175,806)
Acquisition of K1, K2 and K3, net of cash acquired ................... (927,290) --
Investment in ASI .................................................... (399,000) --
Cash held in escrow to fund ASI investment commitment ................ (60,000) --
Acquisition of Integra Technologies, LLC ............................. (17,702) --
Acquisition of K4 .................................................... -- (575,000)
Acquisition of AAPMC ................................................. -- (2,109)
Proceeds from the sale (purchase) of investments ..................... 136,881 (204,774)
----------- ---------
Net cash used in investing activities ............................ (1,669,428) (957,689)
----------- ---------

Cash flows from financing activities:
Net change in bank overdrafts and short-term borrowings .............. 5,376 (5,259)
Net proceeds from issuance of long-term debt ......................... 1,028,203 603,569
Payments of long-term debt ........................................... (48,769) (7,865)
Net proceeds from the issuance of 20.5 million common
shares in a private equity offering ................................ 410,000 --
Proceeds from issuance of stock through employee stock
purchase plan and stock options .................................... 5,477 1,621
----------- ---------
Net cash provided by financing activities ....................... 1,400,287 592,066
----------- ---------

Net increase (decrease) in cash and cash equivalents .................... 10,820 (145,666)
Cash and cash equivalents, beginning of period .......................... 98,045 227,587
----------- ---------
Cash and cash equivalents, end of period ................................ $ 108,865 $ 81,921
=========== =========

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ........................................................... $ 66,396 $ 9,675
Income taxes ....................................................... $ 17,533 $ 13,666
</TABLE>

The accompanying notes are an integral part of these statements.

5
<PAGE> 6
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. INTERIM FINANCIAL STATEMENTS

The consolidated financial statements and related disclosures as of
September 30, 2000 and for the three and nine months ended September 30, 2000
and 1999 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 our opinion, 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 our latest annual report as of December 31,
1999 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, 2000 are
not necessarily indicative of the results to be expected for the full year.

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

2. RISKS AND UNCERTAINTIES

Our future results of operations involve a number of risks and
uncertainties. Factors that could affect 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 our relationship with ASI for all of our
wafer fabrication output, reliance on a small group of principal customers,
timing and volume of orders relative to the 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 and the results of ASI
through the equity method of accounting.

3. RELATIONSHIP WITH ANAM SEMICONDUCTOR INC.

On May 1, 2000 we completed our purchase of ASI's three remaining packaging
and test factories, known as K1, K2 and K3, for a purchase price of $950.0
million and made an additional equity investment in ASI of $309.0 million of the
total $459.0 million we committed to invest at that time. We fulfilled the
remaining equity investment commitment of $150.0 million in three installments
of which $30.0 million was invested on June 30, 2000, $60.0 million was invested
on August 30, 2000 and $60.0 million was invested on October 27, 2000. Included
in our September 30, 2000 consolidated balance sheet within noncurrent other
assets is a restricted escrow account balance of $60.0 million that was used to
fund in October 2000 the final installment of our equity investment commitment.
We financed the acquisition and investment with the proceeds of a $258.8 million
convertible subordinated notes offering, a $410.0 million private equity
financing, $750.0 million of new secured bank debt and approximately $103
million from cash on hand.

As of September 30, 2000, we have invested a total of $440.6 million in
ASI. The amount by which the cost of our investment exceeds our share of the
underlying assets of ASI as of the date of our investment is being amortized on
a straight-line basis over a five-year period. The amortization is included in
our consolidated statement of income within equity in income of investees. As of
September 30, 2000, the unamortized excess of the cost of our equity investment
in ASI above our share of the underlying net assets is $168.4 million. With the
fulfillment of our investment commitment in ASI and ASI's creditor banks
conversion of an additional 13.2 billion won (approximately $11.7 million) of
ASI's debt to equity, we owned as of October 31, 2000 42% of the outstanding
voting stock of ASI. We will continue to report ASI's results in our financial
statements through the equity method of accounting. ASI was released from
workout with its Korean creditor banks on July 18, 2000.

The acquisition of K1, K2 and K3 was accounted for as a purchase.
Accordingly, the results of K1, K2 and K3 have been included in the accompanying
consolidated financial statements since the date of acquisition. Goodwill and
acquired intangibles as of the acquisition date were $547.0 million and are
being amortized on a straight-line basis over a 10 year period. Acquired
intangibles include the value of acquired patent rights and of a
workforce-in-place.

6
<PAGE> 7
acquisition of K1, K2 and K3, we no longer receive packaging and test services
from ASI. We continue to have certain contractual and other business
relationships with ASI, primarily our wafer fabrication services supply
agreement. Under this supply agreement, we have the exclusive right to all of
the wafer output of ASI's wafer fabrication facility, and we expect to continue
to purchase all of ASI's wafer fabrication services.

On May 17, 1999, we purchased ASI's packaging and test business known as
K4. The purchase price for K4 was $575.0 million in cash plus the assumption of
approximately $7.0 million of employee benefit liabilities. The acquisition was
accounted for as a purchase. Accordingly, the results of K4 have been included
in the accompanying consolidated financial statements since the date of
acquisition.

Pro Forma Financial Information for Amkor (unaudited)

The unaudited pro forma information below assumes that the May 2000
acquisition of K1, K2 and K3 occurred at the beginning of 2000 and 1999 and the
May 1999 acquisition of K4 had occurred at the beginning of 1999. The pro forma
adjustments include a provision for amortization of goodwill and other
identified intangibles, an adjustment of depreciation expense based on the fair
market value of the acquired assets, interest expense on debt issued to finance
the acquisitions and income taxes related to the pro forma adjustments. The pro
forma results are not necessarily indicative of the results we 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.

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
2000 1999
---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>

Net revenues .................................. $1,760,644 $1,390,498
Income before income taxes and equity in income
(loss) of investees ........................ 167,462 82,208
Net income .................................... 133,061 67,320
Earnings per share:
Basic net income per common share .......... 0.84 0.49
Diluted net income per common share ........ 0.81 0.48
</TABLE>

The pro forma adjustments exclude the effects of our investments in ASI.
Had we included pro forma adjustments for the nine months ended September 30,
2000 related to our investments in ASI, pro forma net income would have been
$124.5 million and pro forma earnings per share on a diluted basis would have
been $0.76.

Financial Information for ASI

The following summary of unaudited consolidated financial information was
derived from the consolidated financial statements of ASI, reflecting ASI's
packaging and test operations as discontinued operations within their results of
operations. ASI's net income for the nine months ended September 30, 2000
includes a $436.8 million gain on sale of K1, K2 and K3, which was eliminated
for purposes of calculating our equity in income of ASI.

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 2000
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
SUMMARY INCOME STATEMENT INFORMATION FOR ASI
Net revenues ............................... $ 90,342 $ 247,938
Income (loss) from continuing operations ... 2,043 (17,211)
Net income ................................. 2,043 461,353
</TABLE>

7
<PAGE> 8
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
SUMMARY BALANCE SHEET INFORMATION FOR ASI
Cash, including current portion of restricted cash and bank deposits $ 179,026 $ 202,969
Property, plant and equipment, net ................................. 773,710 1,037,935
Total assets ....................................................... 1,182,906 1,487,469
Total debt ......................................................... 216,954 1,447,975
Total liabilities .................................................. 485,555 1,785,219
Total stockholders' equity ......................................... 697,351 (297,750)
</TABLE>

4. INVENTORIES

Inventories consist of raw materials and purchased components that are used
in the semiconductor packaging process. Inventories are located at our
facilities in the Philippines and Korea. Components of inventories follow:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and purchased components $ 91,288 $ 81,379
Work-in-progess ...................... 12,407 10,086
-------- --------
$103,695 $ 91,465
======== ========
</TABLE>

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Land ............................................ $ 80,593 $ 38,349
Buildings and improvements ...................... 436,700 303,077
Machinery and equipment ......................... 1,450,649 883,057
Furniture, fixtures and other equipment ......... 77,959 52,866
Construction in progress ........................ 68,988 47,393
----------- -----------
2,114,889 1,324,742
Less -- Accumulated depreciation and amortization (633,693) (464,974)
----------- -----------
$ 1,481,196 $ 859,768
=========== ===========
</TABLE>

6. INVESTMENTS

Investments include equity investments in affiliated companies and
noncurrent marketable securities as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Equity investments under the equity method:
ASI (ownership of 40% and 18%, respectively) ...... $429,907 $ 39,927
Other equity investments (20% - 50% owned)
Taiwan Semiconductor Technology Corporation ..... 17,341 18,456
Other ........................................... 596 860
-------- --------
Total equity investments ...................... 447,844 59,243
Marketable securities classified as available for sale 4,178 4,429
-------- --------
$452,022 $ 63,672
======== ========
</TABLE>

8
<PAGE> 9
7. DEBT

Following is a summary of short-term borrowings and long-term debt:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term borrowings ..................................................... $ -- $ 3,386
$900.0 million secured bank facility:
Term A loan, LIBOR plus 2.75% due March 2005 ........................... 315,000 --
Term B loan, LIBOR plus 3% due September 2005 .......................... 348,250 --
$200.0 million revolving line of credit, LIBOR plus 2.75% due March 2005 100,000 --
Senior notes, 9.25%, due May 2006 ......................................... 425,000 425,000
Senior subordinated notes, 10.5%, due May 2009 ............................ 200,000 200,000
Convertible subordinated notes, 5.75%, due May 2003 ....................... 50,191 53,435
Convertible subordinated notes, 5%, due March 2007 ........................ 258,750 --
Note payable, interest at bank's prime,
due in installments with balance due April 2004 ........................ -- 11,472
Other, primarily capital lease obligations and other debt ................. 411 628
----------- -----------
1,697,602 693,921
Less -- Short-term borrowings and current portion of long-term debt ....... (73,669) (6,465)
----------- -----------
$ 1,623,933 $ 687,456
=========== ===========
</TABLE>

In March 2000, we issued $258.8 million of convertible subordinated notes
due March 2007. The notes accrue interest at a rate of 5% per annum and are
convertible into Amkor common stock at a conversion price of $57.34 per share.

In May 2000, we incurred $750.0 million of secured bank debt related to our
acquisition of K1, K2 and K3 and investment in ASI. The secured bank debt
consists of a $900.0 million secured bank facility that includes a $200.0
million revolving credit line and two term loans with interest rates that vary
with LIBOR. The secured bank debt provides for amortization of the drawn amount
over a five to a five and one-half year period and quarterly principal and
interest payments. Under the terms of the secured bank facility, we are required
to make mandatory prepayments out of a portion of any excess cash flow, net
proceeds of any asset sales and the net proceeds of any issuance of debt or
equity securities, subject to certain exceptions. The bank facility is secured
by our domestic assets, certain intercompany loans and our equity investment in
ASI and includes financial covenants, as well as covenants restricting our
ability to incur debt, pay dividends, make certain investments and payments and
encumber or dispose of assets.

In connection with our issuance of the convertible notes due March 2007 and
our secured bank facility, we incurred debt issuance costs of $9.3 million and
$20.2 million. The debt issuance costs have been deferred over the life of the
associated debt and are included, net of amortization, in other noncurrent
assets in the consolidated balance sheet.

During the nine months ended September 30, 2000, we completed an early
conversion of convertible subordinated notes. As a result, we exchanged
approximately 248,000 shares of our common stock for $3.2 million of the 5.75%
convertible subordinated notes due May 2003. The fair value of the shares of
common stock issued in the exchanges in excess of the shares required for
conversion was $0.3 million, and was expensed during the nine months ended
September 20, 2000. This amount is included in other expense in the accompanying
consolidated statements of income.

Interest expense related to short-term borrowings and long-term debt is
presented net of interest income of $11.9 million and $8.9 million for the nine
months ended September 30, 2000 and 1999, respectively, in the accompanying
consolidated statements of income.

8. STOCKHOLDERS' EQUITY

In May 2000, we issued 20.5 million shares of our common stock in the
private equity financing and granted warrants that expire four years from
issuance to purchase 3.9 million additional shares of our common stock at $27.50
per share. The fair value of the stock warrants, based on the Black-Scholes
pricing model, is $35.0 million and is included in additional paid-in capital on
our September 30, 2000 consolidated balance sheet.

9
<PAGE> 10
9. 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 basic and diluted
earnings, weighted average shares and per share amounts for the three and nine
months ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------------------------
2000 1999
---------------------------------------- ----------------------------------------
WEIGHTED WEIGHTED
EARNINGS AVERAGE SHARES PER SHARE EARNINGS AVERAGE SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------ ----------- ------------- ------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share .. $45,171 151,831 $ 0.30 $26,088 118,276 $ 0.22
Impact of convertible notes 612 3,718 2,225 15,326
Dilutive effect of options
and warrants ........... -- 3,284 -- 2,024
------- ------- --------- ------- ------- ---------
Diluted earnings per share $45,783 158,833 $ 0.28 $28,313 135,626 $ 0.21
======= ======= ========= ======= ======= =========
</TABLE>

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------------
2000 1999
---------------------------------------- ----------------------------------------
WEIGHTED WEIGHTED
EARNINGS AVERAGE SHARES PER SHARE EARNINGS AVERAGE SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------ ----------- ------------- ------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share .. $113,263 143,744 $ 0.79 $ 56,533 118,090 $ 0.48
Impact of convertible notes 1,802 3,753 6,474 15,331
Dilutive effect of options
and warrants ........... -- 4,166 -- 658
-------- -------- --------- -------- -------- ---------
Diluted earnings per share $115,065 151,663 $ 0.75 $ 63,007 134,079 $ 0.47
======== ======== ========= ======== ======== =========
</TABLE>

10. SEGMENT INFORMATION

In accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," we have two reportable segments, packing
and test services and wafer fabrication services. These segments are managed
separately because the services provided by each segment require different
technology and marketing strategies.

Packaging and Test Services. Through our three factories located in the
Philippines and our four factories located in Korea, we offer 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.

Wafer Fabrication Services. Through our wafer fabrication services
division, we provide marketing, engineering and support services of ASI's deep
submicron CMOS foundry, under a long-term supply agreement. We derive
substantially all of these revenues from Texas Instruments. Wafer fabrication
and packaging and test services provided to Texas Instruments accounted for
14.3% and 16.7% of our total net revenues for the nine months ended September
30, 2000 and 1999, respectively.

The accounting policies for segment reporting are the same as those for our
consolidated financial statements. We evaluate our operating segments based on
operating income. Summarized financial information concerning reportable
segments is shown in the following table. The "Other" column includes the
elimination of inter-segment balances and corporate assets which include cash
and cash equivalents, non-operating balances due from affiliates, investment in
ASI and Taiwan Semiconductor Technology Corporation and other investments.

10
<PAGE> 11
<TABLE>
<CAPTION>
PACKAGING WAFER
AND TEST FABRICATION OTHER TOTAL
---------- ----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Three Months Ended September 30, 2000
Net Revenues ..................... $ 548,873 $ 99,703 $ -- $ 648,576
Gross Profit ..................... 148,863 10,016 -- 158,879
Operating Income ................. 93,271 6,513 -- 99,784

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

Nine Months Ended September 30, 2000
Net Revenues ..................... $1,480,485 $ 269,938 $ -- $1,750,423
Gross Profit ..................... 365,067 26,984 -- 392,051
Operating Income ................. 218,710 16,874 -- 235,584

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

Total Assets
September 30, 2000 ............... $2,807,368 $ 44,907 $ 582,060 $3,434,335
December 31, 1999 ................ 1,391,105 37,011 326,973 1,755,089
</TABLE>

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

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Property, Plant and Equipment, net
United States ................. $ 77,982 $ 48,438
Philippines ................... 580,282 448,644
Korea ......................... 822,376 362,144
Other foreign countries ....... 556 542
---------- ----------
$1,481,196 $ 859,768
========== ==========
</TABLE>

11. COMMITMENTS AND CONTINGENCIES

Amkor is involved in various claims incidental to the conduct of our
business. Based on consultation with legal counsel, we do 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 our financial condition or results of
operations. We are 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. We have accrued our 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 $12.5 million.

11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

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 statements regarding: (1) 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) statements regarding
future won/dollar exchange rates, (6) statements regarding the future of our
relationship with ASI and (7) 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 that May Affect Future Operating Performance". The
following discussion provides information and analysis of our results of
operations for the three and nine months ended September 30, 2000 and our
liquidity and capital resources. You should read the following discussion in
conjunction with and our consolidated financial statements and the related
notes, included elsewhere in this quarterly report as well as the reports we
file with the Securities and Exchange Commission.

OVERVIEW

We generate revenues primarily from the sale of semiconductor packaging and
test services. Historically we performed these services at our three factories
in the Philippines and subcontracted for additional services with ASI which
operated four packaging and test facilities in Korea. In May 1999, we acquired
K4, one of ASI's packaging and test facilities, and in May 2000 we acquired
ASI's remaining packaging and test facilities, K1, K2 and K3. We also generate
revenue by marketing the wafer fabrication services performed by the wafer
fabrication facility owned by ASI. With the completion of our acquisition of K1,
K2 and K3, we no longer depend upon ASI for packaging or test services, but we
continue to market ASI's wafer fabrication services.

Historically, our cost of revenues has consisted principally of: (1)
service charges paid to ASI for packaging and test services performed for us,
(2) costs of materials and (3) labor and other costs at our factories. Service
charges paid to ASI and our gross margins on sales of services performed by ASI
were set in accordance with our supply agreements with ASI, which provided for
periodic pricing adjustments based on changes in forecasted demand, product mix,
capacity utilization and fluctuations in exchange rates, as well as our mutual
long-term strategic interests. Fluctuations in service charges we paid to ASI
have historically had a significant effect on our gross margins. In addition,
our gross margins on sales of services performed by ASI have generally been
lower than our gross margins on sales of services performed by our factories in
the Philippines, but we had not previously borne any of ASI's fixed costs.
Effective with our May 2000 acquisition of K1, K2 and K3 and May 1999
acquisition of K4, we bear all of the costs associated with these factories, but
we no longer pay service charges to ASI for packaging and test services. We will
continue to incur costs of direct materials used in packages that we produce for
our customers. Because a portion of our costs at our factories in the
Philippines and Korea will remain fixed, increases or decreases in capacity
utilization rates may continue to have a significant effect on our gross profit.
The unit cost of packaging and test services generally decreases as fixed
charges, such as depreciation expense on our equipment, are allocated over a
larger number of units produced.

Historically, prices for our packaging and test services and wafer
fabrication 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. We have
been able to partially offset the effect of price declines by successfully
developing and marketing new packages with higher prices, such as advanced
leadframe and laminate packages. We cannot assure you that we will be able to
offset any such price declines in the future.

Relationship with ASI

Through our supply agreements with ASI, we historically have had a first
right to substantially all of the packaging and test services capacity of ASI
and the exclusive right to all of the wafer output of ASI's wafer fabrication
facility. Beginning in May 2000 with our acquisition of K1, K2 and K3, we no
longer receive packaging and test services from ASI. We continue to have certain
contractual and other business relationships with ASI, primarily our wafer
fabrication services supply agreement. Under this supply agreement, we have the
exclusive right to all of the wafer output of ASI's wafer fabrication facility,
and we expect to continue to purchase all of ASI's wafer fabrication services.
Currently we own 42% of ASI's outstanding voting stock. Our company and ASI
continue to have close ties due to our overlapping ownership and management. We
will continue to report ASI's results in our financial statements through the
equity method of accounting. ASI was released from workout with its Korean
creditor banks on July 18, 2000. For more information concerning

12
<PAGE> 13
our relationship with ASI, you should read "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Risk Factors that May Affect
Future Operating Performance."

Financial Impact of Our Acquisition of K1, K2 and K3 and Investment in ASI on
Our Results of Operations

Historically we were very dependent on ASI's packaging and test operations.
Our dependence on ASI has decreased subsequent to our 1999 acquisition of the K4
factory, and now with our most recent acquisition of the K1, K2 and K3
factories. Our acquisition of K1, K2 and K3 was effective May 1, 2000. Because
we historically sold substantially all of the output of K1, K2 and K3, there was
not and will not be a significant change in our revenues as a result of this
acquisition. Our gross profits improved since the cost to operate the factories
is less than the payments made to ASI under our previous supply agreement with
ASI. For the period under our ownership, K1, K2 and K3 generated a combined
gross margin comparable to other company owned factories. This represented a
significant overall improvement in gross margins as compared with the historical
gross margins of approximately 11% generated under the previous ASI assembly and
test supply agreement.

The favorable increase in gross profits was offset by increased operating
expenses related to the operations of K1, K2 and K3. Our interest expense
increased due to the total debt we incurred to finance the $950.0 million
acquisition of K1, K2 and K3 and our $459.0 million investment in ASI.

Our overall effective tax rate decreased to 15% due to the 100% tax holiday
that applies for seven years and then to 50% tax holiday for three additional
years. We expect our overall corporate tax rate to remain at approximately 15%
for the foreseeable future.

Our earnings included equity in income of ASI for the nine months ended
September 30, 2000 of $7.0 million excluding $16.1 million of amortization of
the excess of the cost of our investment in ASI over our share of the underlying
net assets. We expect ASI will continue to strengthen as a result of their
significantly reduced debt burden and the expansion of their wafer fabrication
capacity.

Actual results may differ materially from those anticipated in such
forward-looking statements as a result of certain factors, including those set
forth in "Risk Factors that May Affect Future Operating Performance".

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- -----------------
2000 1999 2000 1999
----- ----- ----- -----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues .................................. 100.0% 100.0% 100.0% 100.0%
Gross profit .................................. 24.5 19.4% 22.4 16.5%
Operating income .............................. 15.4 10.8% 13.5 8.3%
Income before income taxes and equity in income
of investees ............................... 9.5 6.9% 8.4 5.6%
Net income .................................... 7.0 5.2% 6.5 4.1%
</TABLE>

Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

Net Revenues. Net revenues increased $146.8 million, or 29.2%, to $648.6
million in the three months ended September 30, 2000 from $501.8 million in the
three months ended September 30, 1999. Packaging and test net revenues increased
27.7% to $548.9 million in the three months ended September 30, 2000 from $429.7
million in the three months ended September 30, 1999. For the same three month
periods, wafer fabrication net revenues increased to $99.7 million from $72.1
million.

The increase in packaging and test net revenues was primarily attributable
to a significant increase in unit volumes. Overall unit volume increased
approximately 33.2% for the three months ended September 30, 2000 compared to
the three months ended September 30, 1999. This overall unit volume increase was
driven by a 45.7% unit volume increase in advanced and laminate packages as a
result of a broad based demand for such packages. During the same time periods,
unit volumes in our traditional lead frame business increased 22.5%. In
addition, changes in the mix of products we are selling, to more advanced and
laminate packages, also provided an offset to

13
<PAGE> 14
overall price erosion. Offsetting the growth in unit volumes and favorable
changes in product mix were significant average selling price erosion across all
product lines.

The increase in wafer fabrication net revenues represents the expanded
capacity of the wafer fabrication facility from approximately 22,000 wafer
starts per month in the three months ended September 30, 1999 compared to
approximately 24,000 wafer starts per month in the three months ended September
30, 2000.

Gross Profit. Gross profit increased $61.4 million, or 63.0%, to $158.9
million, or 24.5% of net revenues, in the three months ended September 30, 2000
from $97.5 million, or 19.4% of net revenues, in the three months ended
September 30, 1999.

Gross margins were positively impacted by:

- Improved gross margin on revenues from the output of K1, K2 and K3
following our acquisition in May 2000;

- An improvement in gross margin at our test operations in the
Philippines due to a change in test service mix which resulted in an
increased revenue per unit tested; and

- Increasing unit volumes during the third quarter of 2000, which
permitted better absorption of our factories' substantial fixed costs,
resulting in a lower manufacturing cost per unit and improved gross
margins.

The positive impact on gross margins was partially offset by:

- Significant average selling price erosion across our product lines;
and

- Significant levels of capacity expansion and new product line
introductions in the Philippines and Korea that have a tendency to
lower the gross margins until a base level of customers are qualified.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $9.9 million, or 24.5%, to $50.3 million, or
7.7% of net revenues, in the three months ended September 30, 2000 from $40.4
million, or 8.0% of net revenues, in the three months ended September 30, 1999.
The increase in these costs was due to:

- Increased headcount and related personnel costs within our sales,
engineering support and System-in-Package groups; and

- Increased costs related to our Korean factories primarily as a result
of the assumption of the general and administrative expenses of K1, K2
and K3.

Research and Development. Research and development expenses increased $5.8
million to $8.8 million, or 1.4% of net revenues, in the three months ended
September 30, 2000 from $3.0 million, or 0.6% of net revenues, in the three
months ended September 30, 1999. Increased research and development expenses
resulted from increased headcount and general development activities, primarily
the expansion of our Chandler, Arizona-based research facility and the
acquisition of the packaging and test research and development group within ASI
related to the K1, K2 and K3 transaction. Our research and development efforts
support our customers needs for smaller packages and increased functionality. We
continue to invest research and development resources to continue the
development of our Flip Chip interconnection solutions, our System-in-Package
technology, that uses both advanced packaging and traditional surface mount
techniques to enable the combination of technologies in a single chip, and our
Chip Scale packages that are nearly the size of the semiconductor die.

Other (Income) Expense. Other expenses increased $18.9 million, to $38.2
million, or 5.9% of net revenues, in the three months ended September 30, 2000
from $19.3 million, or 3.9% of net revenues, in the three months ended September
30, 1999. The net increase in other expenses was primarily a result of an
increase in interest expense of $19.8 million. The increased interest expense
resulted from the issuance of $258.8 million of convertible subordinated notes
and $750.0 million of secured bank debt to fund our May 2000 acquisition of K1,
K2 and K3 and our investment in ASI and an additional draw of $50.0 million from
the revolving credit line. Other expenses were favorably impacted by a savings
of $1.1 million in accounts receivable securitization charges as a result of the
termination of our accounts receivable securitization agreement at the end of
March 2000.

14
<PAGE> 15
Income Taxes. Our effective tax rate in the three months ended September
30, 2000 and 1999 was 15.0% and 25.0%, respectively. The decrease in the
effective tax rate in 2000 was due to the higher operating profits at our
factories that operate with tax holidays significantly impacted by the
acquisition of K1, K2 and K3. We have structured our global operations to take
advantage of lower tax rates in certain countries and tax incentives extended to
encourage investment. The tax returns for open years are subject to changes upon
final examination. Changes in the mix of income from our foreign subsidiaries,
expiration of tax holidays and changes in tax laws and regulations could result
in increased effective tax rates for us.

Equity in Loss of Investees. Our earnings included equity in income of ASI
for the three months ended September 30, 2000 of $0.8 million excluding the
amortization of the excess of the cost of our investment above of our share of
the underlying net assets of $7.5 million. Our investment in ASI increased to
40.2% as of September 30, 2000 from 38.0% as of May 2000. Total ASI revenue for
the three months ended September 30, 2000 was $90.3 million. ASI's gross profit
for the three months ended September 30, 2000 were $9.5 million or a gross
margin of 10.5%. Total operating expenses for the three months ended September
30, 2000 were $5.7 million or 6.3% of revenues. ASI's results are impacted by
the additional capacity ASI is investing in to support customer demand.

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

Net Revenues. Net revenues increased $378.7 million, or 27.6%, to $1,750.4
million in the nine months ended September 30, 2000 from $1,371.7 million in the
nine months ended September 30, 1999. Packaging and test net revenues increased
27.6% to $1,480.5 million in the nine months ended September 30, 2000 from
$1,160.1 million in the nine months ended September 30, 1999. For the same nine
month periods, wafer fabrication net revenues increased to $269.9 million from
$211.6 million.

The increase in packaging and test net revenues was primarily attributable
to a significant increase in unit volumes. Overall unit volume increased
approximately 37.1% for the nine months ended September 30, 2000 compared to
the nine months ended September 30, 1999. This overall unit volume increase was
driven by a 56.0% unit volume increase for advanced and laminate packages as a
result of a broad based demand for such packages. Unit volumes in our
traditional lead frame business increased 23.4%. In addition, changes in the mix
of products we are selling, to more advanced and laminate packages, also
provided an offset to overall price erosion. Offsetting the growth in unit
volumes and favorable changes in product mix were significant average selling
price erosion across all product lines. In addition, we believe revenues for the
first half of 2000 were adversely effected by advanced wafer capacity
limitations at some of our customer locations, a wafer production shift by one
of our largest customers and the loss of business in our P3 factory due to a
laminate contamination issue all of which occurred in the second quarter of
2000. We have resolved the laminate contamination issue and are in the process
of requalifying the affected customers. We expect that the revenues from the
affected customers will return to more normal levels early 2001.

The increase in wafer fabrication net revenues represents the expanded
capacity of the wafer fabrication facility.

Gross Profit. Gross profit increased $165.2 million, or 72.8%, to $392.1
million, or 22.4% of net revenues, in the nine months ended September 30, 2000
from $226.8 million, or 16.5% of net revenues, in the nine months ended
September 30, 1999.

Gross margins were positively impacted by:

- Increasing unit volumes during the nine months ended September 30,
2000, which permitted better absorption of our factories' substantial
fixed costs, resulting in a lower manufacturing cost per unit and
improved gross margins;

- Improved gross margin on revenues from the output of K1, K2 and K3
following our acquisition in May 2000 and the benefit of a full nine
month period of improved margin on revenues from the output of K4
following our May 1999 acquisition of K4;

- Change in the contract pricing under our supply agreement with ASI
prior to our acquisition of ASI's remaining package and test factories
in May 2000.

The positive impact on gross margins was partially offset by:

- Significant average selling price erosion across our product lines;
and

15
<PAGE> 16
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $33.9 million, or 32.1%, to $139.4 million, or
8.0% of net revenues, in the nine months ended September 30, 2000 from $105.5
million, or 7.7% of net revenues, in the nine months ended September 30, 1999.
The increase in these costs was due to:

- Increased headcount and related personnel costs within our sales,
engineering support and System-in-Package groups; and

- Increased costs related to our Korean factories primarily as a result
of the assumption of the general and administrative expenses of K1, K2
and K3 as well as K4.

Research and Development. Research and development expenses increased $9.0
million to $17.1 million, or 1.0% of net revenues, in the nine months ended
September 30, 2000 from $8.1 million, or 0.6% of net revenues, in the nine
months ended September 30, 1999. Increased research and development expenses
resulted from increased headcount and general development activities, primarily
the expansion of our Chandler, Arizona-based research facility and the
acquisition of the packaging and test research and development group within ASI
related to the K1, K2 and K3 transaction. Our research and development efforts
support our customers needs for smaller packages and increased functionality. We
continue to invest our research and development resources to continue the
development of our Flip Chip interconnection solutions, our System-in-Package
technology, that uses both advanced packaging and traditional surface mount
techniques to enable the combination of technologies in a single chip, and our
Chip Scale packages that are nearly the size of the semiconductor die.

Other (Income) Expense. Other expenses increased $51.9 million, to $87.7
million, or 5.0% of net revenues, in the nine months ended September 30, 2000
from $35.8 million, or 2.6% of net revenues, in the nine months ended September
30, 1999. The net increase in other expenses was primarily a result of an
increase in interest expense of $52.2 million. The increased interest expense
resulted from the issuance of $258.8 million of convertible subordinated notes
and $750.0 million of secured bank debt to fund our May 2000 acquisition of K1,
K2 and K3 and our investment in ASI and an additional draw of $50.0 million from
the revolving credit line. Additionally, the increased interest expense resulted
from having a full nine months of interest expense in 2000 related to the May
1999 issuance of senior and senior subordinated notes to fund the K4
acquisition. Other expenses were favorably impacted by a savings of $2.0 million
in accounts receivable securitization charges as a result of the termination of
the agreement at the end of March 2000.

Income Taxes. Our effective tax rate in the nine months ended September 30,
2000 and 1999 was 16.5% and 27.0%, respectively. The decrease in the effective
tax rate in 2000 was due to the higher operating profits at our factories that
operate with tax holidays significantly impacted by the acquisition of K1, K2
and K3. We have structured our global operations to take advantage of lower tax
rates in certain countries and tax incentives extended to encourage investment.
The tax returns for open years are subject to changes upon final examination.
Changes in the mix of income from our foreign subsidiaries, expiration of tax
holidays and changes in tax laws and regulations could result in increased
effective tax rates for us.

Equity in Loss of Investees. Our earnings included equity in income of ASI
for the nine months ended September 30, 2000 of $7.0 million excluding the
amortization of the excess of the cost of our investment above of our share of
the underlying net assets of $16.1 million. Our investment in ASI increased to
40.2% as of September 30, 2000 from 38.0% as of May 2000 and 18.0% as of October
1999. Total ASI revenue for the nine months ended September 30, 2000 was $247.9
million. ASI's gross profit for the nine months ended September 30, 2000 were
$38.8 million or a gross margin of 15.6%. Total operating expenses for the nine
months ended September 30, 2000 were $18.3 million or 7.4% of revenues. ASI's
results are impacted by the additional capacity ASI is investing in to support
customer demand.

LIQUIDITY AND CAPITAL RESOURCES

Our ongoing primary cash needs are for equipment purchases, factory
expansions, interest and principal payments on our debt and working capital, in
addition to our acquisitions and investments.

In May 2000 we completed our purchase of ASI's remaining three packaging
and test factories, known as K1, K2 and K3 for a purchase price of $950.0
million and made an additional equity investment in ASI of $309.0 million. We
committed to invest $459.0 million in total. We fulfilled the remaining equity
investment of $150.0 million in three installments of which $30.0 million was
invested on June 30, 2000, $60.0 million was invested on August 30, 2000 and
$60.0 million was invested on October 27, 2000. We financed the acquisition and
investment with the proceeds of a $258.8 million convertible subordinated notes
offering, a $410.0 million private equity financing, $750.0 million of secured
bank debt and approximately $103 million of cash on hand. The new secured bank
debt consists of a new $900.0 million secured bank facility that includes a
$200.0 million revolving credit line. As of September 30, 2000, $100.0 million
was available under the revolving credit line. The new secured bank debt
provides for amortization of the drawn amount over a five to a

16
<PAGE> 17
five and one-half year period and quarterly principal and interest payments. In
conjunction with the private equity financing, we issued 20.5 million shares of
our common stock in the private equity offering and granted warrants to purchase
3.9 million additional shares of our common stock at $27.50 per share.

In connection with the new secured bank debt, we terminated a trade
receivables securitization agreement and repaid $71.5 million due under this
facility. The securitization agreement represented a commitment by a commercial
financial institution to purchase, with limited recourse, all right, title and
interest in up to $100 million in eligible receivables. In addition, we repaid
$11.4 million of additional secured term loans.

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 purchase of K4, we completed a private placement in May 1999 to raise $425
million in senior notes and $200 million in senior subordinated notes.

We have invested significant amounts of capital to increase our packaging
and test services capacity. During the last three years we have constructed our
P3 and P4 facilities, added capacity in our other factories in the Philippines
and Korea and constructed a new research and development facility in the U.S.
During the nine months ended September 30, 2000 and 1999, we made capital
expenditures of $402.3 million and $175.8 million, respectively. We intend to
spend approximately $500 million in total capital expenditures in 2000 primarily
to increase the capacity of our factories. We believe the increase in capital
expenditures is necessary to expand our capacity to meet the growth in demand we
expect in 2000 and 2001.

We entered into a non-binding memorandum of understanding with Toshiba to
establish a joint venture assembly and test operation located in Kitakami,
Japan. Toshiba will be the initial customer when the joint venture begins. We
are in the process of finalizing the joint venture agreements and expect
operations to commence during the fourth quarter of 2000 or the first quarter of
2001. Based on negotiations to date, Amkor will be a 60% investor in the joint
venture and would accordingly consolidate the entity. We anticipate that we will
need to invest approximately $30.0 million in the joint venture initially, which
we will fund from our existing line of credit. The term of the joint venture is
expected to be three years at which point it is expected that Amkor will buy
Toshiba's 40% interest. The payment for Toshiba's interest will be primarily
based on the performance of the joint venture during the three year period.
Sales to the joint venture are anticipated to exceed $300 million annually with
marginal contribution to our net income.

Covenants in the agreements governing our new $900.0 million secured bank
facility, our existing $425 million of senior notes and $200 million of senior
subordinated notes and any future indebtedness may materially restrict our
operations, including our ability to incur debt, pay dividends, make certain
investments and payments and encumber or dispose of assets. In addition,
financial covenants contained in agreements relating to our existing and future
debt could lead to a default in the event our results of operations do not meet
our plans. A default under one debt instrument may also trigger cross-defaults
under our other debt instruments. An event of default under any debt instrument,
if not cured or waived, could have a material adverse effect on us.

Net cash provided by operating activities in the nine months ended
September 30, 2000 and 1999 was $280.0 million and $220.0 million, respectively.
Net cash used in investing activities in the nine months ended September 30,
2000 and 1999 was $1,669.4 million and $957.7 million, respectively. Net cash
provided by financing activities in the nine months ended September 30, 2000 and
1999 was $1,400.3 million and $592.1 million, respectively.

We believe that our existing cash balances, available credit lines, cash
flow from operations and available equipment lease financing will be sufficient
to meet our projected capital expenditures, debt service, 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 new secured bank
facility, senior notes and senior subordinated notes significantly reduce our
ability to incur additional debt. Failure to obtain any such required additional
financing could have a material adverse effect on our company.

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<PAGE> 18
RISK FACTORS THAT MAY AFFECT FUTURE OPERATING PERFORMANCE

In addition to the factors discussed elsewhere in this form 10-Q and in our
report on Form 10-K for the year ended December 31, 1999 and our 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 Amkor.

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 our customers' commitments, timing and volume of
orders relative to our production capacity,
- changes in our capacity utilization,
- evolutions in the life cycles of our customers' products,
- rescheduling and cancellation of large orders,
- erosion of packaging selling prices,
- fluctuations in wafer fabrication service charges paid to ASI,
- adverse financial results of ASI
- changes in costs, availability and delivery times of labor, raw materials
and components,
- fluctuations in manufacturing yields,
- changes in product mix,
- timing of expenditures in anticipation of future orders,
- availability and cost of financing for expansion,
- 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 and wafer
fabrication 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. 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 and wafer fabrication services to offset a decline in average
selling prices, our future operating results could suffer.

DEPENDENCE ON THE HIGHLY CYCLICAL SEMICONDUCTOR AND ELECTRONIC PRODUCTS
INDUSTRIES -- WE OPERATE 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.

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<PAGE> 19
HIGH LEVERAGE AND RESTRICTIVE COVENANTS -- OUR SUBSTANTIAL INDEBTEDNESS COULD
ADVERSELY AFFECT THE FINANCIAL HEALTH OF OUR COMPANY AND COULD RESTRICT OUR
OPERATIONS.

We now have a significant amount of indebtedness, which increased
substantially in connection with our acquisition of K1, K2 and K3 and our
investment in ASI. Our indebtedness increased after the incurrence of
approximately $750.0 million of new secured bank debt, which was drawn from a
$900.0 million facility of which $200.0 million is a revolving credit facility
and $258.8 million of convertible subordinated notes to fund the acquisition and
investment.

Covenants in the agreements governing the new secured bank debt, our
existing senior notes and senior subordinated notes and any future indebtedness
may materially restrict our operations, including our ability to incur debt, pay
dividends, make certain investments and payments, and encumber or dispose of
assets. In addition, financial covenants contained in agreements relating to our
existing and future debt could lead to a default in the event our results of
operations do not meet our plans. A default under one debt instrument may also
trigger cross-defaults under our other debt instruments. An event of default
under any debt instrument, if not cured or waived, could have a material adverse
effect on us.

Our substantial indebtedness could:

- increase our vulnerability to general adverse economic and industry
conditions;

- limit our ability to fund future working capital, capital
expenditures, acquisitions, research and development and other general
corporate requirements;

- limit our ability to obtain additional financing;

- require us to dedicate a substantial portion of our cash flow from
operations to service payments on our debt;

- limit our flexibility to react to changes in our business and the
industry in which we operate; and

- place us at a competitive disadvantage to any of our competitors that
have less debt.

We cannot assure you that our business will generate cash in an amount
sufficient to enable us to service our debt or to fund our other liquidity
needs. In addition, we may need to refinance all or a portion of our debt on or
before maturity. We cannot assure you that we will be able to refinance any of
our debt on commercially reasonable terms or at all.

Despite current debt levels, the terms of the instruments governing our
debt do not prohibit us or our subsidiaries from incurring substantially more
debt. If new debt is added to our consolidated debt level, the related risks
that we now face could intensify.

RELATIONSHIP WITH ASI

We report ASI's financial results in our financial statements, and if ASI
encounters financial difficulties, our financial performance could suffer.

With our $459.0 million additional investment in ASI and the conversion of
150 billion won (approximately $132.0 million) of ASI's debt to equity by ASI's
creditor banks, we own approximately 42% of ASI's outstanding voting stock.
Accordingly, we continue to report ASI's financial results in our financial
statements through the equity method of accounting. If ASI's results of
operations are adversely affected for any reason (including as a result of
losses at its consolidated subsidiaries and equity investees), our results of
operations will suffer as well. Financial or other problems affecting ASI could
also lead to a complete loss of our investment in ASI. ASI was released from
workout with its Korean creditor banks on July 18, 2000.

Our wafer fabrication business may suffer if ASI reduces its operations or if
our relationship with ASI is disrupted.

Our wafer fabrication business depends on ASI providing wafer fabrication
services on a timely basis. 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 wafer fabrication business would be harmed. We may not be
able to identify and qualify alternate suppliers of wafer fabrication services
quickly, if at all. In addition, we currently have no other qualified third
party suppliers of wafer fabrication services and do not have any plans to
qualify additional third party suppliers.

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<PAGE> 20
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 FALLS 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 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
revenues. During the nine months ended September 30, 2000 and 1999, we derived
25.4% and 32.0%, respectively, of our net revenues from sales to our largest
five packaging and test customers. In addition, during each of the nine month
periods ended September 30, 2000 and 1999, we derived 15.4% of our net revenues
from wafer fabrication services, and we derived substantially all of these
revenues from 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 four factories in Korea. We also source wafer
fabrication services from ASI's wafer fabrication facility. 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

Our operations in Korea, as well as 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 are denominated in U.S.
dollars, while its labor and some operating costs are denominated in won.
Fluctuations in the won-dollar exchange rate will affect both our company's and
ASI's financial results. With our additional investment in ASI, our financial
results will be further affected by exchange rate fluctuations.

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.

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Risks Associated with Our Operations in the Philippines

Although the political situation and the general state of the economy in
the Philippines have 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 ASI'S PACKAGING AND TEST BUSINESS --
THE ACQUISITION OF THIS BUSINESS REPRESENTS A MAJOR COMMITMENT OF OUR CAPITAL
AND MANAGEMENT RESOURCES.

Our acquisition of ASI's packaging and test factories will require our
management to devote a significant portion of our resources to the maintenance
and operation of factories in Korea. We have limited 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 labor laws.
During the transition period in which we will integrate ASI's packaging and test
business 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.

We retained the approximately 6,600 Korean employees currently working at
K1, K2 and K3, and we may face cultural difficulties until we learn how to
interact with these new employees. If these employees become dissatisfied
working for a U.S. company, they may leave us. If we cannot find new employees
to replace departing ones, our new 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.

In order to manage our growth, we must continue to implement additional
operating and financial controls and hire and train additional personnel. We
cannot assure you that we will continue to be successful in hiring and properly
training sufficient numbers of qualified personnel and in effectively managing
our growth. 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 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 business, which commenced operations in January 1998,
depends significantly upon Texas Instruments. An agreement with ASI and Texas
Instruments requires Texas Instruments to purchase from us at least 40% of the
capacity of ASI's wafer fabrication facility, and under certain circumstances,
Texas Instruments has the right to purchase from us up to 70% of this capacity.
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 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

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<PAGE> 22
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 the
packaging and test services performed by our factories. 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
services 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.

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

The independent semiconductor packaging and test market is very
competitive. This sector is comprised of approximately 40 companies. 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. If we cannot compete successfully
in the future against existing or potential competitors, our operating results
would suffer.

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.

Increasingly, 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

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upon our company the need for additional capital equipment or other process
requirements, (2) restrict our company's ability to expand our respective
operations, (3) subject our company to liability or (4) cause our company to
curtail our operations.

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

As of October 31, 2000, we hold 77 U.S. patents, and we also have 167
pending patents and are preparing an additional 42 patent applications for
filing. In addition to the U.S. patents we hold 585 patents in foreign
jurisdictions. 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. 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.

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.

As of October 31, 2000, Mr. James Kim and members of his family
beneficially owned approximately 51% of our outstanding common stock. Mr. James
Kim's family, acting together, will 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, including transactions which may involve a conflict of
interest;

- mergers involving our company;

- tender offers; and

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

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<PAGE> 24
STOCK PRICE VOLATILITY

The trading price of our common stock has been and is likely to continue to
be highly volatile and could be subject to wide fluctuations in response to
factors such as:

- actual or anticipated quarter-to-quarter variations in operating
results;

- announcements of technological innovations or new products and
services by Amkor or our competitors;

- general conditions in the semiconductor industry;

- changes in earnings estimates or recommendations by analysts;

- developments affecting ASI;

- or other events or factors, many of which are out of our control

In addition, the stock market in general, and the Nasdaq National Market
and the markets for technology companies in particular, have experienced extreme
price and volume fluctuations. This volatility has affected the market prices of
securities of companies like ours for that have often been unrelated or
disproportionate to the operating performance. These broad market fluctuations
may adversely affect the market price of our common stock.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our company is exposed to market risks, primarily related to foreign
currency and interest rate fluctuations. In the normal course of business, we
employ established policies and procedures to manage the exposure to
fluctuations in foreign currency values and changes in interest rates.

Foreign Currency Risks

Our company's primary exposures to foreign currency fluctuations are
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 objective in managing this foreign currency exposure
is to minimize the risk through minimizing the level of activity and financial
instruments denominated in pesos and won. Although we have selectively hedged
some of our currency exposure through short-term (generally not more than 30 to
60 days) forward exchange contracts, the hedging activity to date has been
immaterial.

At September 30, 2000, the 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
portfolio of peso-based assets and liabilities at September 30, 2000, a 20%
increase in the Philippine peso to U.S. dollar exchange rate would result in a
decrease of approximately $1.6 million, in peso-based net assets.

At September 30, 2000, the won-based financial instruments primarily
consisted of cash, non-trade receivables, non-trade payables, accrued payroll,
taxes and other expenses. Based on the portfolio of won-based assets and
liabilities at September 30, 2000, a 20% increase in the Korean won to U.S.
dollar exchange rate would result in a decrease of approximately $3.0 million,
in won-based net assets.

Interest Rate Risks

Our company has interest rate risk with respect to our investment in cash
and cash equivalents, use of short-term borrowings and long-term debt, including
the convertible subordinated notes, senior notes and senior subordinated notes
outstanding, and will have such risk with respect to the new secured bank debt.
Overall, we mitigate the interest rate risks by investing in short-term
investments, which are due on demand or carry a maturity date of less than three
months. In addition, both the short-term borrowings and long-term debt,
excluding our convertible subordinated notes, senior notes and senior
subordinated notes, have variable rates that reflect currently available terms
and conditions for similar borrowings. As the convertible subordinated notes,
senior notes and senior subordinated notes bear fixed rates of interest, the
fair value of these instruments fluctuate with market interest rates. The fair
value of the convertible subordinated notes is also impacted by the market price
of our common stock.

The table below presents the interest rates, maturities, principal cash
flows and fair value of our fixed and variable rate debt as of September 30,
2000.

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------------------------------
FAIR
2000 2001 2002 2003 2004 THEREAFTER TOTAL VALUE
------ ------ ------ ------ ------ ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term debt:
Fixed rate debt -- -- -- 50,191 -- 883,750 933,941 930,986
Average interest rate 5.75% 8.29% 8.15%

Variable rate debt 18,453 73,616 73,561 73,571 73,586 450,874 763,661 763,661
Average interest rate 10.37% 10.37% 10.37% 10.37% 10.37% 10.37% 10.37%
</TABLE>

Based on our conservative policies with respect to investments in cash and
cash equivalents, use of variable rate debt, and the fact we currently intend to
repay upon maturity our senior notes, senior subordinated notes and our
convertible subordinated notes (unless converted), we believe that the risk of
potential loss due to interest rate fluctuations is not material.

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Equity Price Risks

Our outstanding 5.75% and 5% convertible subordinated notes are convertible
into common stock at $13.50 per share and $57.34 per share, respectively. As
stated above, we intend to repay our convertible subordinated notes upon
maturity, unless converted. If investors were to decide to convert their
convertible subordinated notes to common stock, there would be no impact on our
future earnings, other than a reduction in interest expense, unless such
conversion were induced by us.

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PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

In April and May 2000 we raised an aggregate of $410 million in equity
financing through the sale to a group of private investors an aggregate of
20,500,000 shares of our common stock at a price of $20.00 per share. In
addition, we issued these investors four-year warrants for an aggregate of 3.895
million shares of common stock with a strike price of $27.50 per share. The
common stock and warrants were issued in reliance on Rule 506 promulgated under
the Securities Act of 1933, as amended. We used the net proceeds from this
financing to partially fund the acquisition of three semiconductor packaging
factories from Anam Semiconductor, Inc.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

At Amkor Technology, Inc.'s Annual Meeting of Stockholders held on July 19,
2000 the following proposals were adopted by the margins indicated.

1. To elect a Board of Directors to hold office until the next Annual Meeting
of Stockholders or until their respective successors have been elected or
appointed.

<TABLE>
<CAPTION>
NUMBER OF SHARES
VOTED FOR WITHHELD
--------- --------
<S> <C> <C>
James J. Kim ....... 122,469,335 31,465
John N. Boruch ..... 122,470,115 30,685
Winston J. Churchill 122,471,020 29,780
Thomas D. George ... 122,471,560 29,240
George K. Hinckley . 122,470,960 29,840
John B. Neff ....... 122,467,394 33,406
</TABLE>

2. To ratify the appointment of the accounting firm of Arthur Andersen LLP as
independent auditors for the company for the current year. Votes totaled
122,471,365 for, 9,518 against and 19,917 abstain.

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>
12.1 Computation of Ratio of Earnings to Fixed Charges

27.1 Financial Data Schedule.
</TABLE>

(b) REPORTS ON FORM 8-K

We filed with the Securities and Exchange Commission the following reports
on Form 8-K during the quarterly period ended September 30, 2000:

Current Reports on Form 8-K/A dated May 2, 2000 (filed July 17, 2000,
August 18, 2000 and August 31, 2000) related to the acquisition of K1, K2 and K3
and our investment in Anam Semiconductor, Inc. and the financing transactions
related to the acquisition and investment.

Current Report on Form 8-K dated August 2, 2000 (filed August 8, 2000)
related to a press release dated August 2, 2000 announcing our financial results
for the second quarter ending June 30, 2000.

Current Report on Form 8-K dated September 11, 2000 (filed September 18,
2000) related to the change in our certifying accountant.

27
<PAGE> 28
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.

By: /s/ KENNETH T. JOYCE
------------------------------------------
Kenneth T. Joyce
Chief Financial Officer
(Principal Financial, Chief Accounting
Officer and Duly Authorized Officer)

Date: November 14, 2000