This report contains forward-looking statements within the meaning of the federal securities laws, including but not limited to statements regarding:
(1) our plan to exit manufacturing operations in Singapore and related costs,
(2) the amount of our expected capital additions and focus on customer requirements, investments in technology advancements and cost reduction programs, (3) the release of valuation allowances related to taxes in the future, (4) our ability to fund our operating activities, working capital, capital expenditures and debt service requirements for the next twelve months,
(5) the expected use of cash flows, if any in the future, (6) expected workforce reductions and related severance charges, (7) our repurchase of outstanding debt in the future, (8) payment of dividends, (9) compliance with our covenants,
(10) expected contributions to, and interim payouts from, defined benefit pension plans, (11) liability for unrecognized tax benefits, (12) the effect of foreign currency exchange rate exposure on our financial results,
(13) improvement in the semiconductor industry, (14) the effect of capacity utilization rates on our costs and gross margin, and (15) other statements that are not historical facts. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," "intend" or the negative of these terms or other comparable terminology. 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 Part II, Item 1A "Risk Factors" of this Quarterly Report. The following discussion provides information and analysis of our results of operations for the three and nine months ended September 30, 2009 and our liquidity and capital resources. You should read the following discussion in conjunction with Item 1, "Financial Statements" in this Quarterly Report as well as other reports we file with the Securities and Exchange Commission ("SEC").

Overview

Amkor is one of the world's leading subcontractors of semiconductor packaging and test services. Packaging and test are integral steps in the process of manufacturing semiconductor devices. The manufacturing process begins with silicon wafers and involves the fabrication of electronic circuitry into complex patterns, thus creating large numbers of individual chips on the wafers. The fabricated wafers are then probe tested to ensure the individual devices meet electrical specifications. The packaging process creates an electrical interconnect between the semiconductor chip and the system board. In packaging, fabricated semiconductor wafers are separated into individual chips. These chips are typically attached through wire bond or wafer bump technologies to a substrate or leadframe and then encased in a protective material. In the case of an advanced wafer level package, the package is assembled on the surface of a wafer.

Our packages are designed for application specific body size and electrical connection requirements to provide optimal electrical connectivity and thermal performance. The packaged chips are then tested using sophisticated equipment to ensure that each packaged chip meets its design and performance specifications. Increasingly, packages are custom designed for specific chips and specific end-market applications. We are able to provide turnkey assembly and test solutions including semiconductor wafer bump, wafer probe, wafer backgrind, package design, assembly, test and drop shipment services.

The semiconductor industry is showing signs of improvement from the recent cyclical downturn. Our unit demand and utilization increased during the three months ended September 30, 2009 compared to the previous quarter, although lower than the prior year comparable period.

Our net sales for the three months ended September 30, 2009 and 2008 were $616.2 million and $719.7 million, respectively. In the three months ended September 30, 2009, sales decreased $103.5 million, or 14.4%, from the three months ended September 30, 2008 primarily due to the general decline in wirebond packaging services and inventory management efforts by our customers as a result of the global economic recession and weakness in consumer spending. In addition, our flip chip packaging sales decreased for the three months ended September 30,

2009 compared to the three months ended September 30, 2008 primarily due to lower unit demand for gaming systems.

Gross margin for the three months ended September 30, 2009 and 2008 was 25.1% and 17.9%, respectively. Cost of sales for the three months ended September 30, 2008 included a charge of $50.0 million for royalties related to a patent license dispute. The $50.0 million charge reduced our gross margin by seven percentage points for the three months ended September 30, 2008.

Amkor's net income for the three months ended September 30, 2009 was $80.9 million, or $0.31 per diluted share, compared with Amkor's net income of $29.2 million, or $0.15 per diluted share, for the three months ended September 30, 2008. The net income for the three months ended September 30, 2009 includes an income tax benefit of $30.9 million primarily from the release of a tax valuation allowance at our subsidiary in Korea (See Note 4 "Income Taxes" to our Consolidated Financial Statements in Part I Item I of this Quarterly Report). The net income for the three months ended September 30, 2009 also includes a net foreign currency loss of $8.3 million from the remeasurement of certain subsidiaries' balance sheet items compared to a $23.0 million net foreign currency gain in the three months ended September 30, 2008. Net income for the three months ended September 20, 2008 included a $52.4 million charge, net of tax, or $0.25 per diluted share, relating to the accrued and unpaid royalties and interest for a patent license dispute.

Our capital additions totaled $77.3 million in the three months ended September 30, 2009. We have increased our expected capital additions for the full year 2009 to $200 million, or approximately 9% of expected net sales for the year, in response to higher than anticipated customer demand. Capital additions are focused on specific customer requirements, technology advancements and cost reduction programs.

As part of our focus on generating cash flow and driving greater factory and administrative efficiencies, beginning in 2008 and continuing into 2009, we implemented cost reduction measures that include lowering executive and certain other employee compensation, reducing employee and contractor headcount, and shortening work weeks. Some costs previously reduced through cost reduction measures, such as labor and other overhead costs, have increased in the three months ended September 30, 2009 and will continue to increase in order to align with customer demand.

We generated $81.5 million of free cash flow in the three months ended September 30, 2009, and $44.9 million of free cash flow in the nine months ended September 30, 2009. Cash provided by operating activities was $156.8 million for the nine months ended September 30, 2009, as compared with $457.4 million for the nine months ended September 30, 2008. Free cash flow for the nine months ended September 30, 2009 decreased $95.4 million from the prior year comparable period primarily due to reduced business levels due to the recession and approximately $104.9 million of payments made relating to the resolution of a patent license dispute and employee benefit and separation payments partially offset by decreased capital additions. We define free cash flow as net cash provided by operating activities less investing activities related to the acquisition of property, plant and equipment. Free cash flow is not defined by U.S. generally accepted accounting principles ("U.S. GAAP") and a reconciliation of free cash flow to net cash provided by operating activities is set forth under the caption "Cash Flows" below. Please see "Liquidity and Capital Resources" and "Cash Flows" below for a further analysis of the change in our balance sheet and cash flows during the first nine months of 2009.

We believe our financial position and liquidity are sufficient to fund our operating activities for at least the next twelve months. In April 2009, we amended our $100.0 million first lien revolving credit facility which, among other things, extended the maturity date from November 2009 to April 2013. Also, in April 2009, we issued $250.0 million of our 6.0% convertible senior subordinated notes due April 2014 (the "2014 Notes"). In the nine months ended September 30, 2009, we repurchased in open market transactions $133.6 million in aggregate principal amount of our 7.125% senior notes due March 2011, $69.0 million in aggregate principal amount of our 2.5% convertible senior subordinated notes due May 2011, and $49.2 million in aggregate principal amount of our 7.75% senior notes due May 2013 using $210.1 million of net proceeds from issuance of the 2014 Notes and $23.9 million of cash on hand. At September 30, 2009, our cash and cash equivalents totaled approximately $446.7 million with an aggregate of $86.4 million of debt due through the end of 2010. In 2011, the remaining $119.1 million aggregate principal amount of our 2.5% convertible senior subordinated notes and 7.125% senior notes mature.

Results of Operations

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


                                               For the Three           For the Nine
                                               Months Ended            Months Ended
                                               September 30,           September 30,
                                             2009        2008        2009        2008

        Net sales                            100.0 %     100.0 %     100.0 %     100.0 %
        Gross profit                          25.1 %      17.9 %      20.2 %      22.0 %
        Depreciation and amortization         12.1 %      11.0 %      15.3 %      10.9 %
        Operating income                      14.2 %       7.6 %       7.6 %      11.3 %
        Income before income taxes             8.1 %       6.4 %       2.8 %       9.2 %
        Net income                            13.1 %       4.1 %       4.5 %       7.9 %
        Net income attributable to Amkor      13.1 %       4.1 %       4.5 %       7.9 %

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Net Sales. Net sales decreased $103.5 million, or 14.4%, to $616.2 million in the three months ended September 30, 2009 from $719.7 million in the three months ended September 30, 2008. This decline in net sales was primarily due to the general decline in wirebond packaging services and inventory management efforts by our customers as a result of the global economic recession and weakness in consumer spending. In addition, our flip chip packaging services decreased 29% for the three months ended September 30, 2009 compared to the three months ended September 30, 2008 primarily due to lower unit demand for gaming systems.

Packaging Net Sales. Packaging net sales decreased $87.1 million, or 13.7%, to $549.3 million in the three months ended September 30, 2009 from $636.4 million in the three months ended September 30, 2008 because of the broad-based decline in product demand across our package offerings. Packaging unit volume decreased in the three months ended September 30, 2009 to 2.3 billion units compared to 2.5 billion units in the three months ended September 30, 2008.

Test Net Sales. Test net sales decreased $16.4 million, or 19.7%, to $66.8 million in the three months ended September 30, 2009 from $83.2 million in the three months ended September 30, 2008 primarily due to the overall decline in demand due to the global economic recession.

Cost of Sales. Our cost of sales consists principally of materials, labor, depreciation and manufacturing overhead. Since a substantial portion of the costs at our factories is fixed, relatively modest increases or decreases in our capacity utilization rates can have a significant effect on our gross margin.

Material costs as a percentage of net sales increased from 38.0% for the three months ended September 30, 2008 to 39.3% for the three months ended September 30, 2009 due to increasing commodity prices and a change in product mix to packages with higher material content as a percentage of net sales.

As a percentage of net sales, labor costs decreased to 13.0% in the three months ended September 30, 2009 compared to 15.2% in the three months ended September 30, 2008. Labor costs benefitted by a favorable foreign currency effect resulting from the depreciation of the Korean won and other currencies and savings realized from our workforce reduction and other cost savings initiatives. Labor costs include $1.0 million and $9.5 million of termination benefits and charges related to workforce reductions in the three months ended September 30, 2009 and 2008, respectively.

As a percentage of net sales, other manufacturing costs decreased to 22.6% in the three months ended September 30, 2009 from 28.9% in the three months ended September 30, 2008. Included in other manufacturing costs for the three months ended September 30, 2008 is a charge of $50.0 million for royalties related to a patent license dispute. Excluding the effect of the $50.0 million charge, other manufacturing costs in absolute dollars decreased due to reduced costs associated with lower volumes, including utilities and supplies and other cost savings initiatives. Other manufacturing costs also benefitted by a favorable foreign currency effect resulting from

the depreciation of the Korean won and other currencies. These savings are partially offset by $1.0 million of charges related to the wind-down and exit of manufacturing operations in Singapore.

Gross Profit. Gross profit increased $25.6 million to $154.6 million, or 25.1% of net sales, in the three months ended September 30, 2009 from $129.0 million, or 17.9% of net sales, in the three months ended September 30, 2008. Cost of sales for the three months ended September 30, 2008 included a charge of $50.0 million related to a patent license dispute, which reduced our gross margin by seven percentage points. Also included in cost of sales in the three months ended September 30, 2008 are charges related to workforce reduction programs of $9.5 million. The three months ended September 30, 2009 includes $2.0 million in cost of sales related to the wind-down and exit of manufacturing operations in Singapore.

Packaging Gross Profit. Gross profit for packaging increased $30.9 million to $136.6 million, or 24.9% of packaging net sales, in the three months ended September 30, 2009 from $105.7 million, or 16.6% of packaging net sales, in the three months ended September 30, 2008. Included in cost of sales for the three months ended September 30, 2008 is $50.0 million for royalties related to a patent license dispute.

Test Gross Profit. Gross profit for test in the three months ended September 30, 2009 decreased in absolute dollars by $4.4 million to $18.9 million from $23.3 million in the three months ended September 30, 2008, while maintaining a consistent gross margin of approximately 28%. The decrease in gross profit is primarily attributable to overall decline in demand due to the global economic recession.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $6.8 million, or 11.3%, to $53.6 million in the three months ended September 30, 2009, from $60.5 million in the three months ended September 30, 2008. The decrease was primarily due to lower salaries and benefits in our corporate and sales offices that were offset by an increase in enterprise resource implementation costs and professional fees.

Research and Development. Despite the global economic recession, during the three months ended September 30, 2009 we continued to invest in research and development activities, focusing on advanced laminate, flip chip and wafer level packaging services. Research and development expenses decreased $0.7 million to $13.4 million, or 2.2% of net sales in the three months ended September 30, 2009 from $14.1 million, or 2.0% of net sales in the three months ended September 30, 2008. The decrease in our research and development expenses was primarily due to lower salaries and benefits offset by a $2.6 million impairment charge in connection with our research and development equipment in North Carolina that was sold in October 2009. We still maintain a research and development presence in North Carolina but now operate using an asset-light model to save costs.

Gain on Sale of Real Estate. In the three months ended September 30, 2009, we sold land and dormitory buildings in Korea for $0.6 million in cash and reported a gain of $0.1 million, with no net tax effect.

Other (Income) Expense, Net. Other expense, net increased $29.2 million to $37.6 million, or 6.1% of net sales, in the three months ended September 30, 2009 from $8.4 million, or 1.2% of net sales in the three months ended September 30, 2008. This increase was driven by an $8.3 million foreign currency loss in the three months ended September 30, 2009 compared to a $23.0 million foreign currency gain in the three months ended September 30, 2008. The fluctuation in foreign currency was primarily due to the change in the Korean won and the remeasurement of the Korean won denominated severance plan obligation. In addition, there was a loss of $1.2 million related to the repurchase of an aggregate $74.5 million principal amount of our 7.125% senior notes due in 2011 and our 7.75% senior notes due in 2013. Included in the three months ended September 30, 2008 was a charge of $4.0 million of interest related to a patent license dispute.

Income Tax Benefit. In the three months ended September 30, 2009, we recorded an income tax benefit of $30.9 million as compared to income tax expense of $16.3 million in the three months ended September 30, 2008. The three months ended September 30, 2009 includes a $28.1 million income tax benefit for the release of a valuation allowance on the net deferred tax assets of our Korean subsidiary. The three months ended September 30, 2009 also includes an income tax benefit of $5.8 million related to changes in estimates of our uncertain tax positions partially offset by $3.0 million of income tax expense attributable to income taxes in certain profitable foreign jurisdictions, foreign withholding taxes and minimum taxes. The three months ended September 30, 2008 includes $8.3 million of income tax expense for the establishment of a valuation allowance related to certain

deferred tax assets in Japan. The remaining 2008 income tax expense is attributable to profits in certain of our taxable foreign jurisdictions and changes in estimates of our uncertain tax positions.

At September 30, 2009, we had U.S. net operating loss carryforwards totaling $311.7 million, which expire at various times through 2029. Additionally, at September 30, 2009, we had $64.9 million of non-U.S. net operating loss carryforwards, which expire at various times through 2017. We maintain a valuation allowance on all of our U.S. net deferred tax assets, including our net operating loss carryforwards. We also have valuation allowances on deferred tax assets in certain foreign jurisdictions. We will release such valuation allowances as the related tax benefits are realized on our tax returns or when sufficient positive evidence exists to conclude that it is more likely than not that the deferred tax assets will be realized.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

Net Sales. Net sales decreased $598.4 million, or 28.4%, to $1,511.5 million in the nine months ended September 30, 2009 from $2,109.9 million in the nine months ended September 30, 2008. This decline in net sales was due to the general decline in demand and inventory management efforts by our customers as a result of the global economic recession and weakness in consumer spending. As a result, we experienced a broad-based decline in product demand across our packaging and test businesses.

Packaging Net Sales. Packaging net sales decreased $526.5 million, or 28.3%, to $1,336.5 million in the nine months ended September 30, 2009 from $1,863.0 million in the nine months ended September 30, 2008 because of the broad-based decline in product demand across our package offerings. Packaging unit volume decreased in the nine months ended September 30, 2009 to 5.2 billion units compared to 6.8 billion units in the nine months ended September 30, 2008.

Test Net Sales. Test net sales decreased $71.2 million, or 28.9%, to $174.9 million in the nine months ended September 30, 2009 from $246.1 million in the nine months ended September 30, 2008 due to the overall decline in demand due to the global economic recession.

Cost of Sales. Our cost of sales consists principally of materials, labor, depreciation and manufacturing overhead. Since a substantial portion of the costs at our factories is fixed, relatively modest increases or decreases in our capacity utilization rates can have a significant effect on our gross margin.

Material costs as a percentage of net sales increased from 38.1% for the nine months ended September 30, 2008 to 39.6% for the nine months ended September 30, 2009 due to a change in product mix to packages with higher material content as a percentage of net sales.

As a percentage of net sales, labor costs decreased to 13.9% in the nine months ended September 30, 2009 compared to 15.5% in the nine months ended September 30, 2008. Labor costs benefited by a favorable foreign currency effect on labor costs resulting from the depreciation of the Korean won and other currencies and savings realized from our workforce reduction and other cost savings initiatives. These savings are partially offset by $8.9 million of termination benefits, net of a pension curtailment gain of $1.0 million, incurred in the nine months ended September 30, 2009 due to workforce reductions. The nine months ended September 30, 2008 included $11.5 million in termination benefits related to workforce reductions.

As a percentage of net sales, other manufacturing costs increased to 26.2% in the nine months ended September 30, 2009 from 24.5% in the nine months ended September 30, 2008. Other manufacturing costs as a percentage of net sales increased due to higher depreciation costs as a result of our capital expenditures. Other manufacturing costs in absolute dollars decreased $119.6 million from the nine months ended September 30, 2008 to the nine months ended September 30, 2009. Included in other manufacturing costs for the three months ended September 30, 2008 is a charge of $50 million made in connection with a patent license dispute. After considering the effect of the $50.0 million charge, the remaining decrease in absolute dollars of other manufacturing costs is due to reduced costs associated with lower volumes, including utilities and supplies and other cost savings initiatives. These savings are partially offset by $6.5 million in charges related to the wind-down and exit of manufacturing operations in Singapore.

Gross Profit. Gross profit decreased $159.1 million to $305.0 million, or 20.2% of net sales, in the nine months ended September 30, 2009 from $464.1 million, or 22.0% of net sales, in the nine months ended

September 30, 2008. We experienced a decline in gross margin in the nine months ended September 30, 2009 primarily due to the lower levels of demand, which have decreased our capacity utilization rates. In addition, included in our cost of sales in the nine months ended September 30, 2009 is a net charge of $15.4 million related to workforce reduction programs and the exit of manufacturing operations in Singapore. The decrease in gross profit and gross margin was partially offset by improved factory performance due to cost reduction initiatives and the favorable foreign currency effect on labor costs due to the depreciation of the Korean won. Included in cost of sales for the nine months ended September 30, 2008 is a $50.0 million charge made in connection with a patent license dispute and $11.5 million in termination benefits related to workforce reductions.

Packaging Gross Profit. Gross profit for packaging decreased $114.7 million to $274.7 million, or 20.6% of packaging net sales, in the nine months ended September 30, 2009 from $389.4 million, or 20.9% of packaging net sales, in the nine months ended September 30, 2008. The decrease in gross margin is primarily attributable to lower capacity utilization rates. The decrease in gross margin was partially offset by improved factory performance due to cost reduction initiatives and a favorable foreign currency effect on labor costs due to the depreciation of the Korean won. Included in cost of sales for the nine months ended September 30, 2008 is a $50.0 million charge made in connection with a patent license dispute.

Test Gross Profit. Gross profit for test in the nine months ended September 30, 2009 decreased $37.8 million to $36.7 million, or 21.0% of test net sales, from $74.5 million, or 30.3% of test net sales, in the nine months ended September 30, 2008. The decrease in gross margin is primarily attributable to lower capacity utilization rates and higher depreciation costs as a result of our capital additions.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $37.2 million, or 19.3%, to $156.1 million in the nine months ended September 30, 2009, from $193.4 million in the nine months ended September 30, 2008. The decrease was primarily due to lower salaries and benefits in our corporate and sales offices and lower legal fees. These reductions were partially offset by enterprise resource planning implementation costs and termination benefits.

Research and Development. Despite the global economic recession, during the nine months ended September 30, 2009 we continued to invest in research and development activities, focusing on advanced laminate, flip chip and wafer level packaging services. Research and development expenses decreased $9.5 million to $33.5 million, or 2.2% of net sales in the nine months ended September 30, 2009 from $43.0 million, or 2.0% of net sales in the nine months ended September 30, 2008. The decrease in our research and development expenses was primarily due to lower salaries and benefits offset by a $2.6 million charge in connection with our research and development equipment in North Carolina that was sold in October 2009. We still maintain a research and development presence in North Carolina but now operate using an asset-light model to save costs.

Gain on Sale of Real Estate In the nine months ended September 30, 2009, we sold land and dormitory buildings in Korea for $0.6 million in cash and reported a gain of $0.1 million, with no net tax effect. In the nine months ended . . .