May 17, 2004 — Amkor Technology Inc. has entered into a strategic long-term agreement with IBM for semiconductor assembly and test services. The four principal parts of the agreement are:
1. A long-term supply agreement that Amkor estimates could generate in excess of $1.5 billion in assembly and test revenue through 2010;
2. Amkor will buy the land and 950,000 square foot manufacturing complex that was built for and is currently leased by IBM in Shanghai, China;
3. Amkor will acquire IBM’s Singapore test operations, including high-end testers, related assets and employees; and
4. Amkor will enter into a cross-licensing agreement covering select IBM and Amkor assembly and test IP.
Under the long-term supply agreement, Amkor will receive the substantial majority of IBM’s subcontract wire bond and flip chip assembly and final test.
The transaction is valued at approximately $145 million, consisting of $114 million for land, buildings and fixtures, and $31 million for equipment and intangibles.
Amkor will pay IBM a total of $63 million for fixtures, equipment, intangibles and intellectual property, with payments of $20 million at closing, expected May 31, 2004, and $43 million in the fourth quarter of 2004. Amkor will pay $82 million to the China building developer in the fourth quarter of 2004.
“We expect the incremental revenue associated with this supply agreement will be modest in 2004, with most of the effort this year focused on qualifying a number of new products,” said Oleg Khaykin, Amkor’s executive VP for corporate development. “However, based on preliminary volume estimates, we anticipate the revenue associated with this supply agreement could exceed $150 million in 2005.”