This report contains forward-looking statements within the meaning of the federal securities laws, including but not limited to statements regarding:
(1) our expectations regarding demand for our services and customer inventory levels, (2) the focus and level of our expected capital investments,
(3) investments in technology advancements and cost reduction programs, (4) our expected gain on debt extinguishment, (5) our ability to fund our operating activities, working capital, capital expenditures and debt service requirements for the next twelve months, (6) the payment of dividends and expected use of cash flows, if any in the future, (7) compliance with our covenants, (8) the effect of foreign currency exchange rate exposure on our financial results,
(9) the release of valuation allowances related to taxes in the future, (10) the repurchase of outstanding debt, (11) expected labor cost reductions, workforce reductions and related severance charges and the impact on quarterly cost of sales and operating expenses, and (12) 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 months ended March 31, 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.

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 recent credit crisis and global decline in consumer demand has resulted in a deteriorating macro-economic environment. As a result, the semiconductor industry is experiencing a significant cyclical downturn. Such a downturn is characterized by decreases in product demand and excess customer inventories. During the three months ended March 31, 2009, we experienced a significant slowdown in orders. For the three months ended March 31, 2009, our net sales were $388.8 million compared to $699.5 million in the prior year comparable period due to the broad-based decline in demand across our packaging and test businesses. Gross margin for the three months ended March 31, 2009 was 12.4%, down from 25.2% in the prior year comparable period. The recent downturn in demand has resulted in significant declines in our operating results and cash flows as our capacity utilization rates have declined.

As part of our focus on generating cash flow and driving greater factory and administrative efficiencies, beginning in 2008 and continuing into 2009, we have implemented cost reduction measures that include lowering

executive and other employee compensation, reducing employee and contractor headcount, and shortening work weeks. We have also significantly reduced our expected capital investment levels in 2009 to an estimated $100 million, well below our 2008 levels. We were free cash flow negative in the three months ended March 31, 2009 primarily as a result of approximately $103.7 million of payments relating to the resolution of a patent license dispute and employee benefit and separation payments. Cash used in operating activities was $63.2 million for the three months ended March 31, 2009, as compared with cash provided by operating activities of $181.2 million for the three months ended March 31, 2008. 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 three 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 three months ended March 31, 2009, we repurchased in open market transactions $32.1 million in aggregate principal amount of our 7.125% senior notes due March 2011, and $1.0 million in aggregate principal amount of our 2.5% convertible senior subordinated notes due May 2011 using $23.9 million of cash on hand. In April 2009, we repurchased in an open market transaction $35.0 million principal amount of our 2.5% convertible senior subordinated notes due May 2011 using $29.1 million of the proceeds from the issuance of the 2014 Notes. At April 30, 2009, our cash and cash equivalents totaled approximately $500 million with an aggregate of $112.9 million of debt due through the end of 2010. In 2011, the remaining $253.6 million aggregate amount of our 2.5% convertible senior subordinated notes and 7.125% senior notes mature.

Our net sales for the three months ended March 31, 2009 and 2008 were $388.8 million and $699.5 million, respectively. In the three months ended March 31, 2009, sales decreased $310.7 million, or 44.4%, from the three months ended March 31, 2008 primarily due to the general decline in demand and inventory management efforts by our customers as a result of the global economic downturn described above and continued weakness in consumer spending experienced during the three months ended March 31, 2009. We experienced a broad based decline in product demand across our packaging and test businesses during the three months ended March 31, 2009.

Gross margin for the three months ended March 31, 2009 and 2008 was 12.4% and 25.2%, respectively. We experienced a decline in gross margin for the three months ended March 31, 2009 primarily due to the lower levels of demand, which have significantly decreased our capacity utilization rates. In addition, cost of sales for the three months ended March 31, 2009 included a charge of $6.8 million for special termination benefits. This charge was partially offset by a pension curtailment gain of $1.0 million relating to workforce reductions. Gross margin for the three months ended March 31, 2009 benefitted from cost reduction initiatives and the strength of the U.S. dollar against certain foreign currencies.

Amkor's net loss for the three months ended March 31, 2009 was $22.1 million, or $0.12 loss per share, compared with Amkor's net income of $72.0 million, or $0.36 per diluted share, for the three months ended March 31, 2008. The net loss for the three months ended March 31, 2009 includes a $12.1 million net foreign currency gain primarily due to the depreciation of the Korean won against the U.S. dollar and the remeasurement of our Korean won denominated severance plan obligation, and a gain of $9.0 million related to the repurchase of an aggregate $32.1 million principal amount of our 7.125% senior notes and $1.0 million principal amount of our 2.5% convertible senior subordinated notes due in 2011. Also included in the net loss for the three months ended March 31, 2009 is a $7.4 million charge for termination benefits that was partially offset by a $1.1 million pension curtailment gain relating to our workforce reduction programs.

Our capital additions totaled $24.3 million in the three months ended March 31, 2009. Because of the significantly reduced level of consumer demand, capital additions are focused on specific customer requirements, technology advancements and cost reduction programs.

Results of Operations

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


                                                  For the Three Months Ended
                                                           March 31,
                                                   2009                 2008

     Net sales                                        100.0  %             100.0 %
     Gross profit                                      12.4  %              25.2 %
     Depreciation and amortization                     20.6  %              10.5 %
     Operating (loss) income                           (3.1 )%              13.8 %
     (Loss) income before income taxes                 (4.9 )%              11.2 %
     Net (loss) income                                 (5.6 )%              10.3 %
     Net (loss) income attributable to Amkor           (5.7 )%              10.3 %

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Net Sales. Net sales decreased $310.7 million, or 44.4%, to $388.8 million in the three months ended March 31, 2009 from $699.5 million in the three months ended March 31, 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 downturn and continued weakness in consumer spending experienced during the three months ended March 31, 2009. 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 $279.0 million, or 45.2%, to $338.9 million in the three months ended March 31, 2009 from $617.9 million in the three months ended March 31, 2008 because of the broad-based decline in product demand across our package offerings. Packaging unit volume decreased in the three months ended March 31, 2009 to 1.2 billion units compared to 2.2 billion units in the three months ended March 31, 2008.

Test Net Sales. Test net sales decreased $31.4 million, or 38.6%, to $49.9 million in the three months ended March 31, 2009 from $81.3 million in the three months ended March 31, 2008 due to the overall decline in demand due to the global economic downturn.

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 37.1% for the three months ended March 31, 2008 to 39.2% for the three months ended March 31, 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 increased to 16.5% in the three months ended March 31, 2009 compared to 15.8% in the three months ended March 31, 2008. The increase in labor costs includes $6.8 million of termination benefits incurred in the three months ended March 31, 2009 due to workforce reductions, which is partially offset by a pension curtailment gain of $1.0 million. Labor costs benefitted 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.

As a percentage of net sales, other manufacturing costs increased to 31.9% in the three months ended March 31, 2009 from 22.0% in the three months ended March 31, 2008. Other manufacturing costs in absolute dollars increased due to higher depreciation costs as a result of our capital expenditures, which are focused on increasing our wafer bump and flip chip packaging capacity, advanced laminate packaging services and test services. These costs increases were offset by reduced costs associated with lower volumes, including utilities and supplies.

Gross Profit. Gross profit decreased $128.2 million to $48.0 million, or 12.4% of net sales, in the three months ended March 31, 2009 from $176.2 million, or 25.2% of net sales, in the three months ended March 31, 2008. We experienced a decline in gross margin in the three months ended March 31, 2009 primarily due to the lower levels of demand, which have significantly decreased our capacity utilization rates. In addition, included in our cost of sales in the three months ended March 31, 2009 is a charge of $6.8 million for special termination benefits that was partially offset by a pension curtailment gain of $1.0 million relating to workforce reductions. 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.

Packaging Gross Profit. Gross profit for packaging decreased $105.4 million to $43.9 million, or 13.0% of packaging net sales, in the three months ended March 31, 2009 from $149.3 million, or 24.2% of packaging net sales, in the three months ended March 31, 2008. The decrease in gross margin is primarily attributable to lower capacity utilization rates. In addition, cost of sales for the three months ended March 31, 2009 included a charge for termination benefits that was partially offset by a pension curtailment gain. The decrease 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.

Test Gross Profit. Gross profit for test in the three months ended March 31, 2009 decreased $22.3 million to $4.4 million, or 8.8% of test net sales, from $26.7 million, or 32.8% of test net sales, in the three months ended March 31, 2008. The decrease in gross margin is primarily attributable to lower capacity utilization rates and higher depreciation costs as a result of our capital investments. In addition, we recorded a charge in the three months ended March 31, 2009 for termination benefits which was partially offset by a pension curtailment gain attributable to our test business.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $15.3 million, or 23.5%, to $50.1 million in the three months ended March 31,2009, from $65.4 million in the three months ended March 31, 2008. The decrease was primarily due to lower salaries and benefits in our corporate and sales offices and professional fees. These reductions were partially offset by enterprise resource planning implementation costs and termination benefits.

Research and Development. Despite the global economic downturn, during the three months ended March 31, 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 $3.8 million to $10.1 million, or 2.6% of net sales in the three months ended March 31, 2009 from $13.9 million, or 2.0% of net sales in the three months ended March 31, 2008. The decrease in our research and development expenses was primarily due to lower salaries and benefits.

Other Expense (Income), Net. Other expense, net decreased $12.0 million to $6.7 million, or 1.7% of net sales, in the three months ended March 31, 2009 from $18.7 million, or 2.7% of net sales in the three months ended March 31, 2008. This decrease was driven by a net gain of $9.0 million related to the repurchase of an aggregate $33.1 million principal amount of our 7.125% senior notes and 2.5% convertible senior subordinated notes due in 2011. In addition, there was a $1.3 million reduction in net interest expense due to reduced debt, and an increase of $2.6 million in net foreign currency gains primarily due to the depreciation of the Korean won and the remeasurement of the Korean won denominated severance plan obligation.

Income Tax Expense. In the three months ended March 31, 2009, we recorded an income tax expense of $3.1 million as compared to an income tax expense of $5.9 million in the three months ended March 31, 2008. The decrease in income tax expense is primarily attributable to a decline in profits in our taxable foreign jurisdictions. Our income tax expense for the three months ended March 31, 2009 is attributable to income taxes in certain

profitable foreign jurisdictions, foreign withholding taxes, minimum taxes of our operations incurring losses, and valuation allowances, all of which offset the tax benefits generated on the net losses incurred for the period.

At March 31, 2009, we had U.S. net operating loss carryforwards totaling $291.5 million, which expire at various times through 2028. Additionally, at March 31, 2009, we had $105.7 million of non-U.S. net operating loss carryforwards, which expire at various times through 2019. 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 net positive evidence exists to conclude that it is more likely than not that the deferred tax assets will be realized.

Liquidity and Capital Resources

The recent credit crisis and global decline in consumer demand has resulted in a deteriorating macro-economic environment. As a result, the semiconductor industry is experiencing a significant cyclical downturn. During the three months ended March 31, 2009, we experienced a significant slowdown in orders. For the three months ended March 31, 2009, our net sales were $388.8 million compared to $699.5 million in the prior year comparable period due to the broad-based decline in demand across our packaging and test businesses. Gross margin for the three months ended March 31, 2009 was 12.4% down from 25.2% in the prior year comparable period. The downturn in demand has resulted in significant declines in our operating results and cash flows as our capacity utilization rates have declined. We were free cash flow negative by $106.0 million primarily as a result of the $64.7 million payment made in February 2009 in connection with the resolution of a patent license dispute and $39.0 million in other employee benefit and separation payments.

As part of our focus on generating cash flow and driving greater factory and administrative efficiencies, we have implemented cost reduction measures that include lowering executive and other employee compensation, reducing employee and contractor headcount, and shortening work weeks. In the three months ended March 31, 2009, we reduced our work force by approximately 1,750 employees and recorded a severance charge, net of a pension curtailment gain, of $6.3 million. As part of our ongoing efforts to improve performance and manage costs, we continue to evaluate our staffing levels compared to current business needs.

In response to the lower levels of demand and to preserve cash, we have also significantly reduced our expected capital investment levels in 2009 to an estimated $100 million, compared to our 2008 capital additions of $341.7 million. During the first three months of 2009, we had capital additions of $24.3 million compared to $95.2 million in the three months ended March 31, 2008. We operate in a capital intensive industry. Servicing our current and future customers requires that we incur significant operating expenses and make significant capital expenditures, which are generally made in advance of the related revenues and without any firm customer commitments. Because of the significantly reduced level of consumer demand, 2009 capital additions are focused on specific customer requirements, technology advancements and cost reduction programs.

We have a significant level of debt, with $1,464.0 million outstanding at March 31, 2009, of which $69.4 million is current. In April 2009, we issued $250.0 million of our 6.0% convertible senior subordinated notes due April 2014. We expect to use the $244.5 million of net proceeds to reduce other indebtedness and for general corporate purposes.

In the three months ended March 31, 2009, we repurchased in open market transactions $32.1 million in aggregate principal amount of our 7.125% senior notes due March 2011, and $1.0 million in aggregate principal amount of our 2.5% convertible senior subordinated notes due May 2011 using $23.9 million of cash on hand. In April 2009, we repurchased in an open market transaction $35.0 million principal amount of our 2.5% convertible senior subordinated notes due May 2011 using $29.1 million of the proceeds from the issuance of the 2014 Notes. Subsequent to the April 2009 repurchase transactions described above, we have an aggregate of $112.9 million of debt coming due through the end of 2010, and in 2011 the remaining $253.6 million 2.5% convertible senior subordinated notes and 7.125% senior notes mature.

In order to reduce leverage and future cash interest payments, we may from time to time repurchase our outstanding notes for cash or exchange shares of our common stock for our outstanding notes. Any such transactions are subject to the terms of our indentures and other debt agreements, market conditions and other factors.

The interest payments required on our debt are substantial. For example, we paid $15.9 million of interest in the three months ended March 31, 2009. (See "Capital Additions and Contractual Obligations" below for a summary of principal and interest payments.)

The source of funds for our operations, including making capital expenditures and servicing principal and interest obligations with respect to our debt, are cash flows from our operations, current cash and cash equivalents, borrowings under available debt facilities, or proceeds from any additional debt or equity financings. As of March 31, 2009, we had cash and cash equivalents of $291.5 million and availability of $99.5 million under our $100.0 million first lien senior secured revolving credit facility.

We assess our liquidity based on our current expectations regarding sales, operating expenses, capital spending and debt service requirements. Based on this assessment, we believe that our cash flow from operating activities together with existing cash and cash equivalents will be sufficient to fund our working capital, capital expenditure and debt service requirements for at least the next twelve months. Thereafter, our liquidity will continue to be affected by, among other things, volatility in the global economy and credit markets, the performance of our business, our capital expenditure levels and our ability to either repay debt out of operating cash flow or refinance debt at or prior to maturity with the proceeds of debt or equity offerings.

There is no assurance that we will generate the necessary net income or operating cash flows to meet the funding needs of our business beyond the next twelve months due to a variety of factors, including the cyclical nature of the semiconductor industry and the other factors discussed in Part II, Item 1A "Risk Factors."

Many of our debt agreements restrict our ability to pay dividends. The $671.1 million write-off of our goodwill at December 31, 2008 has significantly reduced our ability to pay dividends and repurchase stock and subordinated securities, including our convertible notes. We have never paid a dividend to our stockholders and we do not currently anticipate doing so. We expect cash flows to be used in the operation and expansion of our business, the repayment or repurchase of debt and for other corporate purposes.

We were in compliance with all debt covenants at March 31, 2009 and expect to remain in compliance with these covenants for at least the next twelve months.

Cash Flows

Cash used in operating activities was $63.2 million for the three months ended March 31, 2009 compared to cash provided by operating activities of $181.2 million for the three months ended March 31, 2008. We were free cash flow negative for the three months ended March 31, 2009. Free cash flow decreased by $198.4 million to $(106.0) million for the three months ended March 31, 2009 compared to $92.4 million for the three months ended March 31, 2008.

Net cash (used in) provided by operating, investing and financing activities for the three months ended March 31, 2009 and 2008 were as follows:

                                                For the Three
                                                Months Ended
                                                  March 31,
                                             2009          2008
                                               (In thousands)

                    Operating activities   $ (63,194 )   $ 181,216
                    Investing activities     (46,312 )     (88,777 )
                    Financing activities     (22,297 )     (94,379 )

Operating activities: Our cash flow from operating activities for the three months ended March 31, 2009 decreased by $244.4 million. Operating income for the three months ended March 31, 2009 adjusted for depreciation and amortization, other operating activities and non-cash items decreased $103.2 million which is largely attributable to decreased net sales. Net interest expense for the three months ended March 31, 2009