1
FORM 10-Q/A
---------------
AMENDMENT NO. 1

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

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

For the quarterly period ended September 30, 1998

OR

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

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

Commission File Number: 000-29472

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

Delaware
(State or other jurisdiction of incorporation or organization)
--------------------

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

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

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

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

Yes  [ X ]        No [   ]

The number of outstanding shares of the registrant's Common Stock as of
November 12, 1998 was 117,860,000.

2

EXPLANATORY NOTE

This Quarterly Report on Form 10-Q/A is being filed as Amendment No. 1 to
the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1998. This Form 10-Q/A is being filed with the Securities and
Exchange Commission to amend and restate the Registrant's consolidated balance
sheet as of September 30, 1998, the Registrant's consolidated statement of
income for the nine months ended September 30, 1998, the Registrant's
consolidated statement of cash flows for the nine months ended September 30,
1998, the Registrant's results of operations table for the nine months ended
September 30, 1998 and Exhibit 27.1, Financial Data Schedule. Financial results
contained herein reflect the fact that prior to May 1, 1998 certain of the
Company's subsidiaries were taxed as S corporations and, as a result, did not
recognize any provision for federal income taxes. This Form 10-Q/A is being
filed because the previously estimated tax provision was revised in the fourth
quarter based upon the full year results of the S corporation. Consequently,
year-to-date June 1998 results have been restated to reflect $4.5 million in
income taxes attributable to the S corporation shareholders, and a corresponding
reduction in income taxes attributable to the Registrant. There was no impact on
the results of operations for the three months ended September 30, 1998. All
proforma financial data included herein include a proforma provision to reflect
the U.S. federal and state income taxes, which would have been recorded by the
Company if these subsidiaries had been C corporation. There was no impact on
proforma net income and proforma per share amounts.

3
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMKOR TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

DECEMBER 31,     SEPTEMBER 30,
1997              1998
----              ----
(UNAUDITED
AND RESTATED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................... $  90,917         $ 172,328
Short-term investments ............................     2,524             1,000
Accounts receivable --
Trade, net of allowance for doubtful
accounts of  $4,234 and $5,773 ...............   102,804           125,332
Due from affiliates ............................    14,431            79,355
Other ..........................................     4,879             6,509
Inventories .......................................   115,870            76,726
Other current assets ..............................    26,997            15,006
---------         ---------
Total current assets ......................   358,422           476,256
---------         ---------
PROPERTY, PLANT AND EQUIPMENT, net ..................   427,061           421,058
---------         ---------
INVESTMENTS:
ASI at equity .....................................    13,863                --
Other .............................................     5,958             5,761
---------         ---------
Total investments .........................    19,821             5,761
---------         ---------
OTHER ASSETS:
Due from affiliates ...............................    29,186            28,536
Other .............................................    21,102            59,215
---------         ---------
Total other assets ........................    50,288            87,751
---------         ---------

Total assets .............................. $ 855,592         $ 990,826
=========         =========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of
long-term debt ................................. $ 167,317         $  41,872
Trade accounts payable ............................   113,037            85,194
Due to affiliates .................................    15,581            28,664
Bank overdraft ....................................    29,765            10,701
Accrued expenses ..................................    43,973            84,024
Accrued income taxes ..............................    26,968            31,536
---------         ---------
Total current liabilities .................   396,641           281,991
---------         ---------
LONG-TERM DEBT ......................................   196,934            18,514
---------         ---------
CONVERTIBLE SUBORDINATED NOTES ......................        --           207,000
---------         ---------
DUE TO ANAM USA, INC ................................   149,776                --
---------         ---------
OTHER NONCURRENT LIABILITIES ........................    12,084            12,057
---------         ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST ...................................     9,282                --
---------         ---------
STOCKHOLDERS' EQUITY:
Common stock ......................................        46               118
Additional paid-in capital ........................    20,871           381,063
Retained earnings .................................    70,621            90,083
Cumulative translation adjustment .................      (663)               --
---------         ---------
Total stockholders' equity ................    90,875           471,264
---------         ---------
Total liabilities and stockholders'
equity .................................. $ 855,592         $ 990,826
=========         =========

The accompanying notes are an integral part of these statements.

2

4
AMKOR TECHNOLOGY, INC.

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

FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
1997               1998
----               ----
(UNAUDITED)        (UNAUDITED
AND RESTATED)

NET REVENUES ....................................        $ 1,043,620         $ 1,143,175
COST OF REVENUES-- including purchases from ASI .            900,788             948,920
-----------         -----------
GROSS PROFIT ....................................            142,832             194,255
-----------         -----------
OPERATING EXPENSES:
Selling, general and administrative ...........             74,094              87,671
Research and development ......................              5,751               6,104
-----------         -----------
Total operating expenses ...................             79,845              93,775
-----------         -----------
OPERATING INCOME ................................             62,987             100,480
-----------         -----------
OTHER (INCOME) EXPENSE:
Interest expense, net .........................             27,400              16,503
Foreign currency (gain) loss ..................               (592)              3,833
Other expense, net ............................              2,176               7,092
-----------         -----------
Total other expense ........................             28,984              27,428
-----------         -----------
INCOME BEFORE INCOME TAXES, EQUITY IN INCOME OF
ASI AND MINORITY INTEREST .....................             34,003              73,052
PROVISION FOR INCOME TAXES ......................              3,531              16,688
EQUITY IN INCOME  OF ASI ........................                 --                  --
MINORITY INTEREST ...............................              7,569                 559
-----------         -----------
NET INCOME ......................................        $    22,903         $    55,805
===========         ===========
PRO FORMA DATA (UNAUDITED):
Historical income before income taxes,
equity in income of ASI and
minority interest ..........................        $    34,003         $    73,052
Pro forma provision for income taxes ..........              7,158              21,188
-----------         -----------
Pro forma income before equity in
income of ASI and minority
interest ...................................             26,845              51,864
Historical equity in income of ASI ............                 --                  --
Historical minority interest ..................              7,569                 559
-----------         -----------
Pro forma net  income .........................        $    19,276         $    51,305
===========         ===========
Basic pro forma net income per common share ...        $       .23         $       .50
===========         ===========
Diluted pro forma net income per common share .        $       .23         $       .49
===========         ===========
Shares used in computing basic pro forma
net income per common share .................             82,610             102,284
===========         ===========
Shares used in computing diluted pro
forma net income per common share ............             82,610             110,933
===========         ===========

The accompanying notes are an integral part of these statements.

3

5
AMKOR TECHNOLOGY, INC.

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

FOR THE THREE MONTHS
ENDED SEPTEMBER 30,
1997              1998
----              ----
(UNAUDITED)       (UNAUDITED)

NET REVENUES ..............................        $ 380,130         $ 386,718
COST OF REVENUES -- including
Purchases from ASI .....................          314,246           321,758
---------         ---------
GROSS PROFIT ..............................           65,884            64,960
---------         ---------
OPERATING EXPENSES:
Selling, general and administrative .....           26,829            30,017
Research and development ................            2,236             2,109
---------         ---------
Total operating expenses .............           29,065            32,126
---------         ---------
OPERATING INCOME ..........................           36,819            32,834
---------         ---------
OTHER (INCOME) EXPENSE:
Interest expense, net ...................           11,045             2,106
Foreign currency (gain) loss ............             (692)              130
Other expense, net ......................              889             1,195
---------         ---------
Total other expense ..................           11,242             3,431
---------         ---------

INCOME BEFORE INCOME TAXES,
EQUITY IN INCOME OF ASI AND
MINORITY INTEREST .......................           25,577            29,403
PROVISION FOR INCOME TAXES ................              842             8,529
EQUITY IN INCOME  OF ASI ..................               --                --
MINORITY INTEREST .........................            5,710                --
---------         ---------
NET INCOME ................................        $  19,025         $  20,874
=========         =========
PRO FORMA DATA (UNAUDITED):
Historical income before income taxes,
equity in income of ASI and
minority interest ....................        $  25,577
Pro forma provision for income taxes ....            1,769
---------
Pro forma income before equity in
income of ASI and minority
interest .............................           23,808
Historical equity in income of
ASI ..................................               --
Historical minority interest ............            5,710
---------
Pro forma net  income ...................        $  18,098
=========
Basic (pro forma for 1997) net  income
per common share .....................        $     .22         $     .18
=========         =========
Diluted (pro forma for 1997) net income
per common share .....................        $     .22         $     .17
=========         =========
Shares used in computing basic (pro forma
for 1997) net income per common share .           82,610           117,860
=========         =========
Shares used in computing diluted (pro forma
for 1997) net income per common share .           82,610           133,193
=========         =========

The accompanying notes are an integral part of these statements.

4

6
AMKOR TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
1997                1998
----                ----
(UNAUDITED)          (UNAUDITED
AND RESTATED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................        $    22,903         $    55,805
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization ............................             64,072              86,998
Provision for accounts receivable ........................                910               1,539
Provision for excess and obsolete
Inventory ..............................................              6,763               7,200
Deferred income taxes ....................................            (13,557)              6,056
Equity (gain) loss of investees ..........................               (405)                 --
Loss on sale of fixed assets and investments .............                 --               1,309
Minority interest ........................................              7,569                 559
Changes in assets and liabilities excluding
effects of acquisitions
Accounts receivable ......................................            (38,886)            (13,867)
Proceeds from sale/(repurchase of) accounts
Receivable .............................................             88,800             (16,500)
Other receivables ........................................             (3,573)             (1,630)
Inventories ..............................................            (16,785)             31,944
Due to/(from) affiliates, net ............................            (12,578)            (51,191)
Other current assets .....................................             (5,480)              5,954
Other non-current assets .................................              2,459              (4,459)
Accounts payable .........................................             37,158             (21,543)
Accrued expenses .........................................             30,156              37,428
Accrued taxes ............................................              9,697               4,568
Other noncurrent liabilities .............................              1,527                 740
-----------         -----------
Net cash provided by operating activities ...........            180,750             130,910
-----------         -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, including
purchase of AATS .....................................           (151,503)            (80,494)
Acquisition of minority interest in AAP ..................                 --             (33,750)
Acquisition of AKI .......................................                 --              (3,244)
Sale of property, plant and equipment ....................              1,141                  89
Purchases of investments and issuances of notes receivable            (14,605)               (300)
Proceeds from sale of investments ........................                 --               2,021
-----------         -----------
Net cash used in investing activities ................           (164,967)           (115,678)
-----------         -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in bank overdrafts and short-term
Borrowings ...............................................             58,533            (170,437)
Net proceeds from issuance of 35,250,000 common shares
In public offering, net ..................................                 --             360,265
Proceeds from issuance of Anam USA, Inc. debt ..............          1,003,203             522,116
Payments of Anam USA, Inc. debt ............................         (1,011,403)           (658,029)
Net proceeds from issuance of long-term debt ...............              8,034             203,023
Payments of long-term debt .................................            (41,806)           (157,659)
Distributions to stockholders ..............................             (5,000)            (33,100)
Change in division equity account ..........................              3,752                  --
-----------         -----------
Net cash provided by financing activities ............             15,313              66,179
-----------         -----------
NET INCREASE  IN CASH AND CASH  EQUIVALENTS ..................             31,096              81,411
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...............             49,664              90,917
-----------         -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD .....................        $    80,760         $   172,328
===========         ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest .................................................        $    28,708         $    19,373
Income taxes .............................................              7,193               6,988

The accompanying notes are an integral part of these statements.

4

7
AMKOR TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation

The consolidated financial statements include the accounts of Amkor
Technology, Inc. and its subsidiaries (the "Company"). All of the Company's
subsidiaries are wholly owned except for a small number of shares of each of the
Company's Philippine subsidiaries which are required to be owned by directors of
these companies pursuant to Philippine law.

The consolidated financial statements reflect the elimination of all
significant intercompany accounts and transactions.

The investments in and the operating results of 20% to 50% owned companies are
included in the consolidated financial statements using the equity method of
accounting.

Prior to the Reorganization (as defined below), the Company's financial
statements were presented on a combined basis as a result of common ownership
and business operations of all the Amkor Companies (as defined below), including
AK Industries, Inc. ("AKI"). The Reorganization was treated similar to a pooling
of interests as it represented an exchange of equity interests among companies
under common control, except for the acquisition of AKI, which was accounted for
as a purchase transaction. The purchase price for the AKI stock, which
represented the fair value of these shares, approximated the book value of AKI.

Reorganization

Prior to the Reorganization , the combined financial statements of Amkor
Technology, Inc. ("ATI") and its subsidiaries and AKI and its subsidiary
included the accounts of the following companies based on the ownership
structure prior to the Reorganization (these companies are referred to as the
"Amkor Companies"):

- -        Amkor Electronics, Inc. ("AEI") (a U.S. S Corporation) and its wholly
owned subsidiaries Amkor Receivables Corp. (a U.S. Corporation) and
Amkor Wafer Fabrication Services SARL (a French Limited Company)
("AWFS").

- -        T.L. Limited ("TLL") (a British Cayman Island Corporation) and its
Philippine subsidiaries, Amkor Anam Advanced Packaging, Inc. ("AAAP")
(wholly owned) and Amkor/Anam Pilipinas, Inc. ("AAP") (which was owned
60% by TLL and 40% by Anam Semiconductor, Inc. ("ASI") (which changed
its name in 1998 from Anam Industrial Co., Ltd.) and AAP's wholly-owned
subsidiary Automated MicroElectronics, Inc. ("AMI");

- -        C.I.L., Limited ("CIL") (a British Cayman Islands Corporation) and its
wholly-owned subsidiary Amkor/Anam Euroservices S.A.R.L. ("AAES") (a
French Corporation);

- -        Amkor Anam Test Services, Inc. (a U.S. Corporation);

- -        The semiconductor packaging and test business unit of Chamterry
Enterprises, Ltd. ("Chamterry"). During the third quarter of 1997
Chamterry transferred its customers to AEI and CIL and ceased
operations of its semiconductor and test business unit; and

- -        AKI (a U.S. Corporation) and its wholly owned subsidiary Amkor-Anam,
Inc. (a U.S. Corporation).

6

8
AMKOR TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

Prior to the Reorganization, all of the Amkor Companies were
substantially wholly owned by Mr. and Mrs. James Kim or entities controlled by
members of Mr. James Kim's immediate family (the "Founding Stockholders"),
except for AAP which was 40% owned by ASI and one third of AEI and all of AKI
which were owned by trusts established for the benefit of other members of Mr.
James Kim's family ("Kim Family Trusts"). The Amkor Companies were an
interdependent group of companies involved in the same business under the
direction of common management. ATI was formed in September 1997 to facilitate
the Reorganization and consolidate the ownership of the Amkor Companies. In
connection with the Reorganization, AEI was merged into ATI. Amkor International
Holdings ("AIH"), a Cayman Islands holding company, became a wholly owned
subsidiary of ATI. AIH was formed to hold the following entities: First Amkor
Caymans, Inc. ("FACI"), which was formed to hold AAAP, AAP and its subsidiary
AMI, TLL and its subsidiary CIL and CIL's subsidiary AAES. The relative number
of shares of common stock issued by the Company in connection with each of the
transactions comprising the Reorganization was based upon the relative amounts
of stockholders' equity at December 31, 1997. On April 14, 1998, Mr. and Mrs.
James Kim and the Kim Family Trusts owned two-thirds (9,746,760 shares) and
one-third (4,873,380 shares) of the ATI common stock outstanding, respectively.
As of April 29, 1998, ATI issued 67,989,851 shares of common stock, representing
approximately 82% of its shares immediately after the Reorganization, in
exchange for all of the outstanding shares of AIH and its subsidiaries. Of such
shares, 27,528,234 shares and 36,376,617 shares were gifted to Mr. and Mrs.
James Kim and the Kim Family Trusts, respectively, such that Mr. and Mrs. James
Kim and the Kim Family Trusts owned 45.1% and 49.9%, respectively, of the ATI
common shares outstanding after the Reorganization. Following such transactions
the Founding Stockholders beneficially owned a majority of the outstanding
shares of ATI common stock. In addition, ATI acquired all of the stock of AKI
from the Kim Family Trusts for approximately $3 million. The merger of AEI and
ATI, the creation of AIH and FACI, the issuance of ATI common stock for AIH and
the acquisition of AKI are collectively referred to as the "Reorganization".
(See " -- Income Taxes" regarding change in AEI tax status.)

Other Noncurrent Assets

Other noncurrent assets consist principally of goodwill, deferred debt
issuance costs, security deposits, deferred income taxes and the cash surrender
value of life insurance policies.

The Company recorded goodwill representing the excess of cost over the
book value of ASI's minority interest in AAP (See Note 11). Goodwill is being
amortized on a straight line basis over a period of ten years, which is the
estimated future period to be benefited by the acquisition.

In connection with the $207,000 offering of Convertible Notes (See Note
2), the Company incurred approximately $9,100 of debt issuance costs which have
been deferred and will be amortized and reflected as interest expense over the
life of the Convertible Notes.

Stock Compensation Plans

The Company accounts for its stock-based compensation in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". Accordingly, compensation cost for stock based plans is generally
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock. The Company adopted the disclosure only requirements of Statement of
Financial Accounting Standards ("SFAS") No. 123.

Income Taxes

The Company accounts for income taxes following the provisions of SFAS
No. 109, "Accounting for Income Taxes," which requires the use of the liability
method. If it is more likely than not that some portion or all of the deferred
tax assets will not be realized, a valuation allowance is provided.

6

9
AMKOR TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

The Company reports certain income and expense items for income tax
purposes on a basis different from that reflected in the accompanying
consolidated financial statements. The principal differences relate to the
timing of the recognition of accrued expenses which are not deductible for
federal income tax purposes until paid, the use of accelerated methods of
depreciation for income tax purposes and unrecognized foreign exchange gains and
losses.

AEI elected to be taxed as an S Corporation under the provisions of the
Internal Revenue Code of 1986 and comparable state tax provisions. As a result,
AEI did not recognize U.S. federal corporate income taxes. Instead, the
stockholders of AEI were taxed on their proportionate share of AEI's taxable
income. Accordingly, no provision for U.S. federal income taxes was recorded for
AEI. Given the Offerings (see Note 2), for informational purposes, the
accompanying consolidated statements of income include an unaudited pro forma
adjustment to reflect income taxes which would have been recorded if AEI had not
been an S Corporation, based on the tax laws in effect during the respective
periods.

Just prior to the offerings, AEI terminated its S Corporation status,
at which point the profits of AEI became subject to federal and state income
taxes at the corporate level.

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 established accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded on the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting.

SFAS No. 133 is effective for fiscal years beginning after June 15,
1999. Early adoption at the beginning of any quarter after issuance is
permitted, but cannot be applied retroactively. The provisions of the statement
must be applied to derivative instruments and certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997.

The Company has not determined the timing of or method of adoption.
However, it believes that the impact of adopting SFAS No. 133 on its financial
statements will not be material.

Risks and Uncertainties

The Company's future results of operations involve a number of risks
and uncertainties. Factors that could affect the Company's future operating
results and cause actual results to vary materially from expectations include,
but are not limited to, dependence on the highly cyclical nature of both the
semiconductor and the personal computer industries, competitive pricing and
declines in average selling prices, dependence on the Company's relationship
with ASI (see Note 9), reliance on a small group of principal customers, timing
and volume of orders relative to the Company's production capacity, availability
of manufacturing capacity and fluctuations in manufacturing yields, availability
of financing, competition, dependence on international operations and sales,
dependence on raw material and equipment suppliers, exchange rate fluctuations,
dependence on key personnel, difficulties in managing growth, enforcement of
intellectual property rights, environmental regulations and fluctuations in
quarterly operating results.

7

10
AMKOR TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

2.  INITIAL PUBLIC OFFERING

On May 6, 1998, ATI completed its initial public offering of 30,000,000
shares of its common stock at a price to the public of $11.00 per share and
$180,000 aggregate principal amount of Convertible Notes ("Initial Public
Offering" or "Offerings"). Also on May 8, 1998, ATI sold 5,250,000 additional
shares of its common stock and $27,000 additional principal amounts of
Convertible Notes in conjunction with the underwriters' over-allotment options.
The net proceeds were approximately $558,121, after deducting the underwriter
discounts and estimated offering expenses. The convertible notes ("Convertible
Notes") 1) are convertible into ATI common stock at $13.50 per share; 2) are
callable in certain circumstances after three years; 3) are unsecured and
subordinate to senior debt; 4) carry a coupon rate of 5.75%; and 5) have a
maturity of five years. Approximately $264,000 of the proceeds were used to
reduce short-term and long-term borrowings. Approximately $86,000 of the
proceeds were used to reduce amounts due to Anam USA, Inc., ASI's wholly-owned
subsidiary ("AUSA"). Approximately $34,000 of the proceeds were used to purchase
ASI's 40% interest in AAP (See Note 11). In connection with the Offerings, one
existing stockholder sold approximately 5,000,000 of his shares.

3.  INTERIM FINANCIAL STATEMENTS

The consolidated financial statements and related disclosures as of September
30, 1998 and for the three and nine months ended September 30, 1997 and 1998 are
unaudited, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management of the Company, these financial
statements include all adjustments (consisting only of normal recurring
adjustments) necessary for the fair presentation of the results for the interim
period. These financial statements should be read in conjunction with the
Company's Registration Statements on Form S-1 (File Nos. 333-49645 and
333-51521) filed with the Securities and Exchange Commission. The results of
operations for the three and nine months ended September 30, 1998 are not
necessarily indicative of the results to be expected for the full year.

4.  INVENTORIES

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

December 31,   September 30,
1997            1998
----            ----
(unaudited)

Raw materials and purchased components        $105,748        $ 68,150
Work-in-process ......................          10,122           8,576
--------        --------
$115,870        $ 76,726
========        ========

8

11
AMKOR TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

5.  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

December 31,     September 30,
1997              1998
----              ----
(unaudited)

Land ..................................          $  2,346          $  2,346
Building and improvements .............           109,528           141,084
Machinery and equipment ...............           448,032           512,132
Furniture, fixtures and other equipment            33,050            38,678
Construction in progress ..............            31,964             8,063
--------          --------
624,920           702,303
Less -- Accumulated depreciation
and amortization ....................           197,859           281,245
--------          --------
$427,061          $421,058
========          ========

6.  STOCKHOLDERS' EQUITY

At the date of the Reorganization (See Note 1), consolidated retained
earnings included $3,243 related to AKI. This amount is reflected as a
reduction in retained earnings in 1998 as a result of the purchase of AKI
by ATI.

7.  EARNINGS PER SHARE

The pro forma net income per common share was calculated by dividing
the pro forma net income by the weighted average number of shares outstanding
for the respective periods, adjusted for the effect of the Reorganization (see
Note 1).

Weighted
Earnings           Avg.  Shares        Per Share
(Numerator)         (Denominator)          Amount
-----------         -------------          ------

Nine Months Ended September 30, 1998
Basic Earnings Per Share ...          $    51,305          102,284,000          $   0.50
Convertible Notes ..........                2,994            8,649,000
Dilutive Effect of Options .                   --                   --
-----------          -----------          --------
Diluted Earnings Per Share .          $    54,299          110,933,000          $   0.49
===========          ===========          ========

Three Months Ended September 30, 1998
Basic Earnings Per Share ...          $    20,874          117,860,000          $   0.18
Convertible Notes ..........                1,780           15,333,000
Dilutive Effect of Options .                   --                   --
-----------          -----------          --------
Diluted Earnings Per Share .          $    22,654          133,193,000          $   0.17
===========          ===========          ========

Stock options to purchase approximately 3,000,000 shares of common stock were
outstanding subsequent to the Initial Public Offering, but are excluded from the
computation of diluted earnings per share as the average market price was below
the option's exercise price.

9

12
AMKOR TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

8.  STOCK COMPENSATION PLANS

1998 Director Option Plan. The Company's 1998 Director Option Plan (the
"Director Plan") was adopted by the Board of Directors in January 1998 and
was approved by the Company's stockholders in April 1998. A total of
300,000 shares of Common Stock have been reserved for issuance under the
Director Plan. The option grants under the Director Plan are automatic and
non- discretionary. Generally, the Director Plan provides for an initial
grant of options to purchase 15,000 shares of Common Stock to each new
non-employee director of the Company (an "Outside Director") when such
individual first becomes an Outside Director. In addition, each Outside
Director will automatically be granted subsequent options to purchase 5,000
shares of Common Stock on each date on which such Outside Director is
re-elected by the stockholders of the Company, provided that as of such
date such Outside Director has served on the Board of Directors for at
least six months. The exercise price of the options is 100% of the fair
market value of the Common Stock on the grant date, except that with
respect to initial grants to directors on the effective date of the
Director Plan the exercise price was 94% of the Initial Public Offering
price per share of Common Stock in the Initial Public Offering. The term of
each option is ten years and each option granted to an Outside Director
vests over a three year period. The Director Plan will terminate in January
2008 unless sooner terminated by the Board of Directors. As of September
30, 1998, there were 60,000 options outstanding under the Director Plan.

1998 Stock Plan. The Company's 1998 Stock Plan (the "1998 Plan") generally
provides for the grant to employees, directors and consultants of stock
options and stock purchase rights. The 1998 Plan was adopted by the Board
of Directors in January 1998 and was approved by the Company's stockholders
in April 1998. Unless terminated sooner, the 1998 Plan will terminate
automatically in January 2008. The maximum aggregate number of shares which
may be optioned and sold under the 1998 Plan is 5,000,000 plus an annual
increase to be added on each anniversary date of the adoption of the 1998
Plan.

Unless determined otherwise by the Board of Directors or a committee
appointed by the Board of Directors, options and stock purchase rights
granted under the 1998 Plan are not transferable by the optionee.
Generally, the exercise price of all stock options granted under the 1998
Plan must be at least equal to the fair market value of the shares on the
date of grant. In general, the options granted will vest over a four year
period and the term of the options granted under the 1998 Plan may not
exceed ten years. As of September 30, 1998, there were 3,080,200 options
outstanding under the 1998 Plan.

1998 Stock Option Plan for French Employees. The 1998 Stock Option Plan for
French Employees (the "French Plan") was approved by the Board of Directors
in April 1998. Unless terminated sooner, the French Plan will continue in
existence for 5 years. The French Plan provides for the granting of options
to employees for AAES and AWFS, the Company's French subsidiaries (the
"French Subsidiaries"). A total of 250,000 shares of Common Stock have been
reserved for issuance under the French Plan plus an annual increase to be
added on each anniversary date of the adoption of the French Plan. In
general, stock options granted under the French Plan vest over a four year
period, the exercise price for each option granted under the French Plan
shall be 100% of the fair market value of the shares of Common Stock on the
date the option is granted and the maximum term of the option must not
exceed ten years. Shares subject to the options granted under the French
Plan may not be transferred, assigned or hypothecated in any manner other
than by will or the laws of descent or distribution before the date which
is five years after the date of grant. As of September 30, 1998, there were
68,600 options outstanding under the French Plan.

10

13
AMKOR TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

A summary of the status of the Company's stock option plans follows:

WEIGHTED AVERAGE
NUMBER         EXERCISE PRICE
OF SHARES          PER SHARE
---------          ---------

Balance at January 1, 1998 ........               --          $      --
Granted ...........................        3,243,500              10.98
Exercised .........................               --                 --
Cancelled .........................           34,700          $   11.00
---------          ---------
Balance at September 30, 1998 .....        3,208,800          $   10.98
---------          ---------
Exercisable at September 30, 1998..               --                 --
---------          ---------

Significant option groups outstanding at September 30, 1998 and the
related weighted average exercise price and remaining contractual life
information are as follows:

WEIGHTED
OUTSTANDING           EXERCISABLE          AVERAGE
Options with Exercise Prices of                    --------------------    -----------------     REMAINING
SHARES         PRICE    SHARES      PRICE    LIFE (YEARS)
------         -----    ------      -----    ------------

$11.00 ....................................      3,148,800        $11.00     --        $11.00       9.6
------               ------       ---
$10.34 ....................................         30,000        $10.34     --        $10.34       9.6
------               ------       ---
$ 9.14 ....................................         30,000        $ 9.14     --        $ 9.14       9.8
---------        ------               ------       ---
Options outstanding at September 30, 1998..      3,208,800
=========

A summary of the weighted average fair value of options at grant date granted
during the nine months ended September 30, 1998 follows:

WEIGHTED          
WEIGHTED AVERAGE       AVERAGE
NUMBER       EXERCISE PRICE      GRANT DATE
OF SHARES       PER SHARE         FAIR VALUES
----------    ----------------     -----------

Options whose exercise price is greater than the                                             
market price on grant date .........................           37,600          $   11.00         $   2.42
---------          ---------         --------
Options whose exercise price equals market price on                                          
grant date .........................................        3,175,900          $   10.98         $   4.74
---------          ---------         --------
Options whose exercise price is less than the market                                         
price on grant date ................................           30,000          $   10.34         $   4.97
---------          ---------         --------

In order to calculate the fair value of stock options at date of grant,
the Company used the Black-Scholes option pricing model. The following
assumptions were used: expected option term - 4 years, stock price volatility
factor - 47%, dividend yield - 0%, and risk free interest rate - 5.38%.

1998 Employee Stock Purchase Plan. The Company's 1998 Employee Stock Purchase
Plan (the "Purchase Plan") was adopted by the Board of Directors in January 1998
and was approved by the stockholders in April 1998. A total of 1,000,000 shares
of common stock have been made available for sale under the Purchase Plan and an
annual increase is to be added on each anniversary date of the adoption of the
Purchase Plan. Employees (including officers and employee directors of the
Company but excluding 5% or greater stockholders) are eligible to participate if
they are customarily employed for at least 20 hours per week and for more than
five months in any calendar year. The Purchase Plan permits eligible employees
to purchase common stock through payroll deductions, which may not exceed 15% of
the compensation an employee receives on each payday. The initial offering
period began on October 1, 1998 with a seven-month offering period. All
subsequent offering periods will be consecutive six-month periods beginning on
May 1, 1999, subject to change by the Board of Directors. Each participant will
be granted an option on 

11

14
AMKOR TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

the first day of an offering period, and shares of Common Stock will be
automatically purchased on the last date of each offering period. The purchase
price of the Common Stock under the Purchase Plan will be equal to 85% of the
lesser of the fair market value per share of Common Stock on the start date of
the offering period or on the purchase date. Employees may end their
participation in an offering period at any time, and participation ends
automatically on termination of employment with the Company. The Purchase Plan
will terminate in January 2008, unless sooner terminated by the Board of
Directors.

The Company accounts for its stock compensation plans as prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related interpretations. Accordingly, no compensation cost
has been recognized in the Consolidated Statements of Income. Had the Company
recorded compensation expense for its stock compensation plans, as provided by
SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net
income and basic and diluted earnings per share would have been reduced to the
pro forma amounts indicated below:

For the Nine                For the Three
Months                      Months
Ended September 30,         Ended September 30,
-------------------         -------------------
1997         1998           1997         1998
----         ----           ----         ----

Net Income:               As reported               $19,276      $51,305        $18,098      $20,874
Pro forma                  19,276       50,363         18,098       20,309

Earnings per share:
Basic:               As reported                  0.23         0.50           0.22         0.18
Pro forma                    0.23         0.49           0.22         0.17

Diluted:             As reported                  0.23         0.49           0.22         0.17
Pro forma                    0.23         0.48           0.22         0.17

9.  RELATIONSHIP WITH ASI

At December 31, 1997, the Company owned 8.1% of the outstanding stock
of ASI, and ASI owned 40% of AAP. On February 16, 1998, the Company sold its
investment in ASI common stock for $13,863 to AK Investments, Inc., an entity
owned by James J. Kim, based on the market value of ASI shares on the Korean
Stock Exchange. On June 1, 1998, the Company purchased ASI's interest in AAP for
approximately $34,000 (See Note 11). In 1997 and the nine months ended September
30, 1998, approximately 68% of the Company's net revenues were derived from
services performed for the Company by ASI, a Korean public company in which
certain of the Company's principal stockholders hold a minority interest. By the
terms of a long-standing agreement, the Company has been responsible for
marketing and selling ASI's semiconductor packaging and test services, except to
customers in Korea and certain customers in Japan to whom ASI has historically
sold such services directly. The Company has worked closely with ASI in
developing new technologies and products. The Company has recently entered into
five-year supply agreements with ASI giving the Company the first right to
market and sell substantially all of ASI's packaging and test services and the
exclusive right to market and sell all of the wafer output of ASI's new wafer
foundry. The Company's business, financial condition and operating results have
been and will continue to be significantly dependent on the ability of ASI to
effectively provide the contracted services on a cost-efficient and timely
basis. The termination or disruption of the Company's relationship with ASI for
any reason, or any material adverse change in ASI's business resulting from
underutilization of its capacity, the level of its debt and its guarantees of
affiliate debt, labor disruptions, fluctuations in foreign exchange rates,
changes in governmental policies, economic or political conditions in Korea or
any other change could have a material adverse effect on the Company's business,
financial condition and results of operations.

The Company previously has met a significant portion of its financing
from financing arrangements provided by Anam USA, Inc. ("AUSA"), a wholly owned
financing subsidiary of ASI. A majority of the

12

15
AMKOR TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

amount due to AUSA represented outstanding amounts under financing obtained by
AUSA for the benefit of the Company with the balance representing payables to
AUSA for packaging and service charges paid to ASI. Based on guarantees provided
by ASI, AUSA obtained for the benefit of the Company a continuous series of
short-term financing arrangements which generally were less than six months in
duration, and typically were less than two months in duration. Because of the
short-term nature of these loans, the flows of cash to and from AUSA under this
arrangement were significant. Purchases from ASI through AUSA were $354,062,
$460,282 and $527,858 for 1995, 1996 and 1997, respectively. Charges from AUSA
for interest and bank charges were $4,484, $7,074 and $6,002 for 1995, 1996 and
1997, respectively. Amounts payable to ASI and AUSA were $252,221, and $156,350
at December 31, 1996 and 1997, respectively.

ASI's ability to continue to provide services to the Company will depend on
ASI's financial condition and performance. ASI currently has a significant
amount of debt relative to its equity, which debt the Company expects will
continue to increase in the foreseeable future. The Company is advised that ASI,
as a public company in Korea, has published its most recent annual consolidated
financial statements as of December 31, 1997. These consolidated financial
statements are prepared on the basis of Korean GAAP, which differs from U.S.
GAAP. U.S. GAAP financial statements are not available. As of December 31, 1997,
ASI, on a consolidated basis, had current liabilities of approximately W2,124
billion, including approximately W1,721 billion of short-term borrowings and
approximately W121 billion of current maturities of long-term debt, and had
long-term liabilities of approximately W1,710 billion, including approximately
W737 billion of long-term debt and approximately W862 billion of long-term
capital lease obligations. As of such date, the total shareholders' equity of
ASI amounted to approximately W77 billion. The deterioration of the Korean
economy during the past year and the resulting liquidity crisis in Korea have 
led to sharply higher domestic interest rates and reduced opportunities for
refinancing or refunding maturing debts as financial institutions in Korea,
which are experiencing financial difficulties, are increasingly looking to 
limit their lending, particularly to highly leveraged companies, and to
increase their reserves and provisions for non-performing assets. Therefore, 
there can be no assurance that ASI will be able to refinance its existing
loans or obtain new loans, or continue to make required interest and principal
payments on such loans or otherwise comply with the terms of its loan 
agreements. Any inability of ASI to obtain financing or generate cash flow
from operations sufficient to fund its capital expenditure, debt service and
repayment and other working capital and liquidity requirements could have a
material adverse effect on ASI's ability to continue to provide services and 
otherwise fulfill its obligations to the Company. In addition, ASI has 
obtained a significant amount of financing through arrangements by AUSA. As an
overseas subsidiary of ASI, AUSA was formed with the approval of the Bank of
Korea. If the Bank of Korea were to withdraw such approval, or if AUSA 
otherwise ceased operations for any reason, ASI would be required to meet 
their financing needs through alternative arrangements.

As of December 31, 1997, ASI and its consolidated subsidiaries were
contingently liable under guarantees in respect of debt of its non-consolidated
subsidiaries and affiliates in the aggregate amount of approximately W857
billion. As of December 31, 1997, such guarantees included those in respect of
all of AUSA's debt totaling $319,200, $176,250 of the Company's debt to banks
and the Company's obligations under a receivables sales arrangement. Prior to
the Initial Public Offering, the Company met a significant portion of its
financing needs through financing arrangements obtained by AUSA for the benefit
of the Company based on guarantees provided by ASI. The Company currently does
not depend on such financing arrangements. In addition, if ASI is unsuccessful
in obtaining a release of its guarantees of its affiliates' debts and if any
relevant subsidiaries or affiliates of ASI were to fail to make interest or
principal payments or otherwise default under their debt obligations guaranteed
by ASI, ASI could be required under its guarantees to repay such debt, which
event could have a material adverse effect on its financial condition and
results of operations.

13

16
AMKOR TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

In October 1998, ASI announced that it had applied for and was accepted into
the Korean financial restructuring program known as "Workout." The Workout
program is the result of an accord among Korean financial institutions to assist
in the restructuring of Korean business enterprises. This process involves
negotiation between the related banks and ASI, and does not involve the judicial
system. The Workout process also does not impact debts outstanding with trade
creditors, in particular balances due to/or from ATI. ASI's operations are
expected to continue uninterrupted during the process. ASI has requested the
following; (1) All short-term debt be converted to long-term debt; (2) current
interest rates be reduced; (3) all cross guarantees of ASI affiliates be
extinquished. The creditor financial institutions can propose an alternative
plan, which in addition to the items requested by ASI, could include debt to
equity conversions and/or change in management. At the present time the creditor
group is still assessing ASI's financial condition and evaluating the overall
workout plan. The Company is not in position to make a determination as to the
likely outcome of this process as it relates to ASI, however.

At September 30, 1998, ASI guaranteed the Company's obligation under a trade
receivables securitization agreement with a commercial financial institution,
whereby the financial institution has committed to purchase, with limited
recourse, all rights, title and interest in eligible receivables as defined by
the agreement, up to $100 million ("Receivables Sale"). Because ASI is a
guarantor, the entry by ASI into the Workout Program has triggered an event of
default under the Company's trade receivables securitization agreement. The
Company has received a waiver for this covenant of the agreement.

10.   ADVANCES TO ASI

The Company incurs charges from ASI for packaging and test services performed
on a monthly basis. Historically the Company has paid ASI for these services on
net 30-day terms. On July 21, 1998 the Company entered into a prepayment
agreement with ASI relating to packaging and test services. In accordance with
the agreement, the Company made a $50,000 non-interest bearing advance to ASI
representing approximately one month's charges for packaging and test services.
The Company agreed to offset this advance against billings by ASI for packaging
and test services provided in the fourth quarter of 1998. In October, 1998 the
Company reduced its advance to ASI by $16.7 by offsetting this amount against
amounts due to ASI for October 1998 packaging and test services. The remaining
balance due of $33.3 million will be offset during November and December of
1998.

In connection with its wafer foundry agreement with Texas Instruments, Inc.
("TI"), the Company and TI agreed to revise certain payment and other terms
contained in the Master Purchase Agreement entered into during 1998 ("Master
Purchase Agreement"). As part of this agreement TI agreed to advance ATI $20,000
in June 1998 as a prepayment of wafer foundry services to be provided in the
fourth quarter of 1998. The Company has recorded this amount in accrued
expenses. The Company in turn advanced these funds to ASI as a prepayment for
foundry service charges. The Company agreed to offset the advance to ASI against
billings by ASI for wafer foundry services in the fourth quarter of 1998. The
balance is reflected in the current portion of Due from Affiliates. The
Company's advance from TI has been eliminated as of October 31, 1998. As of
October 31, 1998, the Company reduced the advance to ASI by $19 million to
offset amounts due to ASI for October 1998 wafer foundry services.

To facilitate capacity expansion for new product lines, certain customers
advanced ATI funds to purchase certain equipment to fulfill such customer's
forecasts. In certain cases, the customer has requested that the equipment be
installed in the ASI factories. In these cases, the Company received funds from
the customer and advanced the funds to ASI. ASI in turn purchased the necessary
equipment. ASI repays ATI through a reduction of the monthly processing charges
related to the customer product being assembled. ATI will reduce its obligation
to the customer through a reduction in the accounts receivable, due from the
customer, at the time services are billed. These amounts are reflected in
Accrued Expenses

14

17
AMKOR TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

and current portion of Due from Affiliates. As of September 30, 1998 this amount
was approximately $4.6 million.

The Company utilizes Anam S&T Co, Ltd. ("AST"), an affiliate of ASI, as a key
supplier of leadframes. Historically, the Company has paid AST for these
services on net 30-day terms. Effective at the end of July 1998, the Company
changed its payment policy from net 30-days, to paid-in advance. Accordingly,
the Company now pays for its materials before shipment. This change in payment
policy has resulted in an advance to AST, which is reflected in the current
portion of Due from Affiliates. As of September 30, 1998, the balance paid in
advance to AST was approximately $5,000.

11.    ACQUISITIONS

On June 1, 1998, the Company purchased ASI's 40% interest in AAP for $33,750.
The acquisition was accounted for using the purchase method of accounting which
resulted in the elimination of the minority interest liability reflected on the
consolidated balance sheet, and the recording of approximately $23,910 of
goodwill which is being amortized over 10 years.

12.    COMMITMENTS AND CONTINGENCIES

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

The Company has various purchase commitments for materials, supplies and
capital equipment incidental to the ordinary conduct of business. As of
September 30, 1998, the Company had commitments for capital equipment of
approximately $28 million. In the aggregate, such commitments are not at prices
in excess of current market.

13.    SUBSEQUENT EVENT

On October 21, 1998, the Company announced that it entered into a joint
venture, Taiwan Semiconductor Technology Corporation ("TSTC"), with Taiwan
Semiconductor Manufacturing Corporation, Acer Inc., United Test Center and
Chinfon Semiconductor & Technology Company. TSTC, which is expected to commence
operations during the first quarter of 1999, will provide independent advanced
integrated circuit ("IC") packaging services primarily for the Taiwan market and
Taiwan foundry output. The Company plans to invest an estimated $40 million over
the next two years in TSTC. In October 1998, the Company invested $8.6 million
as part of the second round of joint venture financing. Currently, the Company
has an 11.6% interest in the joint venture. To increase its interest in the
joint venture the Company's Board of Directors approved the purchase of
additional TSTC shares from ASI for $10 million. The $10 million represents
ASI's investment as part of the joint venture's initial round of financing in
which, ATI did not participate. ASI did not participate in the joint venture's
second round of financing. After the purchase of ASI's shares, the Company will
own a 25% interest in TSTC.

15

18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion contains "forward-looking statements" within the
meaning of the U.S. Federal securities laws, including statements regarding the
anticipated growth in the market for the Company's products, the Company's
anticipated capital expenditures and financing needs, the Company's expected
capacity utilization rates, the belief of the Company as to its future operating
performance and 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
"Factors That May Affect Operating Results". The following discussion provides
information and analysis of the Company's results of operations for the three
months and the nine months ended September 30, 1997 and 1998 and its liquidity
and capital resources and should be read in conjunction with the Company's
unaudited Consolidated Financial Statements and Notes included in Item 1. The
operating results for interim periods are not necessarily indicative of results
for any subsequent period.

OVERVIEW

Background. The Company is the world's largest independent provider of
semiconductor packaging and test services. The Company believes that it is also
one of the leading developers of advanced semiconductor packaging and test
technology in the industry. The Company offers a complete and integrated set of
packaging and test services including integrated circuit ("IC") package design,
leadframe and substrate design, IC package assembly, final testing, burn-in,
reliability testing, and thermal and electrical characterization. The Company
recently began offering wafer fabrication services. The Company provides
packaging and test services through its three factories in the Philippines as
well as the four factories of Anam Semiconductors, Inc. (formerly Anam
Industrial Co, Ltd.) ("ASI") in Korea, and wafer fabrication services through
ASI's new wafer foundry, pursuant to the Supply Agreements between the Company
and ASI.

The Company was formed in September 1997 to consolidate the operations of the
Amkor Companies, including AEI which was incorporated in 1970. These companies
were under common management and in the same business prior to the Company's
formation. As a result of the Reorganization, the financial statements included
in this filing are presented on a consolidated basis. See note 1 of Notes to
Consolidated Financial Statements. Prior to the Reorganization, AEI elected to
be taxed as an S Corporation under the Internal Revenue Code of 1986 and
comparable state tax laws. Accordingly, AEI did not recognize any provision for
federal income tax expense during the periods presented in the Consolidated
Financial Statements. The Consolidated Financial Statements include a pro forma
provision for income taxes, which reflects the U.S. federal income taxes which
would have been recorded by the Company if AEI had not been an S Corporation
during these periods.

The Company's results of operations are generally affected by the capital-
intensive nature of its business. In 1997 and the nine months ended September
30, 1998, the Company invested $179.0 million and $80.5 million, respectively,
in property, plant, and equipment. Increases or decreases in capacity
utilization rates can have a significant effect on gross margins since the unit
cost of packaging and test services generally decrease as fixed charges, such as
depreciation expense for the equipment, are allocated over a larger number of
units produced. The Company plans to invest an additional approximately $25.0
million in property, plant and equipment during the balance of 1998. In
addition, the Company's gross margin is significantly affected by fluctuations
in service charges paid to ASI pursuant to the Supply Agreements. See
"Dependence on Relationship with ASI; Potential Conflicts of Interests." Pricing
arrangements relating to packaging and test services provided by ASI to the
Company are subject to quarterly review and adjustment, and pricing arrangements
relating to wafer fabrication services provided by ASI are subject to annual
review and adjustment, in each case on the basis of factors such as changes in
the semiconductor market, forecasted demand, product mix and capacity
utilization and fluctuations in exchange rates, as well as the mutual long-term
strategic interest of the Company and ASI. The Company's results of operations
are also affected by declines over time in the average selling prices for
particular products. At times in the past, the Company has been able to offset,
at least in part, the effect of such

16

19
decline on its margins by successfully developing and marketing new products
with higher margins, such as advanced leadframe and laminate products and by
taking advantage of economies of scale and higher productivity resulting from
volume production. During 1998, the general slowdown in the semiconductor
industry has resulted in strong pricing pressures which have resulted in
decreased average selling prices ("ASP's") on many of the Company's products.
There can be no assurance that the Company will be successful at offsetting any
future declines in the selling prices of its products. During the first nine
months of 1998, the Company has seen a significant growth in its laminate
product business. Overall, the percentage of revenue derived from laminate
products has increased rapidly during the first nine months of 1998. The shift
in product mix has impacted the Company's revenues in that the average laminate
product has an average selling price almost ten times the average selling price
of an advanced or traditional product. See "Factors That May Affect Operating
Results -- Expansion of Manufacturing Capacity; Profitability Affected by
Capacity Utilization Rates."

Due to the concentration of market share in the semiconductor industry, the
Company has been largely dependent upon a small group of customers for a
substantial portion of its business. In 1997 and the nine months ended September
30, 1998, 40.1% and 35.4%, respectively, of the Company's packaging and test
revenue were derived from sales to the Company's top five packaging and test
customers, with 23.4% and 20.3%, respectively, derived from packaging and test
sales to Intel. The Company currently generates 100% of its wafer fabrication
revenues from, Texas Instruments (TI). See "Factors That May Affect Operating
Results -- Customer Concentration; Absence of Backlog."

Relationship with ASI. In 1997 and the nine months ended September 30, 1998,
approximately 68% of the Company's revenues were derived from sales of services
performed for the Company by ASI. In addition, substantially all of the revenues
of ASI in 1997 and the nine months ended September 30, 1998 were derived from
services sold by the Company. Historically, ASI has directly sold packaging and
test services in Japan and Korea. The Company assumed substantially all of the
marketing rights for services in Japan in January 1998. Also, the Company
recently began offering wafer fabrication services through ASI's new deep
submicron CMOS foundry which is capable of producing up to 15,000 8 inch wafers
per month. See "Factors That May Affect Operating Results -- Risks Associated
with New Wafer Fabrication Business." The Company expects the proportion of its
net revenues derived from sales of services performed for the Company by ASI and
the percentage of ASI's revenues from services sold by the Company to increase
as the level of ASI's wafer fabrication output continues to grow. The Company
has a first right to substantially all of the packaging and test service
capacity of ASI and the exclusive right to all of the wafer output of ASI's new
wafer foundry.

The Supply Agreements between the Company and ASI generally provide, among
other things, for periodic price reviews and adjustments and coordination of
research and development efforts regarding package design and packaging and
testing processes and technologies. The Supply Agreements have a five year
initial term and thereafter may be terminated upon five years' notice. There can
be no assurance that ASI will not terminate either Supply Agreement upon the
expiration of such initial term, or that if it does terminate a Supply
Agreement, that the Company will be able to enter into a new agreement with ASI
on terms favorable to the Company or at all.

The Company expects that the businesses of the Company and ASI will continue
to remain highly interdependent by virtue of their supply relationship, overlaps
and family ties between their respective shareholders and management, financial
relationships, coordination of product and operation plans, joint research and
development activities and shared intellectual property rights. As a result, the
Company's business, financial condition and operating results will continue to
be significantly dependent on ASI, including without limitation ASI's ability to
effectively provide the contracted services on a cost-efficient and timely basis
as well as ASI's financial condition and results of operations. The Company will
continue to be controlled to a significant degree by James Kim and members of
his family, and Mr. Kim and other members of his family will also continue to
exercise significant influence over the management of ASI and its affiliates. In
addition, the Company and ASI will continue to have certain contractual and
other business relationships and may engage in transactions from time to time
that are material to the Company. Although any such material agreements and
transactions would require approval of the Company's Board of Directors, such
transactions will generally not require any additional approval by a separate
committee

17

20
comprised of the disinterested members of the Board of Directors and conflicts
of interest may arise in certain circumstances. There can be no assurance
that such conflicts will not from time to time be resolved against the
interests of the Company. The Company currently has six directors, five of whom
are disinterested. Under Delaware corporate law, each director owes a duty of
loyalty and care to the Company, which if breached can result in personal
liability for the directors. In addition, the Company may agree to certain
changes in its contractual and other business relationships with ASI, including
pricing, manufacturing allocation, capacity utilization and capacity expansion,
among others, which in the judgment of the Company's management will result in
reduced short-term profitability for the Company in favor of potential long-term
benefits to the Company and ASI. There can be no assurance that the Company's
business, financial condition or results of operations will not be adversely
affected by any such decision. See " -- Liquidity and Capital Resources" and
"Factors That May Affect Operating Results - - Dependence on Relationship with
ASI; Potential Conflicts of Interest."

In October 1998, ASI announced that it had applied for and was accepted into
the Korean financial restructuring program known as "Workout." The Workout
program is the result of an accord among Korean financial institutions to assist
in the restructuring of Korean business enterprises. This process involves
negotiation between the related banks and ASI, and does not involve the judicial
system. The Workout process also does not impact debts outstanding with trade
creditors, in particular balances due to/or from ATI. ASI's operations are
expected to continue uninterrupted during the process. ASI has requested the
following; (1) All short-term debt be converted to long-term debt; (2) current
interest rates be reduced; (3) all cross guarantees of ASI affiliates be
extinguished. The creditor financial institutions can propose an alternative
plan, which in addition to the items requested by ASI, could include debt to
equity conversions and/or change in management. At the present time the creditor
group is still assessing ASI's financial condition and evaluating the overall
workout plan. The Company is not in position to make a determination as to the
likely outcome of this process as it relates to ASI.

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21

RESULTS OF OPERATIONS

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

THREE MONTHS                 NINE MONTHS
ENDED                       ENDED
SEPTEMBER 30,                SEPTEMBER 30,
-------------------          ------------------
1997           1998          1997          1998
----           ----          ----          ----
(RESTATED)

Net revenues ....................      100.0%         100.0%        100.0%        100.0%
Cost of revenues ................       82.7           83.2          86.3          83.0
-----          -----         -----         -----
Gross profit ..................       17.3           16.8          13.7          17.0
-----          -----         -----         -----
Operating expenses:
Selling, general and           
administrative ................        7.0            7.8           7.1           7.7
Research and development ......         .6            0.5           0.6           0.5
-----          -----         -----         -----
Total operating expenses ...        7.6            8.3           7.7           8.2
-----          -----         -----         -----
Operating income ................        9.7            8.5           6.0           8.8
-----          -----         -----         -----
Other (income) expense:
Interest expense, net .........        2.9            0.6           2.6           1.5
Foreign currency (gain) loss ..       (0.2)            --            --           0.3
Other expense, net ............        0.3            0.3           0.2           0.6
-----          -----         -----         -----
Total other expense ........        3.0            0.9           2.8           2.4
-----          -----         -----         -----
Income before income taxes,
equity in income (loss) of
ASI and minority interest ....        6.7            7.6           3.2           6.4
Provision for income taxes ......        0.2            2.2           0.3           1.5
Equity in income (loss) of ASI ..         --             --            --            --
Minority interest ...............        1.5             --           0.7            --
-----          -----         -----         -----
Net income ......................        5.0            5.4           2.2           4.9
Pro forma adjustment for income
taxes .........................        0.2             --           0.4           0.4
-----          -----         -----         -----
Pro forma net (loss) income .....        4.8%           5.4%          1.8%          4.5%
=====          =====         =====         =====

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THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1997

Net Revenues. The Company's net revenues of $386.7 million for the third quarter
of 1998 were up 1.7% compared to net revenues in the third quarter of 1997. Due
to a continued slowdown in the semiconductor industry, which the Company
believes has resulted in excess packaging and test capacity and increased 
pricing pressures, packaging and test revenues decreased 6.2% during the third
quarter of 1998 compared to packaging and test revenues in the third quarter
of 1997. Net revenues and gross profit in the third quarter of 1998 were 
negatively impacted by a significant drop in average selling prices across all
product lines and especially by decreases in the selling prices of laminate 
products. The Company significantly reduced prices for laminate products, to
meet competitive pressures on prices from the continued overall slowdown in the 
semiconductor industry and existing excess capacity. If the Company is not able
to reduce its material costs commensurate with declining average selling
prices, the Company's gross margin will be adversely affected. In addition, the
Company has significant fixed costs, which cannot be reduced if demand for its
products decrease. The decline in packaging and test revenues was offset by
revenues from the Company's wafer fabrication business which continued to 
increase, as well as revenues from Japan customers resulting from the 
assumption of marketing rights in Japan in January, 1998. Third quarter 1998 
net revenues exceeded net revenues in the second quarter of 1998 by less than
1%. Packaging and test revenues decreased 4.2% in comparison to packaging and
test revenues in the second quarter of 1998, while wafer fabrication revenues
increased 137% compared to the second quarter of 1998.

Total unit volumes in the third quarter of 1998 decreased compared to the third
quarter of 1997 and were basically flat compared to the second quarter of 1998.
The Company's high end products (its laminate and advanced products) continued
to grow in volume, accounting for 58% of net revenues in the third quarter of
1998 compared to 43% of net revenues in the third quarter of 1997 and 54% of net
revenues in the second quarter of 1998. In the third quarter of 1998 unit
volumes for laminate products grew significantly compared to the third quarter
of 1997 and the second quarter of 1998. The Company anticipates continued strong
growth for its laminate products as demand for new technology in semiconductor
packaging continues to move in the direction of smaller and thinner sizes, which
is currently best achieved with high end products. Unit volume of traditional
products during the third quarter of 1998 declined in comparison to the third
quarter of 1997 and the second quarter of 1998 volumes. Losses in volume for
traditional products resulted from decreased sales to a small group of
customers, who chose to bring traditional packaging in-house to fill their own
excess capacity. The Company believes that as overall demand for traditional
type packages increases in the future, the Company will see an increase in
demand from these same customers.

As a result of competitive pressures and slow market conditions, the Company
does not anticipate any growth in packaging and test revenues during the fourth
quarter of 1998 or first quarter of 1999. The Company expects significant
continued growth in revenue from its wafer fabrication business during the
fourth quarter of 1998. However, the Company is currently dependent upon one
customer for all of its current wafer fabrication revenues. Significant changes
in demand from this customer and the Company's inability to attract additional
customers could result in significant fluctuations in wafer fabrication
revenues.

Gross profit. Gross profit for the third quarter of 1998 decreased 1.4% to $65.0
million, or 16.8% of net revenues, from $65.9 million, or 17.3% of net revenues
in the third quarter of 1997. The lower gross margin percent in the third
quarter of 1998 compared to the third quarter of 1997 is attributed to the
following:

-   Lower gross margins during the third quarter of 1998 due to
higher fixed costs and decreased unit volumes associated with
traditional products packaged in the Company's Philippine
operations.

-   Revenue contribution from wafer fabrication services in the
third quarter of 1998, which services generally have lower
gross margins than packaging and test revenues. The Company
did not have any revenues from wafer fabrication services in
the third quarter of 1997.

20

23
-   Improved gross margins on packaging and test services provided
by ASI, as a result of the new supply agreement between the
Company and ASI entered into in January, offset other
decreases in gross margin.

The gross margin percent of 16.8% for the third quarter of 1998 was also below
second quarter 1998 gross margin of 17.6%. The lower gross margin percent in the
third quarter of 1998 compared to the second quarter of 1998 is attributed to
the following:

-   Lower gross margins during third quarter of 1998 due to higher
fixed costs and increased material costs as a percent of
revenue relating to laminate products assembled in the
Company's Philippine operations.

-   Revenue contribution from wafer fabrication services in the
third quarter of 1998, which services generally have lower
gross margins than packaging and test revenues. The Company
did not have any revenues from wafer fabrication services in
the third quarter of 1997.

-   Gross margins on packaging and test services provided by ASI
were unchanged from second quarter of 1998.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the third quarter 1998 were $30.0 million, or 7.8%
of net revenues, compared to $26.8 million, or 7.0% of net revenues, for the
third quarter of 1997 and $28.9 million, or 7.5% of net revenues, for the second
quarter of 1998. Increases are due primarily to employee related costs at P3 and
at the wafer fabrication division and U.S. marketing, and sales divisions.

In November of 1998, the Company instituted a cost reduction program designed to
decrease its selling, general and administrative expenses. Most significantly,
the Company reduced the headcount of its U.S. sales, marketing and
administrative functions by approximately 10%. The Company does not expect the
charges related to this program to have a significant impact on fourth quarter
net income. The Company expects to realize the benefit of the cost reduction
program beginning in the first quarter of 1999.

Research and Development Expenses. Research and development expenses were $2.1
million for the third quarter of 1998 compared to $2.2 million in the third
quarter of 1997 and $1.9 million in the second quarter of 1998.

Other (Income) Expense. Total other expense decreased to $3.4 million in the
third quarter 1998 compared to $11.2 million in the third quarter of 1997 and
$7.6 million for the second quarter of 1998. The declines in other expenses are
due primarily to declines in net interest expense in these periods. Proceeds
received from the Company's initial public offering in May 1998 were used to
repay much of the Company's outstanding debt. Additionally, the Company has
accumulated a significant cash balance. For the third quarter of 1998, net
interest expense was $2.1 million compared to $11.0 million in the third quarter
of 1997 and $4.9 million in the second quarter of 1998.

Income Taxes. The Company's effective tax rate for the third quarter of 1998 was
29% compared to effective tax rates of 6.9% and 29%, in the third quarter of
1997 and the second quarter of 1998, respectively (after giving effect to the
pro forma adjustment for income taxes). The low effective tax rate during the
third quarter of 1997 resulted from the recognition of deferred tax assets on
currency losses for Philippine tax reporting purposes, which are not recognized
for financial reporting purposes.

Minority Interest. Minority interest represented ASI's ownership in the
consolidated net income of Amkor/Anam Pilipinas, Inc. ("AAP"). Accordingly, the
Company recorded a minority interest expense in its consolidated financial
statements relating to the minority interest in the net income of AAP. 

21

24
In the second quarter of 1998, the Company purchased ASI's 40% interest in AAP
and, as a result, the Company now owns substantially all of the common stock of
AAP. The acquisition of the minority interest resulted in the elimination of the
minority interest liability and in additional goodwill amortization of
approximately $2.5 million per year.

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1997

Net Revenues. Although packaging and test net revenues for the nine months ended
September 30, 1998 have increased over the same period in the prior year, the
growth rate in packaging and test revenue has declined during each quarter of
1998. At the same time, revenues from the Company's Wafer fabrication business
have grown rapidly since operations began in January 1998 and the Company
assumed marketing rights from ASI for the packaging and test business in Japan.
Overall, the Company's net revenues of $1,143 million for the nine months ended
September 30, 1998 were up 9.5% compared to net revenues of $1,044 million for
the nine months ended September 30, 1997. Packaging and test revenue increased
5.2%, while revenues from wafer fabrication operations contributed an additional
revenue increase of 4.3%.

Total unit volumes increased during the nine months ended September 30, 1998
compared to the same period in 1997. The most significant increases were seen in
the laminate products, whose volume more than doubled over the prior year. The
Company's advanced products also increased in volume, however unit volumes for
traditional packages were down. For the nine months ended September 30, 1998
laminate and advanced products accounted for approximately 52% of total
packaging and test revenue compared to approximately 37% in the same period of
the prior year. This trend has been consistent throughout the year and the
Company does not expect any near term changes. The Company expects demand for
new technology in semiconductor packaging to continue moving in the direction of
smaller and thinner sizes, which is currently best achieved with laminate and
advanced type products. Traditional products decreased to 43% from approximately
59% in the nine months ended September 30, 1997. Test revenues increased to 5%
of total packaging and test revenues for the nine months ended September 30,
1998, compared to 4% for the same period in 1997.

Gross profit. Gross profit for the nine months ended September 30, 1998,
increased 36.0% to $194.3 million, or 17.0% of net revenues, compared to $142.8
million, or 13.7% of net revenues for the nine months ended September 30, 1997.
The higher gross margin percent in 1998 is attributed to the following:

- Improved gross margins on packaging and test services provided by ASI
as a result of the new supply agreement entered into in January 1998.

- Improved gross margins at the Company's P3 factory operations, which
were incurring significant start-up losses in the first half of 1997.
Improved gross margins primarily resulted from increased volumes and
better absorption of general fixed costs.

- The positive impact from increased wafer fabrication sales during
1998, compared to no revenue in 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended September 30, 1998 were $87.7
million, or 7.7% of net revenues, compared to $74.1 million, or 7.1% of net
revenues, for the nine months ended September 30, 1997. Increases in these costs
were due primarily to increased costs at P3, as product volumes continue to
increase, and costs at the wafer fabrication division which began operations
during 1998.

Research and Development Expenses. Research and development expenses were $6.1
million for the nine months ended September 30, 1998 compared to $5.8 million in
the nine months ended September 30, 1997.

Other (Income) Expense. Total other expense decreased to $27.4 million in the
nine months ended September 30, 1998 compared to $29.0 million in the nine
months ended September 30, 1997. The declines in other expenses are due
primarily to declines in net interest expense in these periods. Proceeds
received from the Company's initial public offering in May 1998 were used to
repay much of the Company's outstanding debt. Additionally, the Company has
accumulated a significant cash balance. For

22

25
the nine months ended September 30, 1998, net interest expense was $16.5 million
compared to $27.4 million in the nine months ended September 30, 1997. The
savings from the reduction in interest charges were offset in part by an
increase in costs associated with the company's accounts receivable
securitization agreement. Costs related to this agreement, which was signed in
July 1997, were approximately $3.8 million in the nine months ended September
30, 1998 compared to $0.9 million in the same period of 1997. In addition, for
the nine months ended September 30, 1998 the Company incurred approximately $1.5
million in loan charges related to its efforts to extend certain bank facilities
prior to the initial public offering. Due to fluctuations in the Philippine
peso, the Company incurred foreign exchange losses of $3.8 million for the nine
months ended September 30, 1998, compared to a gain of $0.6 million for the nine
months ended September 30, 1997.

Income Taxes. The Company's effective tax rate for the nine months ended
September 30, 1998 was 29% compared to an effective tax rate of 21% in the nine
months ended September 30, 1997 (after giving effect to the pro forma adjustment
for income taxes). The low effective tax rate for the nine month period ended
September 30, 1997 resulted from the recognition of deferred tax assets on
currency losses for Philippine tax reporting purposes, which are not recognized
for financial reporting purposes, net of increases in the effective rate
resulting from non-deductible losses at the company's P3 operations which is
currently under a tax holiday.

Minority Interest. Minority interest represented ASI's ownership in the
consolidated net income of Amkor/Anam Pilipinas, Inc. ("AAP"). Accordingly, the
Company recorded a minority interest expense in its consolidated financial
statements relating to the minority interest in the net income of AAP.

In the second quarter of 1998, the Company purchased ASI's 40% interest in AAP
and, as a result, the Company now owns substantially all of the common stock of
AAP. The acquisition of the minority interest resulted in the elimination of the
minority interest liability and in additional goodwill amortization of
approximately $2.5 million per year.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1998, the Company had cash and cash equivalents of $172.3
million and working capital of $188.9 million. At September 30, 1998, the
Company's working capital reflected an increase of $150.9 million compared to
December 31, 1997. The increase in the Company's working capital since December
31, 1997 resulted primarily from the reduction of short-term debt and increased
cash balances as a result of its initial public offering during the second
quarter of 1998. (See Note 2 of Notes to Consolidated Financial Statements).

The Company used the net proceeds received from the initial public offering
primarily to repay an aggregate of approximately $264 million of short-term and
long-term borrowings. Additionally, $86 million of the proceeds were used to
repay amounts due to AUSA. In addition, the Company used such net proceeds to
repay $102 million of short-term loans and $34 million to repurchase ASI's 40%
interest in AAP. Following the application of the net proceeds of the initial
public offering, the Company had $33 million of short-term borrowing and current
portion of long-term debt, $225 million of long-term debt, which includes $207
million of the 5.75% Convertible Notes sold by the Company in the initial public
offering, and no amounts then due to AUSA. In addition, the remaining $176
million of such net proceeds was available for capital expenditures and working
capital.

The Company has been investing significant amounts of capital to increase its
packaging and test services capacity, including the construction of P3, the
addition of capacity in the Company's other Philippine facilities and the
construction of a new manufacturing facility in the United States. Advanced
packaging processes are being developed at the U.S. facility. In 1997 and the
nine months ended September 30, 1998, the Company made capital expenditures of
$179.0 million and $80.5 million, respectively. Because the Company and ASI have
added a significant amount of packaging and test capacity in recent years, the
Company has decreased its level of capital expenditures in 1998. The Company
currently intends to spend approximately $25 million in capital expenditures
during the fourth

23

26
quarter of 1998, primarily for capacity expansion at the Company's existing
facilities in the Philippines to meet expected demand. The Company believes that
expenditure levels could increase substantially in 1999 to provide the Company
with adequate capacity.

The Company believes that its existing cash balances, cash flow from
operations, available equipment lease financing, and bank borrowings will be
sufficient to meet its anticipated cash requirements including working capital
and capital expenditures, for at least the next 12 months. There can be no
assurance, however, that lower than expected revenues, increased expenses,
increased costs associated with the purchase or maintenance of capital
equipment, decisions to increase planned capacity or other events will not cause
the Company to seek more capital, or to seek capital sooner than currently
expected. The timing and amount of the Company's actual capital requirements
cannot be precisely determined and will depend on a number of factors, including
demand for the Company's services, availability of capital equipment,
fluctuations in foreign currency exchange rates, changes in semiconductor
industry conditions and competitive factors. There can be no assurance that such
additional financing will be available when needed or, if available, will be
available on satisfactory terms. Failure to obtain any such financing could have
a material adverse effect on the Company. In addition, if the Company obtains
such financing by selling equity securities of the Company, the Company's
stockholders may experience significant dilution.

Prior to the Initial Public Offering, the Company met a significant portion of
its cash requirements for working capital and capital expenditures from a
combination of cash from operating activities, short-term and long-term bank
loans and financing obtained for the benefit of the Company by AUSA, a
wholly-owned financing subsidiary of ASI, as well as financing from a trade
receivables securitization agreement. Currently, the Company does not rely on
financing obtained for its benefit by AUSA. Cash provided by operating
activities in 1997 and the nine months ended September 30, 1998 was $250.1
million and $130.9 million, respectively. Cash provided (used) in financing
activities was $(16.0) million and $66.2 million for 1997 and the nine months
ended September 30, 1998, respectively.

At September 30, 1998, the Company's debt consisted of $41.9 million of
borrowings classified as current liabilities, $18.5 million of long-term debt
and capital lease obligations, $207.0 million of convertible subordinated notes,
and no amounts due to AUSA. At September 30, 1998, the Company had $86.6 million
in borrowing facilities with a number of domestic and foreign banks, of which
$50.3 million remained unused. Certain of the agreements with such banks require
compliance with certain financial covenants and restrictions, and are
collateralized by assets of the Company. These facilities are typically
revolving lines of credit and working capital facilities for one-year renewable
periods and generally bear interest at rates ranging from 10.5% to 17.0%.
Long-term debt and capital lease obligations outstanding at September 30, 1998
have various expiration dates through April 2004, and accrue interest at rates
ranging from 5.8% to 13.0%.

At September 30, 1998 ASI guaranteed the Company's obligation under a trade
receivables securitization agreement with a commercial financial institution,
whereby the financial institution has committed to purchase, with limited
recourse, all rights, title and interest in eligible receivables, as defined by
the agreement, up to $100 million ("Receivables Sale"). ASI currently has a
significant amount of debt relative to its equity and is contingently liable
under guarantees in respect of debt of its subsidiaries and affiliates,
including AUSA. In October 1998, ASI entered into a debt restructuring program,
referred to in Korea as "Workout". See "Overview-Relationship with ASI." Because
ASI is a guarantor, the entry by ASI into the Workout program has triggered an
event of default under the Company's trade receivables Securitization agreement.
The Company has received a waiver for this covenant of the agreement.

The Company incurs charges from ASI for package and test services performed on
a monthly basis. Historically, the Company has paid ASI for these services on
net 30-day terms. On July 21, 1998, the Company entered into a prepayment
agreement with ASI relating to package and test services. In accordance with the
agreement, the Company made a $50 million non-interest bearing advance to ASI
representing approximately one month's charges for package and test services. In
October 1998, the Company reduced its advance to ASI by $16.7 million by
offsetting this amount against amounts due to ASI for October 1998 packaging and
test charges. The Company will offset the remaining advance balance against
billings by ASI for packaging and test services provided in November and
December of 1998.

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27
In connection with its wafer foundry agreement with Texas Instruments, Inc.
("TI"), the Company and TI agreed to revise certain payment and other terms
contained in the Master Purchase Agreement. As part of this agreement, TI agreed
to advance the Company $20 million in June 1998 as a prepayment of wafer foundry
services to be provided in the fourth quarter of 1998. The Company in turn
advanced these funds to ASI as a prepayment for foundry service charges. The
Company reduced the advance to ASI by $19 million to offset amounts due to ASI
for October 1998 wafer foundry services. The remaining balance of $1million will
be offset against November billings from ASI. The Company's advance from TI has
been eliminated as of October 31, 1998. 

Prior to the consummation of the Reorganization, AEI was treated for U.S.
federal and certain state tax purposes as an S Corporation under the Internal
Revenue Code of 1986 and comparable state tax laws. As a result, AEI did not
recognize U.S. federal corporate income taxes. Instead, up until the termination
of AEI's S Corporation status on April 28, 1998 (the "Termination Date"), Mr.
and Mrs. Kim and the trusts established for the benefit of other members of Mr.
James Kim's family (the "Kim Family Trusts") had been obligated to pay U.S.
federal and certain state income taxes on their allocable portion of the income
of AEI. The Company, Mr. and Mrs. Kim and the Kim Family Trusts have entered
into tax indemnification agreements providing that the Company will be
indemnified by such stockholders, with respect to their proportionate share of
any U.S. federal or state corporate income taxes attributable to the failure of
AEI to qualify as an S Corporation for any period or in any jurisdiction for
which S Corporation status was claimed through the Termination Date. The tax
indemnification agreements also provide that under certain circumstances the
Company will indemnify Mr. and Mrs. Kim and the Kim Family Trusts if such
stockholders are required to pay additional taxes or other amounts attributable
to taxable years on or before the Termination Date as to which AEI filed or
files tax returns claiming status as an S Corporation. AEI has made various
distributions to Mr. and Mrs. Kim and the Kim Family Trusts which have enabled
them to pay their income taxes on their allocable portions of the income of AEI.
Such distributions totaled approximately $5.0 and $33.1 million in 1997 and for
the nine months ended September 30, 1998, respectively. The Company believes the
amount of such undistributed net income was less than $1.0 million at September
30, 1998. (See Note 1of Notes to Consolidated Financial Statements.)

FOREIGN CURRENCY TRANSLATION GAINS AND LOSSES

The Company's subsidiaries in the Philippines maintain their accounting
records in U.S. dollars. This is due to the fact that all sales, the majority of
all bank debt and all significant material and fixed asset purchases of such
subsidiaries are denominated in U.S. dollars. As a result, the Philippine
subsidiaries' exposure to changes in the Philippine peso/U.S. dollar exchange
rate relates primarily to certain receivables and advances and other assets
offset by payroll, pension and local liabilities. To minimize its foreign
exchange risk, the Company selectively hedges its net foreign currency exposure
through short-term (generally not more than 30 to 60 days) forward exchange
contracts. To date, the Company's hedging activity has been immaterial.

YEAR 2000

The Company has been actively engaged in addressing the Year 2000 (Y2K) issues.
These issues result from the use of two-digit, rather than four digit, year
dates in software, a practice which could cause date-sensitive systems to
malfunction or fail because they may not recognize or process date information
correctly.

State of Readiness: To manage its Y2K program, the Company has divided its
efforts into four program areas:

- -    Computing Systems (computer hardware and software);
- -    Manufacturing Equipment;
- -    Facilities and Utilities; and
- -    Supply Chain (equipment/inventory vendors, freight forwarders and other 
vendors).

25

28
For each of these program areas, the Company is using a five step approach:

- -    Ownership (creating awareness, assigning tasks, structured feedback and
updates); 
- -    Inventory (listing items to be assessed for Y2K readiness);
- -    Initial Assessment (prioritizing the inventoried items and assessing their
Y2K readiness including validation with vendors and testing where 
appropriate);
- -    Risk Assessment (Evaluate initial assessments, develop action and 
contingency plans); and 
- -    Corrective Action Deployment (implementing corrective actions, verifying 
implementation, finalizing and executing contingency plans).

At September 30 ,1998, the Ownership and Inventory steps were essentially
complete for all program areas (other than ongoing structured feedback and
updates on progress). The target completion dates for priority items by
remaining steps are as follows: Initial Assessment and Risk Assessments first
quarter of 1999; Corrective Action Deployment - second quarter of 1999.

To date, the Company is on target to complete its initial assessments and risk
assessments by the first quarter of 1999. The status for each program area is as
follows:

- -        Computing Systems: With a few of exceptions, the Company believes that
its technical infrastructure, including servers, communications
equipment, personal computers ("PCs"), operating systems and standard
software are Y2K compliant. Replacement of older PCs will take place
through the end of 1999 as part of the Company's normal
upgrade/expansion plans. Physical testing of the technical
infrastructure is in process. The Company's applications inventory is
complete, and plans are in place for either the upgrade or replacement
of certain applications. Development of test plans and actual testing
of applications whose functionality is impacted by Y2K are currently in
process.

- -        Manufacturing Equipment: All manufacturing equipment has been
inventoried and vendors have been contacted for their position on Y2K
compliance. For every piece of equipment, the Company plans to
implement vendor recommended actions, then perform a test on a
representative piece of equipment (e.g. at the make/model/software
version/BIOS level) for its conformance with industry Y2K testing
standards. Assembly equipment testing is proceeding with relatively few
failures experienced to date. Test equipment testing is scheduled to
begin in the near future.

- -        Facilities and Utilities: All facilities and utilities will be
inventoried in the fourth quarter of 1998 with supplier inquiries and
initial risk assessment also to begin in the fourth quarter of 1998.

- -        Supply Chain: Supply Chain inventories and vendor surveys have been
completed. In addition, the Company has developed supplier audit
programs for its key equipment and material suppliers and freight
forwarders. The Company will begin vendor audits and collection of
support from such vendors regarding their Y2K compliance during the
fourth quarter of 1998. In addition, the Company is continuing to
review external software and information technology service providers ,
and to verify the readiness of our banking contacts. The Company
intends to prepare contingency plans by the first quarter of 1999 for
any supplier or service provider that is not Y2K capable. The Company
will continue follow-up activities with select vendors through 1999,
updating the related contingency plans regularly.

ASI is the Company's most significant vendor. Because of its
significance, the Company has conducted regular reviews as to the
status of ASI's Y2K plan and progress. ASI has established a plan which
mirrors the plan formulated by the Company. To date, the Company
believes ASI to be at a similar stage of completion and the Company
believes ASI is on target to meet the same timing deadlines previously
outlined by the Company.

The Company's manufacturing equipment and systems are highly automated
incorporating PC's, embedded processors, and related software to control
activity scheduling, inventory tracking, statistical

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analysis and automated manufacturing. A significant portion of the Company's Y2K
efforts on internal systems is intended to prevent disruption to manufacturing
operations. 

Costs to Address Y2K Issues: The Company continues to evaluate the estimated
costs associated with the efforts to prepare for Y2K issues based on actual
experience. While the efforts will involve additional costs, the Company
believes, based on available information, that it will be able to manage its Y2K
transition without any material adverse effect on its business operations or
financial results.

Risks of Y2K Issues and Contingency Plans: The Company continues to assess the
Y2K issues relating to its Computing Systems, Manufacturing Equipment,
Facilities and Utilities and its Supply Chain. The Company's planning process is
intended to mitigate worst - case business disruptions. The Company is preparing
contingency plans to address worst-case issues which could delay product
delivery. As noted above, the Company expects its initial contingency plans to
be completed by the first quarter of 1999. The Company will continue to update
its contingency plans throughout 1999 as circumstances dictate.

As stated above, based on currently available information, the Company does not
believe that the Y2K matters discussed above will have a material adverse impact
on the Company's financial condition or business operations, however, it is
uncertain to what extent the Company may be affected by such matters. In
addition, there can be no assurance that the failure to ensure Y2K capability by
a supplier, customer, or another third party would not have a material adverse
effect on the Company's financial condition or overall trends in results of
operations.

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FACTORS THAT MAY AFFECT OPERATING RESULTS

In addition to the factors discussed elsewhere in this form 10-Q and in the
Company's Registration Statements on Form S-1 (file Nos. 333-49645 and
333-51521) filed with the Securities and Exchange Commission, the following are
important factors which could cause actual results or events to differ
materially from those contained in any forward looking statements made by or on
behalf of the Company.

FLUCTUATIONS IN OPERATING RESULTS; DECLINES IN AVERAGE SELLING PRICES

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

Beginning in 1997 and continuing through the current quarter of 1998, intense
competition and a general slowdown in the semiconductor industry worldwide
resulted in decreases in the average selling prices of many of the Company's
packages. The Company expects that average selling prices for its services will
continue to decline in the future. A decline in average selling prices of the
Company's services, if not offset by reductions in the cost of producing those
services or by a shift to higher margin products, would decrease the Company's
gross margins and could materially and adversely affect the Company's business,
financial condition and results of operations.

DEPENDENCE ON THE HIGHLY CYCLICAL SEMICONDUCTOR AND PERSONAL COMPUTER INDUSTRIES

The Company's business is substantially affected by market conditions in the
semiconductor industry, which is highly cyclical and, at various times, has been
subject to significant economic downturns characterized by reduced product
demand, rapid erosion of average selling prices and production overcapacity. In
addition, the markets for semiconductors are characterized by rapid
technological change, evolving industry standards, intense competition and
fluctuations in end-user demand. Because the Company's business will be
dependent on the requirements of semiconductor companies for independent
packaging, test and wafer fabrication services for the foreseeable future, any
future downturn in the semiconductor industry could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company's operating results for 1997 and the first nine months of 1998 were
adversely affected by a downturn in the semiconductor market. In addition, a
significant portion of the Company's net revenues from packaging and test
services depends on the packaging and testing of semiconductors used in personal
computer ("PC") products. The PC industry is subject to intense competition, is
highly volatile and is subject to significant shifts in demand. As a result, any
deterioration of business conditions in the PC industry could have a material
adverse effect on the Company.

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31
DEPENDENCE ON RELATIONSHIP WITH ASI; POTENTIAL CONFLICTS OF INTEREST

ASI was founded in 1956 by Mr. H. S. Kim, who currently serves as the honorary
Chairman and a Representative Director of ASI. ASI is a member of the Anam group
of companies (the "Anam Group"), consisting principally of companies in Korea in
the electronics industries. The management of ASI and the other companies in the
Anam Group are influenced to a significant degree by the family of H. S. Kim,
which, together with the Company, collectively owned approximately 40.7% of the
outstanding common stock of ASI as of December 31, 1997. A significant portion
of the shares owned by the Kim family are leveraged and as a result of this, or
for other reasons, the family's ownership could be substantially reduced. James
Kim, the founder of the Company and currently its Chairman and Chief Executive
Officer, is the eldest son of H. S. Kim. Since January 1992, in addition to his
other responsibilities, James Kim has been serving as acting Chairman of the
Anam Group and a director of ASI. Mr. In-Kil Hwang, the President and a
Representative Director of ASI, is the brother-in-law of James Kim. In addition,
four other members of Mr. Kim's family are on the 13-member Board of Directors
of ASI. After the Initial Public Offering, James Kim and members of his family
beneficially owned approximately 65.8% of the outstanding Common Stock of the
Company, and Mr. Kim and other members of his family will continue to exercise
significant control over the Company.

The businesses of the Company and ASI have been interdependent for many years.
In 1997 and the nine months ended September 30, 1998, approximately 68% of the
Company's revenues were derived from sales of services performed for the Company
by ASI. In addition, substantially all of the revenues of ASI in 1997 and the
nine months ended September 30, 1998 were derived from services sold by the
Company. The Company expects the proportion of its revenues derived from sales
of services performed for the Company by ASI and the proportion of ASI's
revenues from services sold by the Company to increase as the Company begins
selling the wafer fabrication output of ASI's new wafer foundry. In the event
the ability of ASI to supply the Company were disrupted for any reason, the
Company's facilities in the Philippines would be able to fill only a small
portion of the resulting shortfall in capacity. In addition, there are currently
no significant third party suppliers of packaging and test services from which
the Company could fill its orders. As a result, the Company's business,
financial condition and operating results will continue to be significantly
dependent on the ability of ASI to effectively provide contracted services on a
cost-efficient and timely basis. The Company expects that the businesses of the
Company and ASI will continue to remain highly interdependent by virtue of their
supply relationship, family ties between their respective shareholders and
management, financial relationships, coordination of product and operations
plans, joint research and development activities and shared intellectual
property rights. The termination or disruption of the Company's relationship
with ASI for any reason, or the insolvency of, or any material adverse change in
ASI's business resulting from underutilization of its capacity, the level of its
debt and its guarantees of affiliate debt, labor disruptions, fluctuations in
foreign exchange rates, changes in governmental policies, economic or political
conditions in Korea or any other change, could have a material adverse effect on
the Company's business, financial condition and results of operations.

The Company has recently entered into new supply agreements with ASI (the
"Supply Agreements"). Under the Supply Agreements, ASI has granted to the
Company 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 its new
wafer foundry. The Company expects to continue to purchase substantially all of
ASI's packaging and test services, and to purchase all of ASI's wafer output,
under the Supply Agreements. Under the Supply Agreements, pricing arrangements
relating to packaging and test services provided by ASI to the Company are
subject to quarterly review and adjustment, and such arrangements relating to
the wafer output provided by ASI to the Company are subject to annual review and
adjustment, in each case on the basis of factors such as changes in the
semiconductor market, forecasted demand, product mix, capacity utilization and
fluctuations in exchange rates, as well as the mutual long-term strategic
interests of the Company and ASI. Although the Company and ASI agreed to reduce
the price paid by the Company for packaging and test services beginning in the
second quarter of 1998, there can be no assurance that any new pricing
arrangements resulting from such review and adjustment will be favorable to the
Company. Pursuant to long-standing arrangements between ASI and the Company's
operating subsidiaries, sales from ASI to the Company will continue to be made
through AUSA, a wholly-owned financing subsidiary of ASI. Under the 

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32
Supply Agreements, the Company will continue to reimburse AUSA for the financing
costs incurred by it in connection with trade financing provided to the Company.
The Supply Agreements also provide that Amkor-Anam, Inc., a subsidiary of the
Company, will continue to provide raw material procurement and related services
to ASI on a fee basis. The Supply Agreements have a five-year term and may be
terminated by any party thereto upon five years' written notice at any time
after the expiration of such initial five-year term. There can be no assurance
that ASI will not terminate either Supply Agreement upon the expiration of such
initial term or, if it does terminate a Supply Agreement, that the Company will
be able to obtain a new agreement with ASI on terms that are favorable to the
Company or at all.

ASI's ability to continue to provide services to the Company will depend on
ASI's financial condition and performance. ASI currently has a significant
amount of debt relative to its equity, which debt the Company expects will
continue to increase in the foreseeable future. The Company is advised that ASI,
as a public company in Korea, has published its most recent consolidated
financial statements as of and for the year ended December 31, 1997. These
consolidated financial statements are prepared on the basis of Korean GAAP,
which differs significantly from U.S. GAAP. U.S. GAAP financial statements are
not available. The independent auditor's report regarding ASI includes an
explanatory paragraph regarding change in accounting principles, the impact of
the Korean economic situation on ASI and its ability to continue as a going
concern.

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33

1996              1997
----              ----
(IN MILLIONS)

INCOME STATEMENT DATA:
Sales .........................................      W1,338,718       W1,786,457
Cost of sales .................................       1,096,117        1,507,271
----------       ----------
Gross profit ..................................         242,601          279,186
Selling and administrative expenses ...........          77,754          103,158
----------       ----------
Operating income ..............................         164,847          176,028
Non-operating income:
Interest and dividend income ...............          38,569           47,592
Foreign exchange gains .....................          10,420          122,507
Other ......................................           9,268           11,196
----------       ----------
58,257          181,295
----------       ----------
Non-operating expenses:
Interest expenses ..........................         138,657          160,658
Amortization of deferred charges ...........           2,861           33,891
Foreign exchange losses ....................          39,792          339,204
Loss from forward contract .................              --           94,644
Other ......................................           9,962           20,639
----------       ----------
191,272          649,036
----------       ----------
Ordinary income (loss) ........................          31,832         (291,713)
Extraordinary gains ...........................             447              774
Extraordinary losses ..........................          11,072            1,812
----------       ----------
Net income (loss) before income taxes .........          21,207         (292,751)
Income taxes ..................................          17,363            7,922
----------       ----------
Net income (loss) after income taxes ..........           3,844         (300,673)
Minority interests in losses (earnings) of
consolidated Subsidiaries, net ...............          (8,569)           1,206
Amortization of consolidation adjustments,
net ..........................................          (5,326)          (3,009)
Equity in earnings (losses) of
unconsolidated equity-method subsidiaries and
investees, net ..............................             666          (46,253)
----------       ----------
Net loss ......................................        W(9,385)       W(348,729)
==========       ==========

SUMMARY BALANCE SHEET DATA:
Cash and bank deposits ........................        W324,139         W215,024
Accounts and notes receivable, net ............         170,724          189,522
Inventory .....................................         214,494          260,302
Other current assets ..........................         145,302          241,965
----------       ----------
Total current assets .......................         854,659          906,813
----------       ----------
Property, plant and equipment, net ............         994,931        2,159,466
Investments ...................................          83,715          121,880
Long-term accounts receivable .................         198,251          203,739
Long-term loans ...............................             747          258,322
Other long-term assets ........................          92,985          285,810
----------       ----------
Total long-term assets .....................       1,370,629        3,029,217
----------       ----------
Total assets ..........................      W2,225,288       W3,936,030
==========       ==========
Short-term borrowings .........................       1,050,405        1,720,916
Current maturities of long-term debt ..........          85,252          120,913
Other current liabilities .....................         190,989          282,653
----------       ----------
Total current liabilities ..................       1,326,646        2,124,482
----------       ----------
Long-term debt, net of current maturities .....         475,045          736,784
Long-term capital lease obligations ...........         106,068          861,813
Other long-term liabilities ...................          67,672          111,017
----------       ----------
Total long-term liabilities ................         648,785        1,709,614
----------       ----------
Total liabilities .....................       1,975,431        3,834,096
----------       ----------
Minority interests ............................          21,600           25,160
Stockholders' equity ..........................         228,257           76,774
----------       ----------
Total liabilities and stockholders'
equity ............................      W2,225,288       W3,936,030
==========       ==========

A significant amount of the current and long-term liabilities of ASI are
denominated in U.S. dollars and other foreign currencies. At December 31, 1997,
the amount of U.S. dollar and other foreign currency denominated short-term
borrowings, current maturities of long-term debt, long-term debt (net of current
maturities) and long-term capital lease obligations were W1,222 billion, W59
billion, W159 billion and W834 billion, respectively. Due in part to the
significant depreciation of the won (for example, from a Market Average Exchange
Rate, as defined below, of W884 to $1.00 on December 31, 1996 to W1,415 to
$1.00 on December 31, 1997 and W1,315 to $1.00 on November 12, 1998) resulting
from the recent economic crisis in Korea, ASI's liabilities in won terms and its
leverage calculated in won have

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34
significantly increased in 1997. The effect of this depreciation on ASI,
however, has been mitigated by the fact that substantial amounts of ASI's
revenues are denominated in U.S. dollars. The increase in ASI's liabilities was
also attributable in part to additional financing obtained in connection with
the construction of its new wafer foundry. See " -- Risks Associated with New
Wafer Fabrication Business."

The recent economic crisis in Korea has also led to sharply higher interest
rates in Korea and reduced opportunities for refinancing or refunding maturing
debts as financial institutions in Korea, which are experiencing financial
difficulties, are increasingly looking to limit their lending, particularly to
highly leveraged companies, and to increase their reserves and provisions for
non-performing assets. These developments will result in higher interest rates
on loans to ASI and have otherwise made it more difficult for ASI to obtain new
financing. In addition, ASI has obtained a significant amount of financing
through arrangements obtained by AUSA. As an overseas subsidiary of ASI, AUSA
was formed with the approval of the Bank of Korea. If the Bank of Korea were to
withdraw such approval, or if AUSA otherwise ceased operations for any reason,
ASI would be required to meet their financing needs through alternative
arrangements. Therefore, there can be no assurance that ASI will be able to
refinance its existing loans or obtain new loans, or continue to make required
interest and principal payments on such loans or otherwise comply with the terms
of its loan agreements. Any inability of ASI to obtain financing or generate
cash flow from operations sufficient to fund its capital expenditure, debt
service and repayment and other working capital and liquidity requirements could
have a material adverse effect on ASI's ability to continue to provide services
and otherwise fulfill its obligations to the Company. See " -- Risks Associated
with Leverage" and " -- Dependence on International Operations and Sales;
Concentration of Operations in the Philippines and Korea."

As of December 31, 1997, ASI and its consolidated subsidiaries were
contingently liable under guarantees in respect of debt of ASI's
non-consolidated subsidiaries and affiliates in the Anam Group in the aggregate
amount of approximately W857 billion. As of such date, ASI had provided
guarantees for all of AUSA's debt of $319 million and $176 million of bank loans
to one of the Company's subsidiaries, and the Company's obligations under a
receivables sales arrangement. Prior to the initial public offering, the Company
has met a significant portion of its financing needs through financing
arrangements obtained by AUSA for the benefit of the Company based on guarantees
provided by ASI. There can be no assurance that AUSA will be able to obtain
additional guarantees, if necessary, from ASI. The Company currently does not
depend on such financing arrangements. In addition, if any relevant subsidiaries
or affiliates of ASI, certain of which may have greater exposure to domestic
Korean economic conditions than ASI, were to fail to make interest or principal
payments or otherwise default under their debt obligations guaranteed by ASI,
ASI could be required under its guarantees to repay such debt, which event could
have a material adverse effect on its financial condition and results of
operations.

In October 1998, ASI announced that it had applied for and was accepted into
the Korean financial restructuring program known as "Workout." The Workout
program is the result of an accord among Korean financial institutions to assist
in the restructuring of Korean business enterprises. This process involves
negotiation between the related banks and ASI, and does not involve the judicial
system. The Workout process also does not impact debts outstanding with trade
creditors, in particular balances due to/or from ATI. ASI's operations are
expected to continue uninterrupted during the process. ASI has requested the
following; (1) All short-term debt be converted to long-term debt; (2) current
interest rates be reduced; (3) all cross guarantees of ASI affiliates be
extinguished. The creditor financial institutions can propose an alternative
plan, which in addition to the items requested by ASI, could include debt to
equity conversions and/or change in management. At the present time the creditor
group is still assessing ASI's financial condition and evaluating the overall
workout plan. The Company is not in position to make a determination as to the
likely outcome of this process as it relates to ASI, however.

Historically, ASI has undertaken capacity expansion programs and other capital
expenditures primarily on the basis of forecasts of the Company and business
plans prepared jointly with the Company. The Supply Agreements generally provide
for continued capital investment by ASI based on the Company's forecasts and
operational plans prepared jointly by the Company and ASI reflecting such
forecasts. However, as a result of the recent deterioration of the Korean
economy, there can be no assurance that ASI

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35
will be able to fund future capacity expansions and other capital investments
required to supply the Company with necessary packaging and test services and
wafer output on a timely and cost-efficient basis.

The Company and ASI have historically cooperated on the development of new
package designs and packaging and testing processes and technologies. The Supply
Agreements generally provide for continued cooperation between the Company and
ASI in research and development, as well as the cross-licensing of intellectual
property rights between the Company and ASI. If the Company's relationship with
ASI were terminated for any reason, the Company's research and development
capabilities and intellectual property position could be materially and
adversely affected.

The Company will continue to be controlled to a significant degree by James
Kim and members of his family for the foreseeable future, and Mr. Kim and other
members of his family will also continue to exercise significant influence over
the management of ASI and its affiliates. In addition, the Company and ASI will
continue to have certain contractual and other business relationships, including
under the Supply Agreements, and may engage in transactions from time to time
that are material to the Company. For example, on July 21, 1998 the Company
entered into a prepayment agreement with ASI relating to assembly and test
services. In accordance with the agreement, the Company made a $50 million
non-interest bearing advance to ASI, representing approximately one month's
charges for assembly and test services. The Company will offset this advance
against billings by ASI for assembly and test services provided in the fourth
quarter of 1998. (As of October 31, 1998, the Company had offset $16.7 million
of the advance against ASI charges for October 1998.) Additionally, in
connection with its wafer foundry agreement with TI, the Company and TI agreed
to revise certain payment and other terms contained in the Master Purchase
Agreement. As part of this agreement, TI agreed to advance ATI $20 million in
June 1998 as a prepayment of wafer foundry services to be provided in the fourth
quarter of 1998. (TI was repaid in full in October, 1998.) The Company in turn
advanced these funds to ASI as a prepayment for foundry service charges. The
Company will offset $19 million of the advance to ASI against billings by ASI in
October of 1998. Although any material agreements and transactions between the
Company and ASI would require approval of the Company's Board of Directors, such
transactions generally will not require any additional approval by a separate
committee comprised of the disinterested members of the Board of Directors or by
the Stockholders of the Company and conflicts of interest may arise in certain
circumstances. There can be no assurance that such conflicts will not from time
to time be resolved against the interests of the Company. The Company currently
has six directors, five of who are disinterested. Under Delaware corporate law,
each director owes a duty of loyalty and care to the Company, which if 
breached can result in personal liability for the directors.
In addition, the Company may agree to certain changes in its contractual and
other business relationships with ASI, including pricing, manufacturing
allocation, capacity utilization and capacity expansion, among others, which in
the judgment of the Company's management will result in reduced short-term
profitability for the Company in favor of potential long-term benefits to the
Company and ASI. There can be no assurance that the Company's business,
financial condition or results of operations will not be adversely affected by
any such decision.

DEPENDENCE ON INTERNATIONAL OPERATIONS AND SALES; CONCENTRATION OF OPERATIONS IN
THE PHILIPPINES AND KOREA

All of the production facilities currently used to fill the Company's orders
are located in the Philippines and Korea and many of the Company's customers'
operations are located in countries outside of the United States. A substantial
portion of the Company's revenues are derived from sales to customers located
outside of the United States. In 1997 and the nine months ended September 30,
1998, sales to such customers accounted for 28% and 27%, respectively, of the
Company's revenues. The Company expects sales outside of the United States to
continue to represent a significant portion of its future revenues. As a result,
the Company's business will continue to be subject to certain risks generally
associated with doing business abroad, such as foreign governmental regulations,
currency fluctuations, political unrest, disruptions or delays in shipments,
currency controls and fluctuations, changes in local economic conditions and
import and export controls, as well as changes in tax laws, tariffs and freight
rates. The Company has structured its global operations to take advantage of
lower tax rates in certain countries and tax incentives extended to

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36
encourage investment. The Company's tax returns through 1993 in the Philippines
and through 1994 in the U.S. have been examined by the Philippine and U.S. tax
authorities, respectively. The recorded provisions for subsequent open years are
subject to changes upon examination by tax authorities of tax returns for these
years. Changes in the mix of income from the Company's foreign subsidiaries,
expiration of tax holidays and changes in tax laws and regulations could result
in increased effective tax rates for the Company.

Philippines

The Company's results of operations and growth will be influenced by the
political situation in the Philippines and by the general state of the
Philippine economy. Although the political and economic situation in the
Philippines has stabilized in recent years, it 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 has led to instability in the
Philippine economy. Any future economic or political disruptions or instability
or low economic growth in the Philippines could have a material adverse effect
on the Company's business, financial condition and results of operations.
Because the functional currency of the Company's Philippine operations is the
U.S. dollar, the Company has recently benefited from cost reductions relating to
peso denominated expenditures, primarily payroll costs. The Company believes
that such devaluation of the Philippine peso will eventually lead to inflation
in the Philippines, which could offset any savings achieved to date.

Korea

In 1997 and the nine months ended September 30, 1998, approximately 68% of the
Company's revenues were derived from sales of services performed for the Company
by ASI. The operations of ASI are subject to certain risks. 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. No assurance can be given that the level of
tensions with North Korea will not increase or change abruptly as a result of
current or future events, which could have a material adverse effect on ASI's,
and as a result the Company's, business, financial condition and results of
operations.

Since the beginning of 1997, Korea has experienced a significant increase in
the number and size of companies filing for corporate reorganization and
protection from their creditors. Such failures were caused by, among other
factors, excessive investments, high levels of indebtedness, weak export prices
and the Korean government's greater willingness to allow troubled corporations
to fail. As a result of such corporate failures, Korea's financial institutions
have experienced a sharp increase in non-performing loans and certain Korean
banks have ceased operations. In addition, declines in domestic stock prices
have reduced the value of Korean banks' assets. These developments have led
international credit rating agencies to downgrade the credit ratings of Korea,
as well as various companies (including ASI) and financial institutions in
Korea.

During the same period, the value of the won relative to the U.S. dollar has
depreciated significantly. The base rate under the market average exchange rate
system, as announced by the Korea Financial Telecommunications and Clearings
Institute in Seoul, Korea (the "Market Average Exchange Rate") as of November
12, 1998 was W1,315 to $1.00, as compared to the December 31, 1996 Market
Average Exchange Rate of W884 to $1.00. Such depreciation of the won relative
to the U.S. dollar has increased the cost of imported goods and services, and
the value in won of Korea's public and private sector debt denominated in U.S.
dollars and other foreign currencies has also increased significantly. Korea's
foreign currency reserves also have declined significantly. Such developments
have also led to sharply higher domestic interest rates and reduced
opportunities for refinancing or refunding maturing debts as financial
institutions in Korea, which are experiencing financial difficulties, are
increasingly looking to limit their lending, in particular to highly leveraged
companies, and to increase their reserves and provisions for non-performing
assets.

In order to address the liquidity crisis and the deteriorating economic
situation in Korea, the Korean government concluded an agreement with the
International Monetary Fund on December 3, 1997 pursuant

34

37
to which Korea is eligible to receive loans and other financial support reported
to amount to an aggregate of approximately $58 billion (the "IMF Financial Aid
Package"). Because there are conditions on the availability of loans and other
financial support under the IMF Financial Aid Package, there can be no assurance
that such conditions will be satisfied or that such loans and other financial
support will be available. In connection with the IMF Financial Aid Package, the
Korean government announced a comprehensive policy package (the "Reform Policy")
intended to address the structural weaknesses in the Korean economy and the
financial sector. While the Reform Policy is intended to alleviate the current
economic crisis in Korea and improve the Korean economy over time, the immediate
effects could include, among others, slower economic growth, a reduction in the
availability of credit to Korean companies, an increase in interest rates, an
increase in taxes, an increased rate of inflation due to the depreciation of the
won, an increase in the number of bankruptcies of Korean companies, labor unrest
and labor strikes resulting from a possible increase in unemployment, and
political unrest. These events could have a material adverse effect on the
Korean economy. Moreover, there can be no assurance that either the IMF
Financial Aid Package or the Reform Policy will be successful. In addition,
there can be no assurance that political pressure will not force the Korean
government to retreat from some or all of its announced Reform Policy or that
the Reform Policy will be implemented as currently contemplated.

The Korean government has stated that as of December 31, 1997 the total amount
of Korea's private and governmental external liabilities was $154.4 billion
under IMF standards. As of December 31, 1997, the total amount of foreign
currency reserves held by Korea was $20.4 billion, of which the usable portion
(the total less amounts on deposit with overseas branches of Korean financial
institutions and swap positions between the Korean central bank and other
central banks) was $8.9 billion. Pursuant to an exchange offer concluded in
April 1998, the Korean financial institutions exchanged approximately $21.8
billion of their short-term foreign currency debt for longer term floating rate
loans guaranteed by the Korean government. In addition, the Korean government
raised approximately $4 billion through an international offering of its debt
securities in April 1998. Korean financial institutions and the Korean corporate
and public sectors continue to carry substantial amounts of debt denominated in
currencies other than the won, including short-term debt, and there can be no
assurance that there will be sufficient foreign currency reserves to repay this
debt or that this debt can be extended or refinanced.

Such recent and potential future developments relating to Korea, including the
continued deterioration of the Korean economy, could have a material adverse
effect on ASI's and the Company's business, financial condition and results of
operations. See " -- Dependence on Relationship with ASI; Potential Conflicts of
Interest."

CUSTOMER CONCENTRATION; ABSENCE OF BACKLOG

Due to the concentration of market share in the semiconductor industry, the
Company has been largely dependent on a small group of customers for a
substantial portion of its business. In 1997 and the nine months ended September
30, 1998, 40.1% and 35.4%, respectively, of the Company's net revenues were
derived from sales to the Company's top five customers, with 23.4% and 20.3% of
the Company's net revenues, respectively, derived from sales to Intel
Corporation ("Intel"). The ability of the Company to maintain close,
satisfactory relationships with such customers is important to the ongoing
success and profitability of its business. The Company expects that it will
continue to be dependent upon a relatively limited number of customers for a
significant portion of its net revenues in future periods. None of the Company's
customers are presently obligated to purchase any amount of packaging or test
services or to provide the Company with binding forecasts of product purchases
for any period. In addition, the Company's new wafer fabrication business will
be significantly dependent upon Texas Instruments, Inc. ("TI"). The reduction,
delay, or cancellation of orders from one of the Company's significant
customers, including Intel for packaging and test services or TI for wafer
fabrication services, could materially and adversely affect the Company's
business, financial condition and results of operations. During the first half
of 1998, TI's orders were below the minimum purchase commitment due to market
conditions and issues encountered by TI in the transition of its products to .18
micron technology. To date, TI's orders during the second half of 1998 have
increased significantly and the Company expects further increases through the
end of 1998. There can be no assurance that TI will meet its purchase
obligations subsequent to Q4 1998. In addition, there can be no assurance that
customers will not reduce, cancel or delay orders. See " -- 

35

38
Dependence on the Highly Cyclical Semiconductor and Personal Computer
Industries" and " -- Risks Associated with New Wafer Fabrication Business."

All of the Company's customers operate in the cyclical semiconductor business
and may vary order levels significantly from period to period. In addition,
there can be no assurance that such customers or any other customers will
continue to place orders with the Company in the future at the same levels as in
prior periods. From time to time, semiconductor companies have experienced
reduced prices for some products, as well as delays or cancellations in orders.
There can be no assurance that, should these circumstances occur in the future,
they will not adversely affect the Company's business, financial condition and
results of operations. The loss of one or more of the Company's customers, or
reduced orders by any of its key customers, could adversely affect the Company's
business, financial condition and results of operations. The Company's packaging
and test business does not typically operate with any material backlog, and the
Company expects that in the future the Company's packaging and test revenues in
any quarter will continue to be substantially dependent upon orders received in
that quarter. The Company's expense levels are based in part on its expectations
of future revenues and the Company may be unable to adjust costs in a timely
manner to compensate for any revenue shortfall.

EXPANSION OF MANUFACTURING CAPACITY; PROFITABILITY AFFECTED BY CAPACITY
UTILIZATION RATES

The Company believes that its competitive position depends substantially on
its ability to expand its manufacturing capacity. Accordingly, although the
Company currently has available manufacturing capacity, the Company expects to
continue to make significant investments to expand such capacity, particularly
through the acquisition of capital equipment and the training of new personnel.
There can be no assurance that the Company will be able to utilize such capacity
or to continue to expand its manufacturing capacity in a timely manner, that the
cost of such expansion will not exceed management's current estimates or that
such capacity will not exceed the demand for the Company's services. In
addition, expansion of the Company's manufacturing capacity will continue to
significantly increase its fixed costs, and the Company expects to continue to
incur substantial additional depreciation and other expenses in connection with
the acquisition of new equipment and the construction of new facilities.
Increases or decreases in capacity utilization rates can have a significant
effect on gross margins since the unit cost of packaging and test services
generally decreases as fixed charges are allocated over a larger number of units
produced. Therefore, the Company's ability to maintain or enhance its gross
margins will continue to be dependent, in part, on its ability to maintain high
capacity utilization rates.

Capacity utilization rates may be affected by a number of factors and
circumstances, including overall industry conditions, operating efficiencies,
the level of customer orders, mechanical failure, disruption of operations due
to expansion of operations or relocation of equipment, fire or natural
disasters, employee strikes or work stoppages or other circumstances. Although
the Company has been able to maintain a high rate of capacity utilization in
recent years as a result of its close association with its customers, its
knowledge of the semiconductor market conditions, and its continued improvements
in operating efficiencies and equipment maintenance, there can be no assurance
that this high utilization rate will be sustained in the future. The Company's
inability to generate the additional orders necessary to fully utilize its
capacity would have a material adverse effect on the Company's business,
financial condition and results of operations. For example, in 1996 the
Company's capacity utilization rates were negatively affected by an unexpected
downturn in the semiconductor industry. There can be no assurance that the
Company's utilization rates will not be adversely affected by future declines in
the semiconductor industry or for any other reason.

RAPID TECHNOLOGICAL CHANGE;  PRODUCT DEVELOPMENT

The semiconductor packaging and test industry is characterized by rapid
increases in the diversity and complexity of semiconductor packaging products.
As a result, the Company expects that it will need to offer, on an ongoing
basis, more advanced package designs in order to respond to competitive industry
conditions and customer requirements. The requirement to develop and maintain
advanced packaging capabilities and equipment could require significant research
and development and capital expenditures in

36

39
future years. In addition, advances in technology also typically lead to rapid
and significant price erosion and decreased margins for older package types and
may lead to products currently being offered by the Company becoming less
competitive or inventories held by the Company becoming obsolete. The failure by
the Company to achieve advances in package design or to obtain access to
advanced package designs developed by others could have a material adverse
effect on the Company's business, results of operations and financial condition.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

The Company's success is also dependent upon the ability of it and ASI to
develop and implement new manufacturing process and package design technologies.
Semiconductor package design and process methodologies have become increasingly
subject to technological change, requiring large expenditures for research and
development. Converting to new package designs or process methodologies could
result in delays in producing new package types, which could adversely affect
the Company's ability to meet customer orders.

MANUFACTURING RISKS;  PRODUCTION YIELDS

The semiconductor packaging process is complex and involves a number of
precise steps. Defective packaging can result from a number of factors,
including the level of contaminants in the manufacturing environment, human
error, equipment malfunction, use of defective raw materials, defective plating
services and inadequate sample testing. From time to time, the Company expects
to experience lower than anticipated production yields as a result of such
factors, particularly in connection with any expansion of its capacity or change
in its processing steps. In addition, the Company's yield on new products will
be lower during the period necessary for the Company to develop the requisite
expertise and experience in producing such products and using such processes.
The failure of the Company or ASI to maintain high quality production standards
or acceptable production yields, if significant and sustained, could result in
loss of customers, delays in shipments, increased costs, cancellation of orders
and product returns for rework, any of which could have a material adverse
effect on the Company's business, financial condition and results of operation.

RISKS ASSOCIATED WITH NEW WAFER FABRICATION BUSINESS

The Company recently began providing wafer fabrication services, with delivery
of the first products from ASI's new foundry in January 1998. Neither the
Company nor ASI has significant experience in providing wafer fabrication
services, and there can be no assurance that the Company will not experience
difficulties in marketing and selling these services or that ASI will not
encounter operational difficulties such as lower than expected yields or longer
than anticipated production ramp-up, unexpected costs and other problems in
providing these services. If the Company or ASI encounters these or similar
difficulties, the Company's and ASI's businesses, financial condition and
results of operations could be materially adversely affected. In addition, TI
has transferred certain of its Complementary Metal Oxide Silicon ("CMOS")
processes to ASI and ASI is dependent upon TI's assistance for developing other
state-of-the-art wafer manufacturing processes. If ASI's relationship with TI is
disrupted for any reason, ASI's ability to produce wafers would be adversely
affected, thus negatively impacting the Company's ability to fulfill its
customers' orders for fabrication services, which could materially and adversely
affect the Company's business, financial condition and results of operations. In
addition, ASI's technology agreements with TI (the "TI Technology Agreements")
only cover .25 micron and .18 micron CMOS technology and TI is not under any
obligation to transfer any next-generation technology. If ASI is not able to
obtain such technology on commercially reasonable terms or at all, the Company's
ability to market ASI's wafer fabrication services could be materially and
adversely affected which could have a material adverse effect on the Company's
and ASI's business, results of operations and financial condition.

The Company's right to the supply of wafers from ASI's foundry is subject to
an agreement (the "TI Manufacturing and Purchasing Agreement") among ASI, the
Company and TI, pursuant to which TI has agreed to purchase from the Company at
least 40% of the capacity of this foundry and under certain circumstances has
the right to purchase up to 70% of this capacity. As a result, the Company's
wafer

37

40
fabrication business will be significantly dependent upon TI, which may
adversely affect the Company's ability to obtain additional customers. If the
Company is unable to sell substantially all of the output of ASI's wafer
foundry, its business, results of operations and financial condition could be
materially and adversely affected. During the first half of 1998, TI's orders
were below the minimum purchase commitment due to market conditions and issues
encountered by TI in the transition of its products to .18 micron technology. To
date, TI's orders during the second half of 1998 have increased significantly
and the Company expects further increases through the end of 1998. There can be
no assurance that TI will meet its purchase obligations subsequent to Q4 1998.
Accordingly, there can be no assurance that TI will place orders representing at
least 40% of the capacity of this foundry during this period or in the future. A
failure by TI to comply with its minimum purchase obligations or the
cancellation of a significant wafer fabrication order by TI or any other
customer could have a material adverse effect on ASI's and the Company's
business, financial condition and results of operations. The TI Manufacturing
and Purchasing Agreement terminates on December 31, 2007, unless terminated
sooner. The TI Manufacturing and Purchasing Agreement may be terminated upon two
years' prior notice by either ASI or TI if ASI and TI are unable to successfully
negotiate prior to June 30, 2000 an amendment to the TI Technology Agreements or
a new agreement with respect to ASI's use of TI's next-generation CMOS
technology. During such two-year period, TI would be obligated to purchase a
minimum of only 20% of the capacity of ASI's wafer fabrication facility. In
addition, the TI Manufacturing and Purchasing Agreement may be terminated sooner
upon, among other events, mutual written consent, material breach of the
agreement by either party, the inability of either party to obtain any necessary
government approvals, the failure of ASI to protect TI's intellectual property
and a change of control, bankruptcy, liquidation or dissolution of ASI.

DEPENDENCE ON RAW MATERIALS SUPPLIERS AND SUBCONTRACTORS

The Company obtains the direct materials for the packaging and test services
of its factories and for the packaging and test services provided by ASI to fill
the Company's orders directly from vendors. To maintain competitive
manufacturing operations, the Company must obtain from its vendors, in a timely
manner, sufficient quantities of acceptable materials at expected prices. The
Company sources most of its raw materials, including critical materials such as
lead frames and laminate substrates, from a limited group of suppliers. The
Company purchases all of its materials on a purchase order basis and has no
long-term contracts with any of its suppliers. From time to time, vendors have
extended lead times or limited the supply of required materials to the Company
because of vendor capacity constraints and, consequently, the Company has
experienced difficulty in obtaining acceptable raw materials on a timely basis.
In addition, from time to time, the Company may reject materials that do not
meet its specifications, resulting in declines in output or yield. There can be
no assurance that the Company will be able to obtain sufficient quantities of
raw materials and other supplies of an acceptable quality. The Company's
business, financial condition and results of operations could be materially and
adversely affected if its ability to obtain sufficient quantities of raw
materials and other supplies in a timely manner were substantially diminished or
if there were significant increases in the costs of raw materials that the
Company could not pass on to its customers.

COMPETITION

The independent semiconductor packaging and test industry is very competitive,
being comprised of approximately 50 companies with about 15 of those companies
have sales of $100 million per year or more. The Company faces substantial
competition from established packaging companies primarily located in Asia, such
as Advanced Semiconductor Engineering, Inc. (Taiwan), ASE Test Limited (Taiwan
and Malaysia), ASAT, Ltd. (Hong Kong), Hana Microelectronics Public Co. Ltd.
(Hong Kong and Thailand), Astra International (Indonesia), Carsem Bhd.
(Malaysia), ChipPAC Incorporated (Korea), Siliconware Precision Industries Co.,
Ltd. (Taiwan), and Shinko Electric Industries Co., Ltd. (Japan). Each of these
companies has significant manufacturing capacity, financial resources, research
and development operations, marketing and other capabilities, and have been
operating for some time. Such companies have also established relationships with
many large semiconductor companies which are current or potential customers of
the Company. The principal elements of competition in the independent
semiconductor packaging market include time to market, breadth of package
offering, technical competence, design services, quality, production yields,
responsiveness and customer service and price. On a larger scale, the

38

41
Company also competes with the internal manufacturing capabilities of many of
its largest customers. There can be no assurance that the Company will be able
to compete successfully in the future against existing or potential competitors
or that the Company's operating results will not be adversely affected by
increased price competition.

The independent wafer fabrication business is also highly competitive. The
Company's wafer fabrication services compete primarily with independent wafer
foundries such as Chartered Semiconductor Manufacturing, Ltd., Taiwan
Semiconductor Manufacturing Company Ltd. and United Microelectronics
Corporation, as well as with integrated device manufacturers such as LG Semicon
Co., Ltd., Hitachi, Ltd., Toshiba Corp. and Winbond Electronics Corporation,
which provide foundry services for other semiconductor companies. Each of these
companies has significant manufacturing capacity, financial resources, research
and development operations, marketing and other capabilities and have been
operating for some time. Many of these companies have also established
relationships with many large semiconductor companies, which are current or
potential customers of the Company. The principal elements of competition in the
wafer foundry market include technology, delivery cycle times, price, product
performance, quality, production yield, responsiveness and flexibility,
reliability and the ability to design and incorporate product improvements.
There can be no assurance that the Company will be able to compete successfully
in the future against such companies.

INTELLECTUAL PROPERTY

The Company currently holds 24 United States patents, five of which are
jointly held with ASI, related to various IC packaging technologies, in addition
to other pending patents. These patents will expire at various dates from 2012
through 2016. With respect to development work undertaken jointly with ASI, the
Company and ASI share intellectual property rights under the terms of the Supply
Agreements between the Company and ASI. Such Supply Agreements also provide for
the cross-licensing of intellectual property rights between the Company and ASI.
In addition, the Company enters into agreements with other developers of
packaging technology to license or otherwise obtain certain process or package
technologies.

The Company expects to continue to file patent applications when appropriate
to protect its proprietary technologies; however, the Company believes that its
continued success depends primarily on factors such as the technological skills
and innovation of its personnel rather than on its patents. The process of
seeking patent protection can be expensive and time consuming. There can be no
assurance that patents will be issued from pending or future applications or
that, if patents are issued, they will not be challenged, invalidated or
circumvented, or that rights granted thereunder will provide meaningful
protection or other commercial advantage to the Company. Moreover, there can be
no assurance that any patent rights will be upheld in the future or that the
Company will be able to preserve any of its other intellectual property rights.

Although the Company is not currently a party to any material litigation, the
semiconductor industry is characterized by frequent claims regarding patent and
other intellectual property rights. As is typical in the semiconductor industry,
the Company may receive communications from third parties asserting patents on
certain of the Company's technologies. In the event any third party were to make
a valid claim against the Company or ASI, the Company or ASI could be required
to discontinue the use of certain processes or cease the manufacture, use,
import and sale of infringing products, to pay substantial damages and to
develop non-infringing technologies or to acquire licenses to the alleged
infringed technology. The Company's business, financial condition and results of
operations could be materially and adversely affected by such developments.
Litigation, which could result in substantial cost to and diversion of resources
of the Company, may also be necessary to enforce patents or other intellectual
property rights of the Company or to defend the Company against claimed
infringement of the rights of others. The failure to obtain necessary licenses
or the occurrence of litigation relating to patent infringement or other
intellectual property matters could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
ASI has obtained intellectual property for wafer manufacturing primarily from
TI. The licenses granted to ASI by TI under the TI Technology Agreements are
very limited. Although TI has granted to ASI a license under TI's trade secret
rights to use TI's technology in connection with ASI's provision of wafer
fabrication services, TI has not granted ASI a license under its patents,

39

42
copyrights and mask works to manufacture semiconductors for third parties.
Although TI has agreed that TI will not assert a claim for patent, copyright or
mask work right infringement against ASI or the Company in connection with ASI's
manufacture of semiconductor products for third parties, TI has reserved the
right to bring such infringement claims against ASI's or the Company's customers
with respect to semiconductor products purchased from ASI or the Company. As a
result, ASI's and the Company's customers could be subject to patent litigation
by TI and others, and ASI and the Company could in turn be subject to litigation
by such customers and others, in connection with the sale of wafers produced by
ASI. Any such litigation could materially and adversely affect ASI's ability to
continue to manufacture wafers and ASI's and the Company's business, financial
condition and results of operations.

NO PRIOR MARKET; LIQUIDITY; STOCK PRICE VOLATILITY

Prior to the initial public offering, there had been no public market
for the Common Stock. There can be no assurance that an active public market for
the Common Stock will be sustained or that the market price of the Common Stock
will not decline. The trading price of the Common Stock has varied significantly
and could be subject to wide fluctuations in the future in response to quarter-
to-quarter variations in operating results, announcements of technological
innovations or new products by the Company or its competitors, general
conditions in the semiconductor industry, changes in earnings estimates or
recommendations by analysts, developments affecting ASI or other events or
factors. In addition, the public stock markets have experienced extreme price
and trading volume volatility in recent months. This volatility has
significantly affected the market prices of securities of many high technology
companies for reasons frequently unrelated to the operating performance of the
specific companies. These broad market fluctuations may adversely affect the
market price of the Common Stock.

BENEFITS OF THE INITIAL PUBLIC OFFERING TO EXISTING STOCKHOLDERS; CONTINUED
CONTROL BY EXISTING STOCKHOLDERS

Immediately after the closing of the initial public offering, based
upon shares outstanding as of the date hereof, James Kim and members of his
family beneficially owned in the aggregate 77,610,000 shares of Common Stock,
which shares represented all of the outstanding Common Stock not offered in the
initial public offering and approximately 65.8% of the total number of shares of
Common Stock outstanding following the initial public offering. The initial
public offering created a public market for the resale of shares held by these
existing stockholders. Such stockholders, acting together, will be able to
effectively control substantially all matters submitted for approval by the
stockholders of the Company. Such matters could include the election of a
majority of the members of the Board of Directors, proxy contests, approvals of
transactions between the Company and ASI or other entities in which Mr. James
Kim and members of his family have an interest, mergers involving the Company,
tender offers, open market purchase programs or other purchases of common stock
that could give stockholders of the Company the opportunity to realize a premium
over the then prevailing market price for their shares of Common Stock. Such
continued control could also have the effect of delaying, deferring or
preventing a change in control of the Company, may discourage bids for the
Common Stock at a premium over the market price and may adversely affect the
market price of the Common Stock.

40

43
PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

9a)  The following exhibits are filed as part of this report:

Exhibit
Number                         Description of Exhibit

27.1                       Financial Data Schedule.

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

(b)  The registrant filed the following report on form 8-K during the quarter
ended September 30, 1998:

Press release issued on July 22, 1998 announcing the financial results for
the second quarter ended June 30, 1998 which included the unaudited
consolidated balance sheet as of June 30, 1998 and the unaudited
consolidated statements of income for the three months and six months ended
June 30, 1998.

SIGNATURES

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

Amkor Technology, Inc.
(Registrant)

Signature                                                   Title                                Date
---------                                                   -----                                ----

/s/ Frank J. Marcucci                    Chief Financial Officer and Secretary (Principal         March 30, 1999
- -----------------------------             Financial, Chief Accounting Officer and Duly 
Frank J. Marcucci                      Authorized Officer)

41

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