MagnaChip Meets Guidance with Power and OLED Businesses Setting Record Revenues

February 16, 2019 by Scott McMahan

MagnaChip Semiconductor Corporation announced financial results for the fourth quarter and full year 2018. Revenue in the fourth quarter was $179.4 million and gross profit margin was 24.5%. For the year 2018, revenue was $750.9 million and gross margin was 26.4%.

Revenue for the quarter was up 2.8% Year-over-Year (YoY) to $179.4 million, which was within the guidance range of $174-$184 million. The company posted Record Power standard products revenue of $46.1 million; up 14.6% YoY. The total gross profit margin of 24.5% was below the guidance range of 25% to 27%, and the gross margin was down 3.8 percentage points YoY primarily due to lower foundry-related fab utilization and increased costs for wafers

Commenting on the company's financial results in Q4, YJ Kim, CEO of MagnaChip, said, "We are pleased to have met our revenue guidance in the seasonally soft fourth quarter despite a challenging macroeconomic backdrop, a slowdown in China, and an inventory correction by customers."

Mr. Kim said, "Our OLED and Power businesses both had record annual revenue in 2018 and are positioned for success in 2019 due to a strong product lineup, robust product roadmap and well-established customer traction. Higher-margin Premium Power products represented over 45% of total Power revenue in Q4, due mainly to growth in the industrial, television, and lighting markets.

Mr. Kim added, "Our foundry business under-performed in Q4 2018 on an "as adjusted" basis, due in part to an inventory correction by customers that caused a drop in utilization in Fab 4. We expect utilization in Fab 4 will decline significantly further in the first half of 2019, due in part to a continuing inventory correction and our decision to be more selective about business as we undergo our strategic evaluation process."

MagnaChip also reported today that it has begun a strategic evaluation of the company's foundry business and Fab 4, the larger of the Company's two 8" manufacturing facilities. Fab 4 is an analog and mixed-signal fab that produces about 73% of the company's total capacity, and this capacity is used primarily to meet wafer demand from foundry customers that rely on outside suppliers.

The strategic evaluation is expected to include a range of possible options, including, but not limited to, joint ventures, strategic partnerships as well as merger and acquisition possibilities. The company has retained financial and legal advisors to assist in the evaluation.

Nader Tavakoli, Chairman of the Board of MagnaChip, said, "The Board is committed to improving MagnaChip's profitability and unlocking shareholder value. As we undertake this strategic evaluation of the Foundry business, we will be mindful of the best interests of all of our stakeholders including shareholders, customers, and employees."