MagnaChip OLED Segment Sees Record Levels in Q1; Power Segment Up 46% YoY

May 02, 2019 by Scott McMahan

Magnachip posted revenue of $157.4 million, which exceeded the guidance range of $150million-$155 million, but was down 5.1% compared to the first quarter of 2018.

The company's Standard Products Group (SPG) posted revenue of $100.3 million, up 13.5% YoY. The Display Standard Products business segment had revenue of $58.2 million, up 17.2%. The OLED segment posted revenues up 41.4% YoY.

Power Standard Products business segment revenue was $42.0 million, up 8.7% YoY. Foundry Services Group (FSG) revenue was $57.1 million, down 26.3% YoY due to a previously disclosed customer inventory correction and a previously announced decision to be more selective about new business as a result of a strategic evaluation of the Foundry business and Fab 4.

Forecast for Q2 of 2019

The company projects revenue to be in the range of $173 million to $181 million, up 12.5% at the mid-point of the projected range when compared with revenue of $157.4 million in the first quarter of 2019

Revenue guidance for the second quarter reflects an expectation that standard product revenue will show double-digit sequential improvement, and Foundry revenue will be flattish as compared to Q1 2019.

Gross profit margin to be in the range of 16% to 18%, as compared to 14.4% in the first quarter of 2019 and 27% in the second quarter of 2018. Gross margin guidance reflects the expectation that fab utilization in the

Foundry Busines Stabilized

Magnachip Chairman of the Board Nader Tavakoli commented about the strategic evaluation of the Foundry business and Fab 4. "The Board and Company-led strategic evaluation of the Foundry business and Fab 4 that was announced in February is ongoing and supported by our financial advisor, JP Morgan, and legal advisor, Paul, Weiss. The Company intends to provide updates about the strategic evaluation process in a timely manner when meaningful milestones are achieved. As stated previously, the Board is committed to improving MagnaChip's profitability and unlocking shareholder value. As we proceed with the strategic evaluation of the Foundry business and Fab 4, we will be mindful of the best interests of all of our stakeholders, including shareholders, customers and employees," Tavakoli said.

"Revenue for both OLED and Power standard products achieved the highest levels ever recorded in the first quarter of a year, despite typically weak seasonal trends and a soft China smartphone market," Magnachip CEO Young-Joon Kim said.

"In the display segment, OLED revenue increased over 41% year over year, and we were awarded six OLED design wins from leading smartphone makers in China. We also commenced volume production of OLED DDICs for mid-range smartphones from a major Korean brand, " Young-Joon Kim said.

"In the Power segment, revenue from Premium products increased nearly 46% from the first quarter a year ago, and accounted for nearly 55% of Power revenue, as compared with 40% in the first quarter of 2018. We also continued to make inroads in the automotive sector, as we commenced shipments of two different high-voltage power standard products to a customer in that market," Young-Joon Kim added.

"Our Foundry revenue and fab utilization both experienced a severe decline in Q1, as was widely anticipated. While the Foundry business will remain weak in Q2, the business has recently showed signs of stabilizing," Young-Joon Kim concluded.