Q2 2020 MagnaChip Semiconductor Corp Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to be.
The Q2, Twentytwenty Magnachip Semiconductors Corporation earnings Conference call at this time, all participants are in listen only mode. After the speakers presentation, there will be a question and answer session.
The question during his section.
Star one on your telephone. Please if I said he sees the conference is being recorded.
Thank you acquire any further testing that's sarkozy, while I would now like turn the conference over two years speaker today.
Mhm, Joan Hi, Jim IR. Please go ahead.
Thank you.
Hello, everyone and thank you for joining us tickets got snapping a chips financial results for the second quarter ended June 30, 2020, the second quarter earnings release that was filed today. After the stock market closed can be found on the company's Investor Relations website, a telephone replay of today's call will be available shortly afterwards.
Completion of the call and the webcast will be archived on our website for one year.
Access information is provided in the earnings press release.
Joining me today are why Jae Kim <unk> chips, Chief Executive Officer, and Youngwoo, Our Chief Financial Officer.
Like GE will discuss the company's recent operating performance and business overview and young will that be a financial results for the quarter and provide guidance for the third quarter.
It will be up to any session. Following the prepared remarks during the course up these conference calls we may make forward looking statement.
Its business outlook and expectations.
Our forward looking statements and all other statements that are historical that's with liked our beliefs and predictions picks up today, and therefore are subject to risks and uncertainties as described in the safe Harbor discussion bounty in on our FCC filings.
During the call. We also will discuss non-GAAP financial measures that non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate on those kinda tip match or I've met and I chips operating performance that may be useful.
A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures can be found in our second quarter earnings release available on our website under the Investor relations at Www at midnight chip that comp.
Now I'll turn the call over to Vijay can't.
Lighting.
[laughter]. Thank you Hello, everyone. Thank you for joining our call today first trouble I like to work combos. So young Joan Oh had the overall youre and Dr. Youngwoo Oh shameful to do first on his call it Magna true.
Most would play important roles as making it you opened three new trapped or has your pure play standard products company.
I also want to have knowledge train Geez, you know board of directors semiconductor veteran Mr. Camilo Martino was named Truman in June.
And Ms. lease Trone, Microsoft Korea joined our newly expanded boarding July.
During the second quarter, our team executed well and delivered excellent results in keeping with our commitment to safety, Oh, Oh employees and country, New D.O. services to our customers, we demonstrated our ability to be rigid and to the impact of the covidien.
19, we continue to take photos steps to mitigate potential risk related to the health and safety, although employees and to the supply chain management.
[noise] key non-GAAP financial metrics exceeded our expectations.
When you for the combined business came in above the high end of the guidance range due to strong demand you know power and foundry businesses gross margin surpassed expectations, driven by improved improved product mix and higher fab you to ligation.
Non-GAAP diluted earnings per share from continuing operations was 13 cents compared to three cents in Q1, although sequentially flattish revenue all bottom line improved due to higher gross margin.
For the fifth consecutive quarter, we generated operating cash flow in Q2, the cash flow from operations was $46 million at the end of second quarter, all cash balance increased 292.8 million, marking the highest level.
Since the IPO scenes March 2011.
In addition to delivering outstanding financial results Oh team has made substantial progress with the pending sale of the foundry business and fair for.
I am comfortable without progress to date, and we're working diligently to complete the remaining cash to close. This transaction. These tasks are mostly relate to separating the should R&D infrastructure and building we are separating the ERP systems reached.
Leasing a new IP infrastructure, and a new quality and reliability assurance lab for the contributing business relocating our oily de test and development center and transferring Paolo process. The R&D capability from fab four to five three I am proud of and thankful.
A full what our team has accomplished during the quarter based on the progress. We've made so far we are now slightly ahead of all in tone on schedule and anticipate that the transaction will likely close in the third quarter instead of our previous estimate of the September October.
Right.
Now, let's take a close look at the country didn't business starting with the display.
During the second quarter, we completely exited all known auto as he di di di di Archie business that was part of our strategic Air Force improved profitability and sharpened focus.
Reference point, we have reported approximately 6 million I've known outdoor T.D. revenue that was recently I was Q1, if we use on apples to apples comparison, our Q2 display business revenue would have been 2.7% down from Q1 had we are just too for this strange.
Cobiz <unk> 19 negatively impacted the global smartphone market during Q1, an extended into Q2, but we performed relative to really work compared to the market. During the first half 2020. According to the market data global smartphone market decline about 20% year over year during the first.
Half of 2020, but our oily di di di business was up 12.4% into first half the above market performance was due in part to the extremity launch schedule from some of our customers how Q2 already di di di Archie revenue was 67 million.
Around 3.9% sequentially and down 8.3% year over year, let me highlight four key takeaways for our display business.
Virtually regarding all new product launches on our Q1 earnings call in May We said, we expect it smartphone makers using only the drivers to launch 18 models into first half 10 motto is being spent scheduled to launch in Q2 actually 20, <unk> launch, bringing the total launch of 20.
The new smartphone models into first half secondly regarding customer design wins, we won eight new oily de de IC design wins in Q2, including five based on the 28 nanometer manufacturing process, Oh 20 nanometer products featuring notable reduction in cheapside and power consumption.
And it continues to demonstrate strong design momentum in this growing product family truly regarding advanced features in Fiveg phones, we are expanding our high frame rate H F. R. Oily D. I see product line, we launched five H F or well really D.
She products to date and all of these.
No support hundred 44, large full full HD plus displays and hundred 20 hurts for the Q H T. Plus this plays faster display response time, either votto to full featured Fiveg smartphones, and we are well position to capitalize on the booming fiveg smartphone industry.
Three oh revenue from five to smartphone accounted for about 20% of the total oily de revenue in first half 2020.
Finally regarding diversification, we continue to diversify the oil in the business into automotive applications. During the second quarter, we taped out I'll first oil in the automotive products leveraging our strategic alignment with major oil in the panel makers, we plan to expand our design wins for.
Total motif displays looking ahead, while quarterly revenue may fluctuate, we remain excited about the long tail mouse Oh look for the oil in the market trends and our unique could you Shouldnt recently, we experienced an upswing in demand for oil in the product. The this recent increase in there.
Men is outstripping supply capability in Q3 because of insufficient lead time the standard lead time for oil the de product is 2.5 to three months.
No.
Let's turn to the power business, the total annual or power semiconductor market is approximately 45 billion, which presents as a tremendous opportunity for longer term growth. It is important to note that today, our manufacturing process R&D was centralize in our main pfaffle facility.
To support both Oh full and Fab Street with the closing of the pending foundry transaction fab three would become a dedicated pfaffle all power business currently critical product development and sizable production for power conducted at five full therefore, we would now.
I would be transferring all ballpark process already do fab three and plan to it good the fat to continue supporting our customers seem initially we also strengths in El Paso business leadership recently by hiring a 35 plus year veteran of power semiconductor what was the general manager.
Oh power business remains on its ensure part of a long term growth and diversification strategy.
Now, let's talk about all puppies in Q2, Paul revenue expressed a strong rebound from Q2 I try not show some signs of recovery from the global pandemic. The revenue came in at 59.8 million up 20% sequentially and down 16.7% year over year, we still.
Pent up demand for medium voltage MOSFET products, driven by the increased popularity of personal transportation, such as E bike and he motorcycles in China.
We are seeing growth momentum without power IC product line, our Paul I see so one of the application in the solid state drive is gaining traction at a global memory company and we are expanding our Paul I see line up to serve a notebook PC and smartphone application in addition to TV.
Patients during Q2, we saw designing and design win activity across and be more spread battery fat Super Junction MOSFET and power she product lines address seeing a wide range of application. We are encouraged by a growing design pipe line in our power business.
Yes.
Turning to the foundry services group Foundry services group revenue was 95.8 million the high its record revenue on 80 inch line since the IPO.
Revenue was up 11% sequentially and up 31% year over year, driven by the surge in demand for work from home related product as a result of the Cobi 19 pandemic.
Now, let's talk about Oh strategic transition.
The sale of foundry business and Pfaffle allows us to transform into a streamline pure play products company focus on the attractive display in power markets why do we can't be immune to the risk of macroeconomic conditions, we are fundamentally resetting our business school.
And I like to share with you our key goals.
That we are targeting to achieve by 2023.
First profitable revenue growth for display we really right on the continued global adoption over really the panels by smartphone makers as well as the proliferation of a new oily de applications full power, we will focus on premium products and penetrating new.
Hi growth segments, such as the automotive market why do we improved financial performance in existing businesses. We may also consider inorganic gross options that I've seen adjusting and E. P. S accretive if the right strategic opportunity presents itself, we plan to grow at a double.
<unk> CAGR from 2022 2023.
Second gross margin.
For this play we exited the low margin non auto Ltd business, we will capitalize on this as we launch new products in emerging display applications for power through a combination of Restablishing No R&D center, increasing our manufacturing output in fab three and also.
Leveraging external foundry services, we will drive a more favorable product premium product mix considering all this we plan to consistently achieved above 30% gross margin in a few years.
Third operating expenses the continuing operations are currently carrying some stranded cost which make some time to on line.
Streamline stanek standard product company, we will right size opex and exercise financial discipline.
Collectively these initiatives will bring a significant improvement to our operating income.
As I mentioned during last earnings call. Our goal is to first reach 810% adjusted operating income levels of the standard product business and then to continue to improve their Uh huh.
[noise] by the end of first quarter of 2021, we should be largely freed up approximately 21 million in annual interest expenses, which will substantially benefit our net income.
We are not stopping here. These goals the important milestones you know continues joni towards profit over growth today, we share with you some financial benefits it benefits of the new back new Magnachip once the pending transaction closes we will be able to share more financial metric.
We also plan Towson analysts day in the future and present Streeteasy initiated to illustrate how we will get there in summary, we delivered better than expected financial results, while accelerating the closing schedule of the pending foundry business sale we.
You know execution to deliver a successful close and strengthened our business foundation for profitable growth, we remain well positioned to navigate through this challenging time and all the industry environment improves we will emerge stronger and capitalize on attractive market trends.
No I will turn the call over to Dr. Wu and come back folks your name.
Thank you I, Jay and Hello, everyone.
Nice to meet you over the phone.
I'm very excited and honored to join Magnachip and to drive as transformation read the great teams and I look forward to engage with our key shareholders.
Before I go into the financial review I would like to its right that we believe Sunday it seemed that transition of up to the foundry services revenue from the continuing operations revenue.
But investors with a better understanding of our core business dessert.
Revenue in true true from continuing operations without the transitional property foundry services was going on line.
Million dollar up 1.6% from Q1 ended down 17.5% from Q2 a year ago.
Which was primarily due to the called me Tonight team that negatively impacted the global smartphone market.
[noise], both sequential and year over year decline was also attributable to the strategic exits of non auto LCD TV I see business, which accounted for 6.3 million dollar in Q1 Twentytwenty.
And 9.6 million dollar nature to 29 team.
Display revenue in Q2 was 69.2 million dollar down 10.8% portal, the quota and down 70.9% year over year.
The decline in the display business was in part due to the above mentioned exit of non auto as city business.
<unk> revenue in Q2 was.
So it is 9.8 million dollar up 20% quotable quota and it down 16.7% year over year.
The sequential improvement of the power business was due to solid rebound in the China market.
Non-GAAP combined revenue from both the continuing the discontinued operations a true intro to was 204.7 million dollar.
Which exceeded the high end over the guidance range.
It does up 3.9% sequentially and flattish read the same portal a year ago.
The sequential improvement was attributable to the increased revenue from our power business and the discontinued operations, which offset the decline in the display business.
Before I go into the gross margin did too I would drive to remind you that when the businesses labeled discontinued and assist our classified as held for sale, all depreciation and amortization corresponding to those assets stops.
Therefore, GAAP gross profit from our can continue to operations and non-GAAP combined gross profit from corporate operations in Q2.
Benefited from this accounting treatment.
Approximately $2 million willing to second quarter.
Gross profit margin a true to from continuing operations without transitional property foundry services was 29.5%.
Up 3.2% person at this point from Q1, and a 5.5 percentage point from Q2 a year ago.
The sequential increase in gross profit margin was due primarily to improved product mix and higher fab utilization.
The year over year improvement was primarily attributable to a reserve of 2.2 million dollar.
Related to legacy display product that was recorded in Q2, all the 2019.
Non-GAAP combined gross profit margin from continuing and discontinued operations in Q2 was 30.
0.8 person.
Exceeded the heart rate high end of the guidance range there.
I was up 5.5 percentage points sequentially and up 9.4 percentage point with the same quarter year ago.
As a result of improved product.
Mix and a higher utilization.
Gross profit margin it should to also benefited from the above mentioned accounting treatments.
Late into the at CES classified as those held for sale effective March 31 Twentytwenty.
Now turning now to operating expense in Q2 [noise].
Operating expenses from continuing operations World.
23.5 million dollar or 21.6% of revenue from continuing operations without transitional properties foundry services.
As compared to the 23.2 million dollar or 20.9% in true one.
And 22.9 million dollar or 17.3 person for the same potter a year ago.
Sure to operating expenses include $1.5 million stock based compensation charges.
That's did in Q2 was 12.4 million dollar that's compared to the 12.1 billion dollar in Q1.
11.1 million into 220 19.
R&D into two was 11.1 million that's compared to the 10.5 million dollar in Q1, and 11.8 million dollar in Q2 last year.
Adjusted operating income from continuing operations in Q2 was 10.1 million dollar up from 7.3 million dollar in Q1 Twentytwenty.
And up from 9.4 million dollar into two a year ago.
Adjusted EBITDA for continuing operations into two was 12.7 million dollar off from nine point ninemillion into on printed 20.
And up from 12 million into two a year ago.
[noise] bps.
On a GAAP basis, our audience for share for continuing operations was 34 cents.
From a loss per share of 89 cents in Q1 Twentytwenty.
And from a loss per share or 25 cents into 220 19.
Our non-GAAP diluted EPS for continuing operations in Q2 was 13 cents.
Ill from three cents in Q1 and up from 11 cents in Q2 last year.
The difference between our debt and non-GAAP EPS was primarily due to the elimination of the noncash that foreign currency gain of 8.5 million dollar.
Now moving to the balance should over the continuous operations.
Cash was 192.8 million dollar.
This compares to the $157.3 million at the end of Q1.
As you recall, our interest payment to occur in the first and third quarter. So the year.
We generated a net operating cash flow all thought is 6 million dollar in Q2.
This is the presented the fifth consecutive appalled drove net positive operating cash flow.
[noise] once the pending transaction closes.
We intend to intended to de lever and strengthen the balance sheet.
The transaction delay to the tax exposure is estimated to be up to 50% of the net cash proceeds of 344.7 million dollar from the transaction.
Accounts receivable was down 20% from Q1.
The decrease in a country specially in Q2 was attributed to the timing of payment from certain customers.
Our days sales outstanding for Q2 was 41 days.
And then put is well inventories was up 22 six person.
From Q1, due primarily to bid and anticipated increases in customer demand for our extended product.
Average days in inventory for Q2 was 54 days.
Capex was 5.5 million dollar in Q2 as compared to the 3.4 million dollar in Q1.
Let me give you more details on our Capex plans.
For 20 to 20, we have some unusual moving parts, we will support the both the continuing and discontinued operations with necessary investment.
In addition will also start to reestablish the process out and be in factory build the Q Ala and relocate the OLED test and the development centers as as well.
Why is it mentioned all year.
Lastly, we are in the process of separating the eye to systems, and establishing or do I infrastructure to support the continuing business after the sale.
This will require a one time investment of between 1 million dollar.
With that we expect the total capex for twentytwenty to be around 35 million dollar.
For 2021, we plan to complete the reason is tub reestablishment of the factory.
Once completed our <unk> three will have dedicated R&D capability.
Equipped to seamlessly assumed the critical project.
Support the growing demand for our power product.
This, especially investment which is estimated to be around 22 million dollar.
Will allow us to pursue a revenue potential that equate to a payback period of less than three years.
With that the total Capex for 2021 is anticipated to be flat to shift from Twentytwenty.
Now moving to the truth be guidance.
On July 20 hour Peppery facility include me, South Korea experienced a temporary power out PG for approximately nine hours and 15 minutes.
We are nearly fully operational you know a pretty facility as over today.
The accident calls to damage at 12 hour work in process wafers with an estimated total cost of up to approximately 2.3 million dollar.
The related impact to our revenue from continuing operations is expected to be negligible.
So called 19 global pandemic.
Escalate to trade pension up rapidly evolving situations and reduce our full visibility what actual results may vary Magnachip currently anticipate fool shoot Threed twentytwenty.
Revenue from continuing operations to be in the range of $118 a million dollars to well only 24 million dollar.
Including $9.5 million to $10 billion of the transitional subsidy following the services [noise].
We want to.
Reminds you that we exited.
Also as Cidade de IC business in Q2.
Gross profit margin from continuing operations to be you know in the range of 25% to 27%.
[noise] without the estimated power outage impact gross profit margin from continuing operation, who they had been in a range of 27% and 29%.
With that I will turn to the call over to the civilian soil.
Thank you lighting and yeah.
So operator that concludes our prepared remarks, and well now open the call for questions.
[noise] thinking as a reminder to ask your question.
Star one on your telephone.
Question like the town hatched <unk>.
Your first question comes online.
Mhm Needham and company. Please go ahead.
Yes, thanks, and thanks for all the details a very helpful and congrats on good momentum despite volatility in industry. The why just a question on the Oh really de business.
You talked about I think inefficient lead time I was wondering if you can kind of elaborate further in terms of what's going on and regarding capacity.
To me OLED and.
How do you see kind of the the smartphone market shaping up to be in the second half.
There's many new product launches that are happening.
So wanted to get a sense of how you're looking at the smartphone bid in the second half and how that could you know affect your your Oh look the oil you guys. Thank you.
[laughter] Vicki I'm, sorry, So you asked a couple of question there. So I try to answer one by one so yes, we are seeing uptick recently and as you know under 12 inch.
The it's not just the 12 inch but the O. Eylea di di the lead time stand a lead time takes about 2.5 month two three months.
From a wafer start to going to Dan wafer out to the a backend assembly tests or testing. So that's about 2.5 to three month timeframe. So let's say if we get some oh uptick in demand that we don't have a additional inventory that we have then you.
I have to go through that 2.5 to three months. So so it's unfortunate thing that the right now the demand is oh stripping out supply capability.
So.
So we'll continue to address that I think it's a good thing.
On the second in terms of the the visibility horse smartphone market you know again, we are still a.
You know facing Koby 19, a the global Oh pandemic steel. So the outlook is murky. However, you know I think the situation for every then there will be different but as I said recently, a they demand is oh, the stripping out of supply.
Hi for the current corridor and then we will talk about the Air Force corridor for then a at the next earnings but right now that is our current situation.
Okay and on the the rebound and power in China, and strong sequential growth of about 20 odd percent, how do we think about that going into second half as well.
Yeah, the power business grew.
Quite significantly last the last three quarters of 2019, and then there was a big inventory correction Q4, but.
You are going up against tough comparison in the third quarter.
But how do we look at kind of the power business going into the back half a year.
Yes, so very good question, so I I see a strong demand in power as well in general so.
We we see the momentum there in the markets so again.
I can't give you a six months forecast, but I I feel good about the the demand that is being generated on the power as well so but the combined we are we're guiding between 100.
18, 200 to 24 million for this quarter for all of those product line on the third quarter.
So if I look at if I strip out the transitional services and at the midpoint of your guidance about a 111 million.
And then Q2 for both power and display was about 109 million so about 2 million.
Sequential increase.
But down from from third quarter.
Last year, which is about a 139 million so the the year over year decline and third quarter.
Primarily related to would you say that the the smartphone, but you know the global.
Well, the 19 impacting smartphone and power from Santa year over year decline.
Yes, I think the this year.
You know the industry faces a slow down as you know the whole semiconductor show so that that so what is being but I think.
Despite the uncertainty Nick a pandemic I think a we we showed very good a relatively good results into first half when the smartphone declined 20% year over year on the first half last year to this year, we grew 12.4% Annoyingly D.
But in the second half I think a you know it's a we remain you know optimistic but at the same time the visibility market due to the Oh global pandemic, there, but oh on general we showing a incremental from the second quarter.
And just last question for me in terms of gross margins and I'll get back into queue.
So the.
There's a drop in gross margin because of that power outage.
He said it would have been higher <unk>, but it still I think below what it will be to Q.
And so I'm just want to understanding that and then you talked about kind of TV, a 30% growth margin in a few years.
I'm wondering you know without getting too much.
<unk>.
What are the drivers of the margin.
You know a they get above 30% and a few years I mean, if I look at this quarter you already did 29.5, and then or product.
You on a normalized level.
You're almost there already you know in putting aside what do you know what happened with the power outage into Q I mean, you're going to Threeq you need your kind of close to the 30% if I'm looking on the standard products.
Wanted to get a sense of how you're thinking about 30% and what was going by what's underneath that.
Yeah. So again you asked a couple of questions. So, let's let me clarify one by one so.
On the Q2, if you look at the continuous operation our gross margin was 27% that includes the transitional service.
On the Q3, if you look at our earnings release.
We said it without the power outage, the gross margin or in between 27% to 29%, which puts you at 20%, which he is upward trend from 27%. Okay. So that's a first answer for that to clarify a two youre really good question, let me try to answer show.
You know we are looking for sustainable gross margin improvement you know if you look at our past history, we have really good quarter and then we you know weve fluctuate a goal is to really get sustainable gross margin.
Oh above 30% so that is our goal and how you're going to do that we'll do a disciplined investment in existing business going up to attract the markets as well as a attractive portfolio reestablished Paolo manufacturing process, R&D and technology pipeline in fab.
Three and a week or so consider any synergistic accretive inorganic opportunity if feet I present itself. So and we will also consider all variable option to accelerate the profit or gross and being accretive in the P.S. and that's our goal and that's what.
We talking about is sustainable.
That is about 30% and as I said before.
First we'll shoot for 10% operating adjusted income and then we'll move.
They are laughter upwards.
Okay. Great. Your question, Yeah, I, just want to clarify the gross profit margin because I'm looking at the press release in the said gross profit margin for standard products is 29.5%.
Which I'm assuming is display in power and foundry was 32.3%.
And then you're saying, 27% for continuing operations I'm just confused that what's the difference between the standard products well within that 20.5% for standard products and.
And why that different from 27% for continuing operations is that the the transitional services.
Yeah that transition or service that 10 million is a at zero cost.
Zero margin, that's why when you some those up that becomes a 27% into Q2.
Okay, but but but you did 29.5% in display and power.
You know collection one okay right.
So that was my question that you know your.
You're gonna be a power and standard business going forward and your you know you did 29.
No we gonna have transfusion or service for the next three years.
No I understand that but that that that could be netted out okay. I got it alright. Thank you so much [noise].
Thank you.
[laughter].
Your next question comes online and seeking to sell that capital. Your line is open.
Hello, Hi, Jay and Dr. Wu.
Good luck in the new role here so.
Why Jay in terms of the.
In terms of the the under shipping of the OLED versus the customer demand is there anything you can do from the supply side to address those are well these persist given your foundry arrangement.
I think we have enough capacity between multiple foundry. It just have lead time right. So when you have a really uptick in demand.
We have to act quickly and so that's what this is about but it's a good good problem to have so.
You know I think the because the pandemic People's forecast has not been Ajay accurate.
So I think that's what's happening and when we have uptick a you know it takes time to adjust we doing our best to Oh, So that we can deliver a much better result.
Understood. So the challenges sending the right order size to the foundries and then the smartphones. The programs you have one you've won quite a few are you seeing any the pull ins or delays if those programs or are they all progressing to the to the to the targets and the second half.
So you know I think it's important to realize that when we when so many design wins like you know cumulative my over 45, each product launch you know some could be a hit a home run so bad so but overall you know we are seeing the momentum in our product.
Ah and portfolio and design win.
And also it's really up to the a smartphone makers are being successfully in the market. So.
That's outside our control, but I think the trend is that we keep winning and a there's a more product launches and more pipeline on our product line, so and we feel good about it and there. We also expanding into automotive first automotive taped out obviously the automotive you then you're not going to see the revenue until next year, but.
Again, we are diversifying and we are go into more higher premium or a product line as well in the early D. And you will see more of these are up in the future.
Okay, and then last question on the power segment.
I don't know you provided the percent that's premium products for the power segment and as the premium products grow I presume the ability to sustain 30% plus gross margins power.
Increases or does it depends on factory utilization has transitioned over what's the kind of the premium product mix and trend and then how is that can help the margins be sustained at these higher levels.
So recently last I would say four quarters out premium product line was around 50%. So goal is to continue do increase the premium product portfolio, obviously, a appropriate capex that the doctor who are laid out today is needed to strengthen our product line as was portfolio.
And that margin improvement will follow a bit having more competitive product and the roadmap. So I think that all that will lead to a better margin improvement to follow.
Okay. Thanks, guys.
Your next question comes online.
Andy Your line is open.
Hi, Thank you for taking my questions and why did you give a couple for interesting numbers than I have that questions and then was one you said.
You smartphones are about 20% auction OLED fields and I'm curious how how does this percentage.
Gross let's deal with next 12 to 18 months.
Interesting share shifts happening in China with a bit.
Lobbies tuition and the Korean smartphone.
The smartphone makers.
Better positioned to take share also did and there are issues happening with China and India. So I'm just trying to understand.
It does your mix of Fiveg smartphones accelerate a you know at a higher he's been the industry from this 20% number that you couldn't be happier over the next let's see.
Up to 24 months.
[noise]. So very good question. Thank you. So if you look at some market research I think they estimate about 17% of Fiveg.
Smartphone this year and obviously, we did about 20% in first half so it's not too far off but we still doing.
Slightly better than the what the market research says for the whole market.
Going forward I think yeah, there would be more fiveg piece and one of the key a feature that is happening in Fiveg is 120 hurts screen and a potentially up 244 for creativity plus so.
As we said that we have five products that we have h. fr capability that we launched a that becomes a key feature for the Fiveg and that HFR feature or show allow you to do more virtual reality and games, which is.
Also important to us the the pandemic I think is changing some of the habits and the award of a or the smartphone news is and the Fiveg is also continued to grow with T. I, a t. as well as the autonomous driving and other new application. So.
I think fiveg will continue to grow.
And Oh, one of the key feature on the Fiveg.
Is a are you like to easily de screen, because oil EDI consumes about 25% less NFC D and without really de a you want to have this a 120 has refresh cycle capability for better a RV and gaming.
So that's our view.
Great and the second number.
This was this a double digit.
Gross rig in the standard.
Power products or the premium product you mentioned over 20, and D. and great granted we are you talked about a design win into powered I see a solid state drive can you give.
More color on the end market that you're going after too to get to this double digit.
Growth over the next few years.
Yes, our goal is to grow double digit in across all our line whether its power. This play on the power. We explained that the we want to new a major application and solid state.
Traditionally our power I see was more hovered around TV application now expanding into the a solid state drive.
I would say expanding to d. So some of the I T. ER segment. So we are diversifying Oh, PPI I see from a TV consumer centric to more a different segment and the computing segment and later to potentially industry will show forced to help with the premium.
Portfolio pop product line in our power business.
Great. Thank you.
And then shall I know I've got a question at this time.
Okay. Thank you. This concludes our second quarter 2020, <unk> earnings Conference call. Please look for details of our future events on Magnachips Investor Relations website. Thank for joining us today the pie.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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