Q4 2020 MagnaChip Semiconductor Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter 2020 magnet chip and they conduct their earnings conference call. At this time, a participant line on a listen only mode.
For the speaker's presentation, there will be a question answer session.
Ask a question during the session you will need to press star one on your telephone.
If for your credit any further assistance please press star zero.
The conference to speak of today, So young John Please go ahead ma'am.
Thank you.
Hello, everyone and thank you for joining us to discuss Mednet chips financial results for the fourth quarter ended December 31st 2020, the fourth 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.
After today's call will be available shortly after the completion of the call and the website will be archived on our website for one year.
Access information is provided in the earnings press release.
Joining me today are YJ, Kim Midnight chips, Chief Executive Officer, and young our Chief Financial Officer.
Mike will discuss the company's recent and annual operating performance and business with you.
Yeah, well they view financial results for the quarter India.
And provide guidance for the first quarter of 'twenty 'twenty one.
Will be a Q&A session following the prepared remarks.
During the course debt conference call. We may make forward looking statements about maybe other chip business outlook and expectations.
Our forward looking statements and all other statements that are not historical debt reflect how our beliefs and predictions.
Predictions as of today and they are for are subject to risks and uncertainties as described in the safe Harbor discussion found in our SEC filings.
During the call. We also will discuss non-GAAP financial measures. The non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate an alternative measure of magna chips operating performance that maybe useful.
A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our fourth quarter earnings release available on our website under the Investor relations at Www Dot net and that chip Dot com.
I now will turn the call over to YJ Kim YJ.
Right.
Hello, everyone. Thank you for joining our call today.
<unk> Q4 results exceeded our expectations capping off one of the most challenging years for any of us during Q4 demand for maintenance for its product remained robust driven by our strong ramping five G.
More importantly, we were able to secure more supplies from foundry partners for OLED products as well as from our internal Fabs free for the power products, we achieved $142 9 million in revenue and 40 cents and non-GAAP EPS total revenue increased 14, 5%.
Chile, and 15, 9% year over year and it surpassed the midpoint of our Q4 2020 guidance by approximately $11 million Theres no doubt that 2020 has presented its share of unique challenges such as the COVID-19 pandemic.
On a stable global economy, and geopolitical uncertainties. Nevertheless for Magna trip 2020 was a remarkable year of structural transformation among the highlight job one.
Adjusted operating income and adjusted EBITDA increased 36, 7% and 29, 3% from 2019, respectively.
Total revenue decreased 2.6 push and year over year due mainly to our exit from the non auto LCD business, if we compare apples to apples our 2020 revenue grew 2.7% GAAP.
GAAP gross profit margin of 25, 3% represented a true.
190 basis point increase from 2019, as we improve the product mix.
We successfully closed the sale of our foundry business and fab for for the total cash proceeds of $356 million and we used $227 4 million to fully redeem the 6.625% senior notes due 2021.
John.
This action significantly strengthened our balance sheet, our stockholders' equity turned positive to reach $345 6 million at the end of 2020 versus a negative 15 million in 2019.
We laid out 2020 through to duck.
Through 2023 strategic initiatives and key metrics on the Amex readout O and launched a new brand identity underscoring our fresh start other pure play standard products company.
It is with my profound gratitude for their dedication and tenacity of every Magna chip team member that I share with the extra ordinary accomplishments in 2020.
Now, let's move to a detailed review of our product business, starting with the OLED business during Q for OLED D. The IC revenue of 84 million set a new historic quarterly record it surpassed our previous revenue high of seven.
The $8 3 million recorded in Q3 of 2019, representing a 19% sequential increase and a $19 four per share an increase year over year for 2020, despite the 8% decline in global smartphone shipments all.
OLED revenue grew 6.5 push and year over year to reach a new high of $284 6 million, making the third consecutive year, while achieving record revenue let.
Let me address a couple of highlights for Q4 as well as fiscal 2020.
First the momentum in five of these smartphones, especially was high frame rate H F. R. E. D D D I see growth stronger in Q4.
We were awarded eight new design wins in Q4, and all of them one five G and H are five models. This.
Revenue from five these smartphones accounted for about 20 per cent of the total OLED revenue in first half 2000 2040 per cent in Q3, and it reached approximately 70% in Q4, representing over 40% of our total too.
1020, OLED revenue second the demand for our products in a key models launched by a Korean smartphone Oems continue to increase in Q4. This key model. Both the flagship features at a desired price points and has been gaining solid ground.
In addition, the strong design momentum with smartphone Oems based in China. During Q3 drove a healthy revenue growth in Q4 during the fourth quarter 12, new smartphone models with our trips who are launched.
We are encouraged by the continued adoption of our distinctive solution by multiple end customers worldwide.
In reviewing the OLED business in 2020, all outstanding proposal. This is a testament to the laser focused execution of the innovative product roadmaps.
The Ak's point, our OLED design activities hit New records in 2020, we secured 838, new OLED design wins in 2020 to reach 50 for cumulative design wins compared to 21, new design wins and 30 for cumulative design wins in 2000.
19 in 2020 about 60% of this 50 for cumulative designs win was derived from the five G and H F for smartphone models.
2020 was awesome Mark O J, a year of rebuilding a solid foundation and strengthening product lineups through excellent OLED penetration into other applications. Although we can't comment on our customers' specific plans I can tell you that our engineering team has been very busy.
Throughout the year engaging with the customer to develop new products in emerging technologies and applications such as oil in the T V micro OLED TV and OLED automotive I'm happy to report you each product is moving new oil and other plant I look forward to updating.
You in the key milestones of these project in the future.
Now, let's turn to the power business power revenue in Q4 2020 came in at $46 9 million up 4% sequentially and up 23, 9% year over year Q for Powell revenue outperformed our expected growth of 15% to 20% year over year.
A year due to the strong demand of our premium products, including power IC for the whole year of 2020, our PA revenue in 2020 was $166 5 million. It was down 5.6, pushing a year over year, our power revenue was significantly impact.
It by COVID-19 during the first half 2020, but he demonstrated and impressive vigilance in the second half of 2020, despite the capacity handicapped caused by the power outage at our Fab Street.
In fact, our second half 2020, Rehbein revenue was an all time half year high since we studied our power business in 2007 now let me highlight key takeaways for our power business for Q4 as well as for.
As well as 2020.
For Q4, 2020, our power IC products continue to deliver healthy growth driven by series of design wins in a wide range of T V models and computing applications.
Power IC revenue crossed the 10 million annual revenue thresholds in 2020, and it is expected grow over 35 per cent into that in 'twenty. One power IC is one of the premium product families that carries a high gross profit margin and we will continue to strive to expand this.
Book by targeting adjacent applications and new customers.
We have three key design wins, our power IC products, two from laptop and one from SSD related applications in reviewing the power business in 2020, we started to reestablish perhaps street, our eight inch fab for power discrete semiconductors, why fab free capacity will gradually.
Increased from 2021, other we installed new tools, we plan to add about 40% incremental capacity for all our standard product standup pouch product by the end of 2020 compared to the 2020 level.
Owning a dedicated power discrete fab also plays a critical role in supporting automotive customers.
Underpinned by the sharpen our R&D focus and go to market strategy, our Pas business introduced a series of new product families that are gaining good initial traction. The total number of new products. We released in 2020 more than double the total number of 2019 and the business.
These pipeline of these new products is expanding.
Demand for our PA products remained strong and how fast free is running at full capacity.
Before I conclude the business review.
We take a few minutes to comment on the demand and supply situation.
According to own their market research. The overall OLED smartphone shipment in Q1, 2021 will be down 17% from Q4, 2020 Q1 being seasonally low.
Against this backdrop the demand for our OLED product she still relative shrunk.
Oh Gee it as well publicized the overall semiconductor demand started to increase from the second half of last year, which caused supply constraints, especially with our 28 nanometer external foundry partners.
While we are leaving some demand in Q1 non met due to supply constraints. We are working closely with our strategic customer and our foundry partners to address supply constraints and we expect the supply situation to improve later in the quarter.
But as we look at our current quarter that demand at most of all end markets remains very healthy against the Atypically low season as.
As we improve our supply situation, we expect to continue executing our pure play products strategy.
In closing we are proud of our solid performance in Q4, and the strategy that the board and management set out in early 2019 hedge position the company for long term success. During the last year, we entered amex worried at all.
An exciting new chapter for growth with a sharpened focus a day.
Pure play standard products company.
Renewed energy and a clear mission of empowering our customers on the Amex rely though we set long term financial targets that we would like to achieve by 2023, while we also recognize a path will not always be a straight line they exciting opportunity ahead.
But only reinforce our confidence in our growth outlook towards 2000 Twenty's free.
Lastly, we plan to host an analyst day on April 22021, our board is committed to maximizing shareholder value and is evaluating various options, including a holistic review of our capital allocation strategy.
Our targeted liquidity position and our ongoing distribution framework.
We recognize that the company may currently have excess liquidity, we plan to address among other things a comprehensive plan for our near term capital allocation, our liquidity leverage policy and our ongoing shareholder distribution.
On or before the upcoming analyst day, now I will turn the call over to Dr. Ooh and come back for the Q&A session.
Thank you YJ and a warm welcome to everyone on the call.
Let's start with key financial metrics for the fiscal 'twenty 'twenty and Q4.
Our revenue in 2020 was $507 $1 million.
Down two 6% from 2019.
The slight decrease was due primarily to the exit of non op for LCD business. Despite the recovery from the COVID-19, and five G smartphone growth in the later part till 'twenty 'twenty.
Display business was $299 $1 million down three 1% from 20 liking.
As a reference point the normal for LCD revenue accounted for approximately $44 $5 million in pension item and the $7 $9 million in 2020.
Our 10 to 20 OLED revenue set another all time record in terms of annual revenue.
Representing outstanding growth three years in.
For all.
Turning now to power business revenue of 106 to $6 $5 billion was down five six per cent from 2019.
Due primarily to the impact from COVID-19 in the first half for 'twenty 'twenty and factory power outage in Q3.
For the year, we made great improvements in profitability in 2000 Twenty's.
The growth gross profit margin improved 290 basis points basis points year over year and other adjusted operating income margin increased to eight 2% from five 8% in 2019.
Adjusted EBITDA represented a 10.4 per cent of the total revenue in 'twenty to 'twenty two.
Compared to seven 9% in 2019.
Our non-GAAP diluted earnings per share from continuing operations was 73 cents in 2020 up from 25 cents in 2019.
Now turning to Q for dessert.
Total revenue in Q4 was $142 $9 million.
For 10, 5% from Q3 and up 15, 9% from Q4.
Joel.
Revenue from the standard product business was $129 $6 million.
11, four per cent from Q3, and up 14, 4% from the same quarter a year ago.
Both sequential and year over year increase was driven mainly by strong demand for OLED for the.
Product, especially for five G and H M for OLED QD IC.
Display revenue in Q4 was $82 $7 million up 18.9% from Q3 and up nine 6% year over year.
Adjusting for the non or the LCD business it was up nearly 20% year over year.
Power revenue in Q4 was $46 $9 million up.
4% sequentially and up 23, 9% year over year.
The significant increase year over year was due to higher demand for.
For premium power products, such as heightened most pets.
Primarily for T V.
Applications and our power IC product.
Gross profit margin in Q4 was finished.
Six 9% up 400 basis points from Q3.
As a reminder, our gross profit margin in Q3 was negatively impacted by three percentage point too.
Due to two unusual items in connection with the delayed recovery from the power outage opiate free.
The displays excess inventory charges related to the U S government export restrictions to Huawei.
Our gross profit margin also expanded 220 basis points from Q4, a year ago, due primarily to product mix improvement.
Turning now to operating expenses.
Operating expenses, including for $4 million, one time termination charges related to the voluntary resignation program in Q4 were $29 $3 million.
For 25% of total revenue as compared to 23 per cent in Q3.
<unk> 21 per cent for the same culture.
Oh go.
SG&A in Q4 was $12 6 million as compared to $12 $9 million in Q3, and $13 $8 million in Q4 last year.
R&D in Q4 was $11.6 million as compared to $12 $5 million in Q3.
11 11 million.
$11 million in Q4 last year.
Stock compensation charges included in operating expenses were $1 9 million in Q4.
Two $2 million for in Q3, and $4 $1 million Q4, 'twenty. Thank you.
Adjusted operating income in Q4 was $15 $4 million up from $8 8 million in Q3 and up from $10 $1 million in Q4 for ear.
Our goal.
Adjusted EBITDA in Q4 was $18 6 million up from $11 7 million in Q3 and up from 12.8.
$8 million in Q4, a year ago.
Net income in Q4 was $66 $6 million as compared to compared with $273 million in Q3, and $23 $4 billion in Q4, a year ago.
As we noted during the last earnings call. The sharp increase in Q3 was due to the recognition of gain on sales over the phone it services business and for fall.
Euro, but your increase in net income was due to the recognition of income tax benefits of $47 $1 million in Q4, primarily from recognizing differences between GAAP and cash tax expenses of 40.
3.9 dollars.
$1 billion.
We were able to recognize such a benefit based on the historical trend of taxable income in different years.
And our increased confidence in forecast for you to taxable income based on growth opportunities as a pure play products company.
After the sale for the disorder with group business and for fall.
Our GAAP diluted earnings per share for was $145 as compared with $5 $889 in Q3, and 54 cents and crew for a year ago.
Our non-GAAP diluted earnings per share from continuing operations in Q4 was 40 cents.
Oh from 14 cents in Q3 and up from 17 in Q4 last year.
The difference between our GAAP and non-GAAP EPS was primarily due to the elimination.
Of the one time recognition of differences between GAAP and cash tax expense of $43 $9 million.
And the elimination of non cash foreign currency gain of.
Celgene point for the millions of dollars.
For all $47 1 million diluted.
Weighted average number of shares outstanding in Q4.
Now moving through the balance sheet.
Cash was $279 $9 million at the end of Q4 for.
This compares to $542 $1 billion at the end of Q3 and 151.
$7 billion at the end of 2019.
In Q4, we used 227 points is $4 million.
To fully redeem the 665% senior notes due 'twenty 'twenty, one and to pay though.
With withholding tax of $20 $5 billion.
As we explained during the last earnings call.
Accounts receivable net part two to $64 4 million and an increase of $11 five per cent from Q3.
Our days sales outstanding for Q4 was 41 days.
Inventories.
Net totaled 30 now.
$9 million, an increase of 16, 1% from Q3.
Our average days in inventory for Q4 was 34 days.
Capex was $19 7 million in Q4.
Capex of $36 1 million in 2020 included approximately $20 million of one time investment.
In line with the previously disclosed Capex plan.
The $20 million also included certain one time spending to ensure the safe management of our fab three pictures connected it to employee health.
In executing deep executing beauty covered plans from the power RPG and factory during the second half 2020.
Now let me give you a brief update on the voluntary resignation program.
Total cash cost of $8 $8 million have been fully paid including statutory severance and pollination benefit.
The program is expected to result in estimated annual cost savings approach basically for $2 billion.
It will help our plans to reduce our adjusted Opex level below 18% of revenue 520 23.
Now moving to the first quarter guidance.
The COVID-19, global pandemic is not behind us and it continues to reduce our forward visibility.
Actual results may vary.
Net chip country anticipate for Q1, 'twenty 'twenty one.
Revenue in the revenue to be in the range of $119 million to $124 million, including about $10 million of the transitional fab three foundry services.
Gross profit margin to be in the range of 25 to 27 per cent.
With that I will pass the call arbitrage for you. Thank you.
Thank you YJ.
Thank you Yung.
Operator. This concludes our prepared remarks, and we'll now open the call for questions.
Right.
I remind you laid in place.
And gentlemen ask the question a small.
For one of your telephone.
To withdraw your question just for stepped down.
Our first question on some final need Silva from Roth capital maybe.
You may begin.
Hello, YJ Hello, John Congratulations for very strong into 2020 and all the progress here.
So I'm trying to understand yes, I'm trying to understand your guidance on the impact of the visibility obviously in uncertainty versus the manufacturing constraints could you give a sense of.
Which segments are perhaps being impacted more by the manufacturing constraint as a whole led or power and perhaps some of the steps you're taking my day, specifically to address these would be helpful. Could you sound more optimistic about hudson yards versus others in terms of the constraints.
Yes, so a very good question. So you know as you want.
You are aware the there's a global foundry can supply constraints.
For all nodes that started in second half last year.
The C V. A supply situation is continuing to Q1 as you know and Oh.
We manufacture all of the oily D using external 12 inch fab.
And are we.
On the 28 nanometer node, where we are leader in the market.
There is a more pent up demand on the oily D as well as Cmos image sensor <unk> and Iot.
And one of the IDM also tap into foundry capacity given a.
The supply constraints, even in the in house manufacturing. So there is some constraints on the 28 nanometer node along with every other node you see.
Some other demand and we see more demand than what we can supply into Q1 as we said.
So some of this demand can.
Can be carried over for some of them also disappear.
Some of the smartphone it has a short term cycle in terms of particularly to your question we.
We do see more shortage in the OLED and we.
We do see about 10 million more of demand and what we can ship at the moment, so, but we do see that.
The supply situation.
For this quarter to get better towards the end of the quarter, but again, we only guide one quarter at a time and a debt.
That is the best picture, we can show you and the other thing is that unlike the LCD product way all year, but generic device selling multiple panel customers. Our devices are custom made shake oily D. So that means that we actually have a real demand that we're trying to sell the same chip to multiple panel customers are.
Therefore, we are really working closely with our strategic customer and our foundry partners to address the supply constraints.
And we expect the supply situation to improve later in the quarter.
Okay. No. That's very helpful color Roger Thank you and then my follow up question is about the gross margin if I adjusted for the factory service arrangement. It seems like Youre approaching 30 per cent. If I did my math correctly can you talk about the drivers for further expansion in gross margin just to understand and level set the expectation we can have here.
Yeah.
Okay.
Yeah.
Yeah.
Yep.
Yeah.
Yep.
So is your decision Yung Chief accounting officer of magnitude.
The gross margin can vary quarter by quarter. So this particular quarter may look like we would leave a cheap the our longer term target already but I mean, he can vary depending on the part of me kind of etcetera. So we will continue to strive hour.
To continue to achieve the target for 30% by 2023, that's why Jay mentioned before.
And it's also a product mix and you see a good part of like Pao I see that's coming in when she has a high gross margin. So we have continued executing and we are also putting additional capacity gradually.
So all of these and we were going to have a new generation of the older products by 2022 as we explained so all that should help towards the gross margin.
Okay, great. Thanks, Thanks, again, and congrats again, congratulations again on the progress here.
And our next question will come from the line of Rajiv Gill from Needham you may begin.
Yes, thanks for taking my questions and congrats as well.
What day, the the OLED revenue was really great in Q4.
The sequential growth as well as kind of a year over year growth.
You know you talked about that five G represents about 70% of the OLED revenue in Q4 and now it's gonna be about 40 per cent for the for all of 2020.
I'm wondering how you're thinking about.
The ramp is.
As we go throughout the year a lot other folks in the supply chain. The <unk> smartphone supply chain pretty much have all said that theres going to be the market is going to double for <unk> smartphones from from 2020.
Going up to about 500 million smartphones and then there's recent reports that it is actually increasing to 550 million phones.
So I'm wondering you know given the fact that your your your new OLED DDI Caesar's so tied to the new <unk> phones.
How are you guys thinking about that that business.
You know this year.
And then I'll have a follow up.
Rajeev. Thank you very good question value question.
But.
As you know we only comment.
Oh results one quarter at a time.
But you are correct that we see the five G smartphone are more than doubling.
And if you look at even the fourth quarter results above 70 per cent of revenue.
For from five G with a channel for the teacher so.
So I can confirm that the demand is very strong and as I said before.
Our product is a custom basic I mean, we its each product is targeted for each panel costumer.
So it's not like something like you can't ship to multiple people and Theres no double bookings so for us.
I can tell you yes it does.
Many very strong and therefore, we are working very closely with our key customer and the partner or the foundry partners to address the the demand and unfortunately, there's supply constraints.
Thank you for that.
Yeah.
Yeah go ahead.
Yeah, and as you said, we expect the supply chain to get better towards the end of the quarter.
And on the power side.
Virtual in terms of year over year growth.
You know post Q1 of last year. It was up about 24 per cent year over year.
In Q4, and so as we go into 2021.
You know what other kind of the key drivers for that business, specifically in 2021, and how is the how those drivers are going to be different say from 2020 or they just kind of a continuation.
What you're seeing in the kind of the power of premium IC market.
Sure. So if you look at my remark in second half of last year, we studied T see tremendous.
Pick up as well as execution.
And we actually seeing in every of our product whether it's the <unk>.
MOSFET to power IC, two Super junction in S E T.
And power IC particular had a really strong growth starting second half as we penetrate new computing application or solid state drive and now we added to the.
The computing segment, an additional line to the other I T.
And as you know the day I tease Hot these day, so and.
Confidently I expect to grow more than 35% on depot I see this year.
But we also see all strong cylinders in all our product line and that's why we are gradually putting increasing the capacity now fast free.
And at the a.
D D. A capacity expansion will continue and will add about about 40% on power capacity by end of 2022, so to meet up to a market demand. That's what we are doing and by 2022, we will have a complete new refresh cycle of our Super Junction.
John Battery fat and.
And the I G. B T. So we look forward to having much robust and competitive product in the power line to grow the market as well as keep up demand with our customers.
And just one last housekeeping.
A housekeeping question the foundry sorry, the transitional services revenue jumped from $8 5 million to $13 million in Q4.
Are you talking about $10 million in Q1.
Is that is it volatile like that or is it.
Gonna be in this kind of $9 million to $10 million range for modeling purposes.
So that's a very good question. So if you recall, we had a power outage and end of July tours.
And he wasn't completely healed until the early part of October right. So so what happened during that time was that the some of the back in that wasn't going did not go out in Q3 studies go out Q4, so we actually.
Study a lot of our wafer starts about 80% was there, but you know the some of the back back in was not able to ship due to power outage and so that will release and that's why you see our.
Its quite a jump from about 9 million to 13 in the fourth quarter, but we expect the foundry a transition or service to be around 10 million a quarter.
Thank you.
Okay.
Thank you and our next question will come from the line of Martin Yang from Oppenheimer, maybe begin.
Oh, Hi, YJ Hi, young my Thanks for taking my questions. My first is on your emerging products like hold my T. V's Microalgae D T V's and per I see.
Can you maybe talk about the potential different customer relationships, you will be addressed with the new products and.
The margin benefit from those emerging products.
A very very good question, Mike So all of those three products.
You mentioned have a higher than corporate gross margin. So I'm very excited about the work we are doing there obviously power IC I said, we are getting into new application in adjacent applications.
So we are getting you know a lot of momentum in 19 with a solid state to.
Laptops to Oh, the I T and also continued expanding of the T V power IC market.
So that's why you're going to see huge growth this year on the power IC, even though it's you know it's a small revenue, but we just crossed the $10 million revenue threshold and loss here.
In terms of the OLED TV and micro early T V.
Again, the minority Tvs.
Some it's a very.
Complicated and very.
Putting the latest greatest OLED technology as well as power IC technology in one chip.
So you know that.
We can't talk too much specific about the timing because it's really tied to some of our key customers, but we are seeing a progress there, but again those are more niche product really targeted for high end, but it's a very nice margin and if money is no object you should by the muscular weighted T V and the high end.
And then OLED T V. Yes, Oh, we we are I expected to start the production in second half.
And we think that by end of the year will generate some meaningful revenue. So we are all excited about all these progress were making in other emerging applications.
Oh, that's great a follow up question on power I see so can you maybe help us understand.
So we think the power solutions, how will a free.
It's a 10% GAAP.
Hey power IC is a total power solutions helped grow the margins.
Florida Power solutions segment can you any comments you can help us understand you know the Oh the.
The margin benefit for power IC for power solutions.
Thank you.
Yes, thanks for asking but you know if you look at any fabulous policymakers in fact, the power IC is a fabulous model for US now we make debt in the fast for the result, but are you know any power IC market you should be looking at above 40%.
Margin right, that's the what the any fabulous model for policy should be so that's.
That's the hint that I can give you and so obviously, we would try to do better but that's what it is.
Great. Thanks.
Yes.
Yeah.
Thank you. Our next question will come from the line <unk> Malik from Citi You may begin.
Hi, Thank you for taking my questions and good job in the zone.
Yeah, a quick clarification on the net.
The only other sponsors on the supply constraints.
10 million I assume that's a unit number.
Net demand in Q1 to $10 million.
Do you do you expect an impact in second quarter.
Why is that.
Resolved by the end of this quarter.
Uh huh.
So very good question. So it's a $10 million not units. So what we're saying Q1 are the <unk>.
We have excess 10 million.
Worse of the demand on the oily D and your second question is you know how is that usually happen is that well usually what happens is that the even last Q4, we had more demand than supply. So some of them carried over to Q1, but some of them.
Actually more than half actually disappears because the the you know the.
The smartphone demand is a what do you call. It a cycle or is what you know six to nine months cycle. So you have to try to address that unfortunately, but I think the point is that our chip is a custom asics. So it's not like you're going to be replaced by someone else I'd say it's.
So we don't see any double booking like other places out there so.
It's showing very healthy demand in the end customer market.
Great and then just going.
Back to <unk> question about the display outlook for the full year.
A five day units I'm supposed to go from $2 50 last year to 500.
And the OLED adoption continues to grow.
Net handset grown unit.
And do we get back on that.
OLED growth trajectory that we were in.
Prior to Covid.
So again I think if you look at the market perspective, you're correct there.
<unk> transition is happening already in Q4 last year 70 per cent of OLED revenue was five G and H are far so we see continued strong demand.
And so again, we are working very closely with my customer very key customer and the foundry partners to work on the supply constraints.
And we expect to make progress starting later in the quarter.
Great. Thank you.
Thank you.
And our next question comes from the line of John Lopez from vertical group you may begin.
Yeah.
Hi, Thanks, very much guys hear me okay.
Yes.
Fantastic.
I had three questions I'm, hoping I could just do them one at a time.
The first one is coming back to the OLED side I'm wondering can you.
I guess my question is has the capacity situation in calendar Q1.
Gives me has that affected your design engagements at all in other words their customers, perhaps more reticent to design.
Your parts higher end parts, given the perhaps the inability to get access to them or is that unchanged Kinder what it was in 2020.
Well if you look at the trend you saw in 2020, our design win pipeline is stronger than ever.
We had a 38 design win with accumulated 50 for that.
That number increased drastically from 2019, so and we are seeing new product taped out every month.
Months or quarter. So the debt design momentum continues into each OLED products address it anywhere between four to six different variants of the panels. So we continue to see a debt demand as well as the needs. It just the.
Unfortunately, we cannot meet the demand due to supply constraints, but the the product that we are doing is showing very good.
Demand and healthy.
Situation for.
The all in end markets.
That's very helpful.
The second one on the power business, if I remember correctly, you guys had gotten channel inventories, perhaps a bit below where you wanted them.
In late 2020.
Can you update us on that have you made any progress on that front just state of affairs on the power channel inventory would be great.
Yes, very good question so in Q.
Q3, we said that our inventory 11 channel is less than months, that's very very low by the way right. So normally we like to share about two months and so we are still working towards that and if you look at our peers and power their channel inventories are up to six months, but.
We tried to make about two months normal inventory, but we're not quite there yet. So we will continue to work on debt and we are continue cranking up our fab three as well as a fast for we still manufacture or some other power products. So that is a concentration.
Okay great.
Third one on the power side, you had made some comments in the prepared remarks about power I see and I didn't quite catch them. I think you mentioned that it crossed $10 billion in quarterly contribution and the expectation was that portion would grow I think you said 30 to 35 per cent, perhaps in 2021 would you mind just spending a second in correcting wherever I'm wrong.
In that recollection.
Sure. So two correctly a phrase it so it's actually we crossed the 10 million annual revenue threshold in 2020, and we expect to grow bigger than 35%. This year. So are you going to see issues.
Yeah, you know double digit high double digit growth on Pollo I see this year and the the point is that.
How I see it was relatively small, but we we know first across the 10 million annual revenue.
Last year got you, Okay, I'm, sorry, I have one last one I apologize if I'm going to sneak in extra line and to make it for the can you speak for a second on the automotive engagement.
I know you guys had been progressing there for several months now I guess my question is given the state of affairs in automotive semiconductor supply demand now is that affecting your engagement either positively or negatively I use that causing that customer to rethink supply chain decisions or is it bringing more customers.
To engage with you just any thoughts you have around those dynamics. Please.
Yeah. So it's a very good question. So I think the current situation because you know it doesn't hurt.
I mean, the automotive and also especially our electric vehicle is it going to continue to growth. So I think that day, we know a good place. So we added 10000 I'll call. We expect to start preproduction second half and I think we start to our revenue in automotive are for that.
On power discrete device for the electric vehicle usage.
So given the supply constraints are there there'll be.
Hopefully and should be more demand for our new partners and that kind of AR devices. So we are fortunate to have our own fab three debt can service the automotive makers. So we are excited about the future in.
The midterm and long term.
Very good thank you very much for all the help.
Yeah.
Thank you Kim.
Thank you and I'm not showing any further questions at this time I'd like to turn the call back over to sell young for any closing remarks.
Thank you.
This concludes our fourth quarter 2020 earnings conference call. Please look for details of our future events on Magna chips Investor Relations website. Thank you for joining us today Goodbye.
Ladies and gentlemen.
Today's conference call. Thank you for participating you may now disconnect.
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