Q4 2021 MagnaChip Semiconductor Corp Earnings Call

February 16, 2022

Thank you for standing by and welcome to the Q4 2021 magnitude of Semiconductor Corporation, earning conference call. At this time all participants are in a listen only mode.

Speaker 1: Thank you for standing by and welcome to the Q4 2021 Magnachip Semiconductor Corporation Earning Conference Call. At this time, all participants are in listen-only mode. After this feature presentation, there will be a question and answer session. To ask a question at that time, please press star then 1 when you touch tone telephone.

After the Speakers' presentation there'll be a question and answer session to ask a question at that time.

Then one when you touch tone telephone.

As a reminder, today's conference call is being recorded.

Speaker 1: As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host, Ms. Sue Young-John. May I be made a guess?

I would now like turn the conference host Ms. Sue Jan John Ma'am, you may begin.

Thank you Hello, everyone. Thank you for joining us to discuss <unk> financial results for the fourth quarter ended December 31st 2021, 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 of today's call will be available.

Speaker 2: Thank you. Hello, everyone. Thank you for joining us to discuss MagnaChips financial results for the fourth quarter ended December 31, 2021. 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 of today's call will be available shortly after completion of the call, and the webcast will be archived on our website for one year. Access information is provided and the earnings press release.

Shortly after 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.

Speaker 2: Joining me today are Y.J. Kim, Meghana Chief Executive Officer, and Xinyang Park, our Chief Financial Officer.

Joining me today are why.

Kim Midnight Chip, Chief Executive Officer, and Shin Young Park, our Chief Financial Officer.

Speaker 2: YJ will discuss the company's recent and annual operating performance and business overview. And Xinyang will review financial results for the quarter and the year and provide guidance for the first quarter of 2022.

<unk> will discuss the company's recent an annual operating performance and business overview and Shin young.

<unk> financial results for the quarter and the year and provide guidance for the first quarter of 2022.

Speaker 2: There will be a Q&A session following the prepared remarks.

There will be a Q&A session following the prepared remarks.

Speaker 2: During the course of this conference call, we may make forward-looking statements about magnetism's business outlook and expectations. Our forward-looking statements and all other statements that are not historical facts reflect our beliefs and predictions as of today and, therefore, are subject to risks and uncertainties as described in the Safe Harbor Statement found in our FCC filings.

During the course of this conference call. We may make forward looking statements about management's business outlook and expectations. Our forward looking statements and all other statements that are not historical facts with black our beliefs and predictions as of today and therefore are subject to risks and uncertainties as described.

And the Safe Harbor statement found in our SEC filings.

Yes.

Speaker 2: 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 MEGNA chip's operating performance that may be useful.

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.

Speaker 2: 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 investors section at www.magnachip.com.

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 investors section at Www Dot Mednet chip that com.

Speaker 2: I now will turn the call over to YJ Kim. YJ?

I now will turn the call over to YJ Kim YJ.

Speaker 3: Hello everyone, thank you for joining our call today.

Hello, everyone. Thank you for joining our call today.

Speaker 3: For the first quarter, the demand and signals from our customers remain strong across the board.

For the first quarter the demand signals from our customers remained strong across the board. However.

Speaker 3: However, severe supply constraints continue to significantly limit our oil revenue potential, which was partially upset by our stronger power business.

Supply constraints continued to significantly limit our OLED revenue potential, which was partially offset by a stronger power business <unk>.

Speaker 3: We reported $110.3 million in revenue and 31 cents in non-GAAP diluted EPS. Our revenue decreased 13.1% sequentially and 22.8% year-over-year as a result of the supply constraint.

Reported $110 3 million in revenue.

<unk> non-GAAP diluted EPS, our revenue decreased 13, 1% sequentially and 22, 8% year over year.

<unk> of the supply constraints. The shortage was felt more severely for 28 nanometer 12 inch wafers, where we have been producing most of our new OLED products, winning numerous designs and rapidly expanding market share in the past few years.

Speaker 3: The shortage was felt more severely for 28 nanometer 12-inch wafers, where we have been producing most of our new OLED products, winning numerous designs and rapidly expanding market share in the past few years.

Speaker 3: Case in point, the revenue from 28 nanometer products grew 80% to $174 million in 2021 from $97 million in 2020.

K casing point the revenue from 28 nanometer products grew 80% to 174 million in 2021 from $97 million in 2020, representing 90% of the total OLED revenue in 2021.

Speaker 3: representing 90% of the total OLED revenue in 2021, as compared to only 34% in 2020. The success of our 28-nanometer product line has been and we expect will continue to be one of the critical growth enablers for us.

One how does it compare to only 34% in 2020 the success of our 28 nanometer product line has been and we expect will continue to be one of the critical growth enablers for us.

Unfortunately.

Speaker 3: A severe shortage of 28nm O LED wafers adversely affected our O LED business as a major limiting factor, adding tremendous pressure to an already difficult supply environment.

Severe shortage of 28 nanometer OLED wafers adversely affected our OLED business as a major limiting factor, adding tremendous pressure to an already difficult supply environment for it.

Speaker 3: Fortunately, we enhanced our supply chain for an additional 20 nanometer capacity last year, which we expect will start to come online in the later part of this year.

Finally, we enhanced our supply chain for and an additional 28 nanometer capacity last year, which we expect will start to come online in the later part of this year.

Looking at the full year.

Speaker 3: Looking at the full year, while our revenue for 2021 declined 6.5% year over year due to the wait for supply shortage partially offset by outstanding growth in our power business, I am pleased that we deliver solid profitability for the full 2021 year.

While our revenue for 2021 declined six 5% year over year due to the wafer supply shortage, partially offset by outstanding growth in our power business I am pleased that we delivered solid profitability for the full 2021 year.

Gross profit margin reached 32, 4%, representing an increase of 710 basis points from 2020, adjusted operating income margin increased to reach 11, 8% of total revenue from eight 2% in 2020 adjusted.

Speaker 3: gross profit margin reached 32.4%, representing an increase of 710 basis points.

Speaker 3: from 2020. Adjust operating income margin increased to reach 11.8% of total revenue from 8.2% in 2020. Adjust net income was 10.8% of total revenue versus 5.6% from the year before and adjust EBITDA also grew to $70.7 million from $52.9 million in 2020.

Net income was 10, 8% of total revenue versus five 6% from the year before.

Adjusted EBITDA also grew to $70 7 million from $52 9 million. In 2000 22021 has certainly presented its share of unique challenges for us. However, our team steadfastly press forward with our plan to achieve not all.

Speaker 3: 2021 has certainly presented its share of unique challenges for us. However, our team steadfastly pressed forward with our plan to achieve not only healthy profitability, but also critical milestones to fuel future growth, upon which I will elaborate shortly. I deeply appreciate every Magnetrip team member for their unwavering commitment and dedication.

The healthy profitability, but also critical milestones to fuel future growth upon which I will elaborate shortly I deeply appreciate every magnet chip team member for their unwavering commitment and dedication.

Speaker 3: I'm most grateful that we could achieve solid results.

Most grateful that we could achieve solid results, while protecting and safeguarding our employee health and safety amidst the global COVID-19 pandemic.

Speaker 3: while protecting and safeguarding our employee health and safety amidst the global COVID-19 pandemic.

Now, let's move to a detailed review of our product business, starting with the OLED business OLED revenue in Q4 was $37 7 million down 31, 8% sequentially and down 53, 1% from our historical record revenue level.

Speaker 3: Now, let's move to a detailed review of our product business starting with the OLED business.

Speaker 3: Our O LED revenue in Q4 was 37.7 million, down 31.8% sequentially, and down 53.1% from our historical record revenue level in Q4 2020. Against severe supply constraints, we have been protecting our profitability by strategically focusing on high-value, high-margin design activity.

In Q4, 2020 against Cvs supply constraints, we have been protecting our profitability by strategically focusing on high value high margin design activities, including the newly launched flagship smartphone model of a major smartphone OEM.

Speaker 3: including the newly launched flagship smartphone model of a major smartphone OEM. Also, revenue from 5G smartphones and high frame rate products continue to represent over 93% of our 2021 OLED revenue.

Also revenue from five <unk> smartphones and high frame rate products continued to grow represent over 93% of our 2021 OLED revenue.

Speaker 3: Turning to the full year review, oil revenue was $192.8 million, down 32.3% year over year, as we unfortunately had to forego some demand. Our demand was more than 50% higher than what we shipped in 2021. However, I am pleased to report some critical milestones that we achieved.

Turning to the full year review OLED revenue was $192 8 million down 32.3.

<unk>, 3% year over year as we unfortunately had to forego some demand our demand was more than 50% higher than what we shipped in 2021. However, I am pleased to report some critical milestones that we achieved.

Speaker 3: One, we have successfully broadened our customer base to include a top-tier panel maker outside Korea. Initial revenue is expected to start in the later part of this year. We are well aligned with top-tier panel makers in the world and positioned to benefit from increasing oil EOD adaption in multiple countries.

One we have successfully broadened our customer base to include a top tier panel maker outside Korea initial revenue is expected to start in the later part of this year, we are well aligned with top tier panel makers in the world and positioned to benefit from increasing OLED adoption in multiple countries.

Speaker 3: Two, we enhanced our supply chain for additional 20 nanometer manufacturing capacity, which is expected to come online in the later part of this year. In addition, we are in discussions with our foundry partners regarding a multiyear supply agreement in order to secure long-term capacity. We have also been working on MOUs and supply agreements with key customers, some of which have been already signed.

These two we enhanced our supply chain for additional 20 nanometer manufacturing capacity, which is expected to come online in the later part of this year. In addition, we are in discussions with our foundry partners regarding a multiyear supply agreement in order to secure long term capacity.

We have also been working on them will use and supply agreements with key customers some of which have been already signed three we expanding into new areas. We have successfully comments initial mass production of OLED TV <unk> during the fourth quarter and we continue to.

Speaker 3: Three, we are expanding into new areas. We have successfully commenced initial mass production of OLED TV DDIC during the fourth quarter, and we continue to expand our large distance.

Span our large this.

Speaker 3: display OLED TV business by addressing next-gen premium TVs with micro LED technology. We used to have over 30% market share in TV application with LCD DDIC with a particular vendor during peak times before we strategically defocused from the business a few years ago. In addition, we are also expanding our OLED DDIC product lineup for automotive display applications.

Display OLED TV business by addressing Nextgen premium Tvs with micro OLED technology, we used to have over 30% market share in TV application with LCD DDI.

With a particular vendor during peak times before we strategically focus from the business a few years ago. In addition, we are also expanding our OLED DDI product lineup for automotive display applications in summary.

Speaker 3: Really the business is winning new customers and expanding into new applications.

OLED business is winning new customers and expanding into new applications. The demand from our current customers is strong in fact, we are getting numerous Arab skus from Korean panel makers, although supply constraints continued to be the gating factor with additional supply capacity.

Speaker 3: the demand from our current customers is strong. In fact, we are getting numerous RFQs from Korean panel makers, although supply constraints continue to be the gating factor.

Speaker 3: With additional supply capacity expected beginning in the later part of this year, we are very optimistic about the rejuvenated growth in our oil E.D. business in the coming years.

<unk> beginning in the later part of this year, we are very optimistic about the rejuvenated growth in our OLED business in the coming years now lets turn to the power business power revenue in Q4 came in at $58 2 million, which was slightly lower than our record revenue in Q3 2020.

Speaker 3: Now let's turn to the power business. Power revenue in Q4 came in at 58.2 million, which was slightly lower than our record revenue in Q3 2021, and a solid quarterly revenue growth of 24.2% year-over-year.

One and a solid quarterly revenue growth of 24, 2% a year over year. The overall demand for our GBT medium voltage MOSFET.

Speaker 3: The overall demand for our IGBT, medium voltage MOSFET and battery fed products in the industrial and wireless application remain strong.

MOSFET and battery FET product in the industry and wireless applications remained strong, especially our <unk> products for solar inverter demonstrated solid traction in Q4 bolstered by growing interest in alternative energy.

Speaker 3: Especially our IGBT products for solar inverter demonstrated solid traction in Q4, and it is being bursted by growing interest in alternative energy.

For full year 2021, our power business deliver record high revenue of $227 8 million.

Speaker 3: For full year 2021, our power business delivered a record high revenue of $227.8 million.

Speaker 3: an increase of 36.8% year-over-year, driven by solid demand across most of our product families are coupled with increased internal capacity resulting from our timely investment in FAF3. Clearly, we are approaching our target ahead of our plan and we are working to further improve FAF3 capacity. Xinyang will provide more details shortly.

An increase of 36, 8% year over year, driven by solid demand across most of our product families are coupled with increased internal capacity, resulting from our timely investment in <unk> III.

Nearly we are approaching our target well ahead of our plan and we are working to further improve fab three capacity Shin young will provide more details shortly.

One notable highlight of for 2021 is a exciting momentum we are seeing in premium power products. Our premium product group grew remarkably in 2021 $217 million from $82 5 million a year ago Super Junction MOSFET.

Speaker 3: One notable highlight for 2021 is the exciting momentum we are seeing in premium power products. Our premium product group grew remarkably in 2021 to 117.1 million from 82.5 million a year ago.

Speaker 3: Super Junction MOSFET not only maintains its solid position in Korean TV markets, but also expands it into PC power, lighting and other industrial applications.

Not only we maintain a solid position in Korean TV markets, but also expanded into PC power lighting and other industrial applications power IC revenue grew over 60% year over year since the first penetration into solid state disk related application in two <unk>.

Speaker 3: Power IC revenue grew over 60% year over year since the first penetration into solid-state fiscal-related applications in 2020. IGBT revenue grew significantly driven by strong demand for renewable energy. Our go-to-market strategy is a

20, <unk> revenue grew significantly driven by strong demand for renewable energy our go to market strategy.

Speaker 3: efficient R&D and timely investment in Fab3 led us to achieve record quarterly revenues three quarters in a row during 2021 and also accelerated development and introduction of new products.

Efficient R&D and timely investment in fab three led us to achieve record quarterly revenues three quarters in a row during 2021 and also accelerated development and introduction of new products.

In summary, we will continue to execute the growth plan of our power business by strengthening in fab, three productivity and introducing new products with superior performance and improved costs, which we expect will further drive healthy growth for many years.

Speaker 3: In summary, we will continue to execute the growth plan of our power business by strengthening Fab 3 productivity and introducing new products with superior proponents and improved costs, which we expect will further drive healthy growth for many years.

Speaker 3: Before I turn the floor over to Xinyang, I will take a few minutes to comment on our capital allocation plan. Given our current business condition, our near-term cash use is focused on three areas.

Before I turn the floor over to <unk> I will take a few minutes to comment on our capital allocation plan given our current business condition.

Our near term cash use is focused on three areas.

Speaker 3: First, we target to maintain 100 million plus cash on the balance sheet. This is mainly for working capital, but it also reflects our customers' desire to see a solid cash balance.

First we target to maintain $100 million plus cash on the balance sheet. This is mainly for working capital, but it also reflects our customers' desire to see a solid cash balance too.

Speaker 3: As we have already demonstrated, we are committed to share the return. In December 2021, our board authorized a $75 million stock repurchase program.

As we have already demonstrated we are committed to shareholder return in December 2021, our board authorized a $75 million stock repurchase program.

Three.

Speaker 3: the remainder of the cash on our balance sheet will be allocated for flexible optionality.

The remainder of the cash on our balance sheet will be allocated for flexible optionality.

Speaker 3: At the present time, we believe that supply is the fundamental limiter of a potential growth. Therefore, enhancing our supply chain is currently deemed one of the imminent capital allocation options. Possible options include, but not limited to, securing additional 20 nanometer manufacturing capacity and locking in multi-year long-term supply agreements, which typically require strong commitments from us and our customers, including prepayment.

At the present time, we believe that supply is the fundamental limiter of potential growth. Therefore, enhancing our supply chain is currently deemed one of the imminent capital allocation options possible options include but not limited to securing additional 20 nanometer manufacturing capacity.

In locking in multiyear long term supply agreements, which typically require a strong commitment from us and our customers, including prepayments. We are also expanding additional manufacturing capacity at fab <unk> III for our power business to address continuously increasing demand.

Speaker 3: We are also expanding additional manufacturing capacity at FAFSA for our power business to address continuously increasing demand.

Speaker 3: In conclusion, we're expanding our customer base, penetrating new applications.

In conclusion, we're expanding our customer base penetrating new applications.

Speaker 3: Our ability to supply is anticipated to improve in the later part of this year. While our near-term outlook is still being challenged by persisting supply constraints, we expect oil and revenue to be flat to slightly up in 2021, compared to 2021, with significant growth coming during the later part of the year.

Our ability to supply is anticipated to improve in the later part of this year, while our near term outlook is still being challenged by persisting supply constraints, we expect OLED revenue to be flat to slightly up in 2021.

Into 2022 compared to 2021 with significant growth coming during later part of the year.

Speaker 3: As a whole company, we expect modest revenue increase in 2022, driven by the oil recovery, as well as decent growth in our power business.

For the whole company, we expect modest revenue increase in 2022, driven by the OLED recovery as well as decent growth in our power business recent developments and critical milestones we have achieved reinforce.

Speaker 3: Recent developments and critical milestones we have achieved reinforce our confidence and optimism about our long-term growth. Now, I will turn the call over to Xinyang and come back for the Q&A session. Xinyang. Thank you, IJ, and welcome to everyone on the call. Let's start with key financial metrics for the full year 2021 and Q4.

Conference and optimism about our long term growth now I will turn the call over to Shin young and come back for the Q&A session. Chanel. Thank you Jay and welcome to everyone on the call, let's start with key financial metrics for the full year 2021 in Q4 revenue.

Speaker 4: Revenue in 2021 was $474.2 million, down 6.5% from 2020. The decrease was primarily due to a decrease in revenue from our OLED VDIC products stemming from a continuous severe supply shortage, which was offset in part by strong revenue growth from our poweroping.

In 2021 was $474 2 million down six 5% from 2020. The decrease was primarily due to a decrease in revenue from our OLED DDI IC product.

I mean from a continued CVR sub supply shortage, which was offset in part by strong revenue growth from our power business.

Display business revenue was $205 3 million down 31, 3% from 2020.

Speaker 4: Display business revenue was $205.3 million, down 31.3% from 2020, whereas power business revenue was up 36.8% from 2020 to $227.8 million.

How our business revenue was up 36, 8% from 2020 to $227 8 million.

However, this revenue growth was driven by solid demand across most product families coupled with increased internal capacity, Richard Kim from our timely investments in factory.

Speaker 4: Our business revenue growth was driven by solid demand across most product families, coupled with increased internal capacity, resulting from our timely investment in February .

Speaker 4: Despite the decline of revenue year over year due mainly to the global shortage in manufacturing capacity, gross profit margin in 2021 improved 710 basis points year over year to reach 32.4%, which flowed through to non-GAIN metrics of adjusted operating income, adjusted net income, and adjusted EVITA, all of which improved year over year as highlighted by YJ earlier.

Despite the decline in revenue year over year over year due mainly to the global shortage in manufacturing capacity gross profit margin in 2021 improved 710 basis points year over year to reach 32, 4%, which flowed through to non-GAAP metrics of adjusted operating income.

Adjusted net income and adjusted EBITDA, all of which improved year over year as highlighted by YJ earlier.

Our non-GAAP diluted earnings per share was $1 nine in 2021 up from 73% in 2020.

Speaker 4: Our non-gap diluted earnings per share was $1.09 in 2021, up from $0.73 in 2020.

Speaker 4: Now turning to Q4 reserves. Total revenue in Q4 was $110.3 million, down 13.1% from Q3, and down 22.8% from Q4 a year ago.

Now turning to Q4 reserve.

Total revenue in Q4 was $110 3 million down 13, 1% from Q3 and down 22, 8% from Q4 a year ago.

Speaker 4: Revenue from the standard product business was $99.5 million, down 15.2% from Q3, and down 23.2% from the same quarter a year ago.

Revenue from the standard products business was $99 $5 million down 15, 2% from Q3 and down 23, 2% from the same quarter a year ago.

Speaker 4: Both the sequential and year-over-year decrease was driven mainly by a significant decrease in revenue from our OLED products due to the previously mentioned supply shortage.

Both the sequential and year over year decrease was driven mainly by a significant decrease in revenue from our OLED product due to the previously mentioned the supply shortage.

However revenue in Q4 was $58 2 million.

Speaker 4: Power revenue in Q4 was $58.2 million, down 1.1% sequentially, but up 24.2% year-over-year, despite the fact that Q4 usually is a seasonally soft quarter.

Down one 1% sequentially, but up 24, 2% year over year.

The fact that Q4, usually is a seasonally soft quarter.

The significant increase year over year was due to strong demand across most product families as well as from the increased internal capacity at our factory.

Speaker 4: The significant increase year-over-year was due to strong demand across most product families as well as from the increased internal capacity at our best rate.

Gross profit margin in Q4 was 35% down 170 basis points from Q3, but up 810 basis points from Q4, a year ago.

Speaker 4: Gross profit margin in Q4 was 35%, down 170 basis points from Q3, but up 810 basis points from Q4 a year ago.

The year over year increase was attributable to an improved product mix.

Speaker 4: The year-over-year increase was attributable to an improved product mix combined with an increase in average selling price under a favorable pricing environment and a higher utilization rate of Web3.

Bind with an increase in average selling price under a favorable pricing environment and a higher utilization rate factory.

In Q3 2021 gross profit margin was favorably impacted by the shipment of certain products that were manufactured at a lower cost in the previous quarter.

Speaker 4: In Q3 2021, gross profit margin was favorably impacted by the shipment of certain products that were manufactured at a lower cost in the previous quarter.

Speaker 4: The higher gross profit margin combined with the higher revenue resulted in a significant improvement in all profitability metrics in Q3.

The higher gross profit margin combined with the higher revenue resulted in a significant improvement in all profitability metrics in Q3.

Now turning to operating expenses.

Speaker 4: SG&A in Q4 was $13.3 million as compared to $12.6 million in Q3 and $12.6 million in Q4 last year.

SG&A in Q4 was $13 3 million as.

<unk> to $12 $6 million in Q3, and $12 6 million in Q4 last year.

Speaker 4: R&D in Q4 was $20.2 million as compared to $12.3 million in Q3 and $11.6 million in Q4 last year.

R&D in Q4 was $20 2 million as compared to $12 $3 million in Q3, and $11 $6 million in Q4 last year.

Speaker 4: Stock compensation charges included in operating expenses were $1.6 million in Q4, $1.9 million in Q3, and $1.9 million in Q4 2020.

Stock compensation charges included in operating expenses were $1 6 million in Q4, $1 9 million in Q3 and $1 $9 million in Q4 2020.

In Q4, our operating income of $63 $9 million included net gain of $49 $4 million that represented income of $72 million from the recognition of a reverse termination fee net of professional service fees and expenses incurred.

Speaker 4: In Q4, our operating income of $63.9 million included net gain of $49.4 million that represented income of $70.2 million from the recognition of a reverse termination fee, net of professional service fees and expenses incurred in connection with a contemplated merger transaction of the company that was terminated in December 2021.

Third in connection with the contemplated merger transaction of the company that was terminated in December 2021.

Speaker 4: Of the $70.2 million, we received $51 million in cash in December 2021, and the remaining $19.2 million is expected to be received by the end of March 2022. This remaining portion was recorded as other receivables on our balance sheet as of December 31, 2021.

Of that $72 million.

We received $51 million in cash in December 2021, and the remaining $19 $2 million is expected to be received by the end of March 2022.

This remaining portion was recorded as other receivables on our balance sheet as of December 31, 2021.

Adjusted operating income in Q4 was $14 4 million down from $22 7 million in Q3 down from $15 $4 million in Q4, a year ago.

Speaker 4: Adjusted operating income in Q4 was $14.4 million, down from $22.7 million in Q3, down from $15.4 million in Q4 a year ago.

Speaker 4: adjusted EBITDA in Q4 was $18.1 million, down from $26.4 million in Q3, and down from $18.6 million in Q4 a year ago.

Adjusted EBITDA in Q4 was $18 $1 million down from $62 62.

$26 4 million in Q3 and down from $18 $6 million in Q4, a year ago.

Speaker 4: The sequential decline in these non-GAAM metrics was primarily attributable to the higher than usual gross profit in Q3, as explained above.

Sequential decline in these non-GAAP metrics was primarily attributable to the higher than usual gross profit in Q3 as explained above.

Net income in Q4 was $53 6 million as compared with $10 8 million in Q3, and $66 $6 million in Q4, a year ago.

Speaker 4: Net income in Q4 was $53.6 million as compared with $10.8 million in Q3 and $66.6 million in Q4 a year ago.

The sharp sequential increase in Q4 in 2021 was due primarily to the recognition of income from the $72 million reverse termination fee discussed earlier.

Speaker 4: The sharp sequential increase in Q4 in 2021 was due primarily to the recognition of income from the $70.2 million reverse termination fee discussed earlier.

Speaker 4: As a reminder, net income in Q4 2020 was favorably impacted by the recognition of income tax benefits of $47.1 million, primarily from recognizing differences between GAAP and cash tax expense of $43.9 million.

As a reminder, net income in Q4 2020 was favorably impacted by the recognition of income tax benefits of $47 $1 million, primarily from recognizing differences between GAAP and cash tax expense of $43 9 million.

Speaker 4: Our GAAP Diluted Earnings per Sharing Q4 was $1.12 as compared with $0.23 in Q3 and $1.45 in Q4 a year ago.

Our GAAP diluted earnings per share in Q4 was $1.12 as compared with 23% in Q3 and $1 45 in Q4 a year ago.

Our non-GAAP diluted earnings per share in Q4 was 31.

Speaker 4: Our non-GET diluted earnings per share in Q4 was $0.31, down from $0.42 in Q3, down from $0.40 in Q4 last year.

Down from 40% in Q3 down from 40 in Q4 last year.

Speaker 4: The difference between our GAAP and non-GAAP EPS in Q4 this year was primarily due to the elimination of income from the $70.2 million reverse termination fee, and related professional service fees and expenses, and income tax effects in connection with these non-GAAP adjustments relating to the contemplated merger transaction of the company that was terminated in December 2021.

The difference between our GAAP and non-GAAP EPS in Q4. This year was primarily due to the elimination of income from the $72 million reverse termination fee and related professional service fees and expenses and income tax effect in connection with these non-GAAP adjustments relating to the contemplated merger transaction of the.

Anthony that was terminated in December 2021.

There were 47 7 million shares outstanding in Q4 calculated on a diluted weighted average basis.

Speaker 4: There were 47.7 million shares outstanding in Q4, calculated on a diluted weighted average basis.

Speaker 4: On December 21, 2021, our board authorized the repurchase of up to $75 million of the company's stock. And as an immediate step, we entered into a $37.5 million affiliated stock repurchase agreement and received an initial delivery of 994,695 shares under the agreement.

On December 21, 2021, our board authorized a repurchase of up to $75 million of the Companys stock and has an immediate step we entered into a $37 $5 million accelerated stock repurchase agreement and received an initial delivery of 995.

695 shares under the agreement.

Our stock buy back under the accelerated stock repurchase agreement expected it to be completed by the end of March 2022.

Speaker 4: Our stop flyback under the accelerated stop repurchase agreement expected to be completed by the end of March 2022.

Now moving to the balance sheet.

Speaker 4: Cash was $279.5 million at the end of Q4. This compares to $276.3 million at the end of Q3 and $279.9 million at the end of 2020.

Cash was $279 $5 million at the end of Q4. This compares to $276 3 million at the end of Q3 and $279 9 million at the end of 2020.

During Q4, we received $51 million out of the $72 million reverse termination fee and spent merger related expenses of about $14 million. We also used $37 $5 million of our cash to entering to the accelerated stock repurchase program that I just mentioned.

Speaker 4: During Q4, we received $51 million out of the $70.2 million reverse termination fee and spent merger-related expenses of about $14 million. We also used $37.5 million of our cash to enter into the accelerated stock repurchase program that I just mentioned.

Accounts receivable net $251 million a.

Speaker 4: Account receivable net totaled $51 million, a decrease of 3% from Q3.

A decrease of 3% from Q3.

Speaker 4: Our day stays outstanding for Q4 was 42 days.

Our day sales outstanding for Q4 was 42 days.

Inventories net ordered $39 4 million an increase of one 5% from Q3.

Speaker 4: Inventories net totaled $39.4 million, an increase of 1.5% from Q3. Our average days in inventory for Q4 was 50 days.

Our average days in inventory for Q4 was 50 days.

Speaker 4: Kepex was $18.8 million in Q4.

Capex was $18 8 million in Q4.

Speaker 4: CapEx of $32.2 million in 2021 included approximately $70 million of one-time investments with our Fed3, which came in lower than the previously disclosed CapEx plans as a result of our cost reduction efforts in negotiating better pricing terms.

Capex of $32 $2 million in 2021 included approximately $17 million of one time investments with our phase III, which came in lower than the previously disclosed Capex plan.

As a result of our cost reduction efforts and negotiating better priced pricing terms.

As YJ mentioned earlier, while we are approaching our target capacity. After three ahead of our plan the demand for our power products has been outstripping our entire capacity.

Speaker 4: As Y.J. mentioned earlier, while we are approaching our target capacity FF3 ahead of our plan, the demand for our power products has been outstripping our internal capacity.

Speaker 4: In 2022, we'll invest about $8 million for special capex to further improve factory capacity within an expected payback period of less than two years.

In 2022, we'll invest about $8 million for special Capex to further improve battery capacity, we didnt expected payback period of less than two years.

Excluding this special Capex, our normalized Capex for 2022 is expected to be at around 4% of total.

Speaker 4: Excluding this special capex, our normalized capex for 2022 is expected to be at around 4% of total.

Speaker 4: Now moving to the first quarter guidance. Our near-term outlook is still being challenged by persisting supply constraints.

Now moving to the first quarter guidance.

Our near term outlook is still being challenged by persisting supply constrained.

Speaker 4: While actual results may vary, looking into the next quarter, which typically presents seasonal softness, MAGNA should anticipate Q1 2022 to be the bottom and currently expects revenue to be in the range of $102 million to $108 million, including about $9 million of traditional factory laundry services.

Actual results may vary looking into the next quarter, which typically present seasonal softness magnitude anticipate Q1 2022 to be the bottom and currently expect.

Revenue to be in the range of $102 million to $108 million, including about $9 million of transition of that III foundry services.

Speaker 4: Gross profit margin to be in the range of 34.5% to 36.5%.

Gross profit margin to be in the range of 34, 5% to 36, 5%.

With that I'll turn the call over to Ken.

Speaker 4: With that, I turn the call over to Soyeon. Soyeon?

Yes.

Thank you YJ. Thank you Shing out so operator. This concludes our prepared remarks, and we'll now open the call for questions.

Speaker 2: Thank you, YJ. Thank you, Xinyang. So operator, this concludes our prepared remarks and we'll now open the call for questions.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your Touchstone telephone again to ask a question. Please press Star then one.

Speaker 1: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then one on your touch-tone telephone. Again, to ask a question, please press star then one. One moment.

One moment for our first question.

Speaker 1: Our first question comes from Roger Gill of Needham & Company. How do you line us up?

Our first question comes from largely Gill of Needham <unk> Company. Your line is open.

Speaker 5: Thank you and thanks for all the insight on the quarter and what you can expect throughout the year. YJ, on the supply constraint issue affecting your OLED revenue, you mentioned, and you and Xiong mentioned, that Q1 will be the bottom in terms of your overall revenue and OLED revenue specifically.

Thank you and thanks for all the insight on the quarter and what you can expect throughout the year, while you're on the supply constraint.

Your OLED revenue.

You mentioned.

And you mentioned that Q1 will be the bottom in terms of your overall revenue and OLED revenue specifically.

I'm wondering how the capacity.

Speaker 5: I'm wondering how the capacity that's coming online from this new partnership, how that will flow throughout the year. Are we expecting more supply coming online in the third and fourth quarter?

Thats coming online.

<unk> new partnership.

How that will kind of flow throughout the year.

Are we expecting.

More.

More supply coming on line in the third and fourth quarter.

Speaker 5: And then, you know, to match the revenue ramp and are you kind of confident that you're going to match the timing between the new supply coming online and you ramp it with OLED with the new non-Korean panel.

And then to match the revenue ramp and are you kind of confident that youre going to match the timing.

Between the new supply coming online and you're ramping with OLED.

New non Korean panel maker, it's really more about the cadence and timing of the demand and supply.

Speaker 5: It's really more about the cadence and timing of the demand and supply.

Yeah. So rod thanks for the question. So I think we gave kind of a framework.

Speaker 3: Yeah, so Raj, thanks for the question. So I think we gave kind of a framework. As you know, we only comment one quarter at a time, but we wanted to give some framework to all so that you have a kind of understanding.

As you know we are fully comment one quarter at a time, but we wanted to give some.

Framework to all so that you have added.

Kind of understanding and so yes, we are bringing a new 20 nanometer foundry and usually when you bring a new 28 nano foundry you will go through typical learning curve. So we are currently being cautious.

Speaker 3: So yes, we are bringing a new 20 nanometer foundry. And usually when you bring a new.

Speaker 3: 28-nano foundry, you will go through a typical e-learning curve. So we are currently being cautious.

Speaker 3: So that's why we're saying that we expect the revenue to start towards the later part of the year. And I think we'll give you more clarity in the second quarter. But, you know, we are associating the typical e-learning curve, bringing a new foundry and the process. But we are very excited about this.

So that's why we're saying that we expect the revenue to start towards the later part of the year and I think we'll give you more clarity.

The.

<unk> quarter, but.

We are associating the typical learning curve bring a new foundry and.

In the process, but.

We are very excited about this.

Speaker 3: additional Foundry partnership as well as the

Additional foundry partnership as well as the <unk>.

Speaker 3: the new customer that's very world-class and that's outside Korea.

The new customer that very world class and Thats outside Korea. So.

Speaker 3: So we expect based on supply constraints, we frame that the oil LED revenue be flat to up.

So we expect based on the supply constraints, we frame that the OLED revenue be flat to up and.

Speaker 3: and the power to grow more than the market. And so that's what we see.

I think power to grow more than the.

The market and so that's what we see.

Okay.

Speaker 5: So that implies a pretty big ramp in OLED in the second half. So I would assume by that time, third or fourth quarter, you would have.

So that implies a pretty big ramp in OLED and the <unk>.

Second half.

So I would assume by that time.

Third or fourth quarter, you would have.

Speaker 5: then overcome some of the learning curves in terms of bringing the capacity.

Ben.

Overcome from the learning curve in terms of bringing the capacity.

Speaker 5: How do we think about the gross margins? Because the gross margins have really been really good the last few quarters and you're guiding it to 35.5% at the midpoint. When more supply comes online from this new foundry, how would that affect your margins, if at all?

How do we think about the gross margin because the gross margins have really been.

Really good.

A few quarters.

You're guiding to 35, 5% at the midpoint.

When more supply comes online from those new foundry, how would that affect your margin if at all maybe.

Speaker 5: Maybe talk quickly about the pricing environment. Is that affecting your margins positively? What about the mixed shift within power to premium power?

Maybe talk quickly about the pricing environment is that affecting your margins positively what about the mix shift within power to premium power.

Speaker 5: Because the margins have been moving up despite some of the revenue declines and all that.

The margins have been moving up despite despite some of the revenue declines in OLED.

Yes, so we have continued to work on.

Speaker 3: Yeah, so we are continuing to work on the, you know...

High value high margin product.

Speaker 3: high value, high margin products. So that's how we done in lieu of the shorter.

That's how we've done.

And in lieu of the shortages.

Speaker 3: The, also when you bring the new process, again, we'll go through yield learning curve. So initially, we've been cautious. We think that will have, you know, impact on the margin, so that's already baked into our forecast.

Also when you bring the.

New process again, we will go through E learning curve. So initially we've been cautious.

That will have.

The impact on the.

The margin so that's already baked into our forecast.

Speaker 3: So again, we will let you know how it progresses. Right now, I think it's best to put some conservative cautious.

So again, we will we will let you know how it progresses, but right now I think it's best that put some conservative cautious because when you bring a new foundry new process, there's a learning curve.

Speaker 3: because when you bring a new foundry, a new process, there's a yield learning curve.

Okay. Thank you.

Thank you.

Speaker 1: Our next question comes from Susie DeSilva of Ross Capital. Your line is open. Hi YJ. Hi Xinyoung. So maybe perhaps a quick follow-up on Roger's question on gross margin. What was the impact on the sale of written-off product in this quarter?

Our next question comes from <unk> Silva of Roth Capital. Your line is open.

Hi, YJ, Hi, Shin young so maybe perhaps a quick follow up on Roger's question on gross margin.

What was the impact on the sale of written off product in this quarter.

It was this is just regular theres not really the particular, the special kind of write off that we took in.

Speaker 4: It was just regular. There's not really the particular, the special kind of write-off that we took. I see. In QR. So it's just a regular quarter as in the normal. Okay, that happens periodically. Okay. And then, um...

In Q1, so it's just your regular quarter.

In the normal.

Okay. Okay. So happens periodically okay and then.

Speaker 1: YJ or Shenyang, the comment about 1Q22 being the bottom, can you just talk about the two or three key elements that give you the confidence to say that going forward at this point? Because it sounds like the Foundry capacity, the new Foundry won't be coming on until the end of the year, so I'm just curious on the comments behind it.

The comment about Q2 being the bottom can you just talk about the two or three key elements that give you the confidence to say that going forward at this point because it sounds like the foundry capacity at a new foundry won't be coming out until the end of the year. So.

I'm just curious on the comments beyond that beyond that.

Yes so.

Speaker 3: Yes, so there are a couple of points. On the power side, as Shin-Young mentioned, we are putting special 8 million of capex. The goal is to bring that additional capacity within six months. We will work on the productivity in the second quarter to get more productivity.

A couple of points on the power side as <unk> mentioned, we are putting.

Special $8 million of Capex. So the goal is to.

Bring that additional capacity.

Within six months so.

And so and we will work on the productivity in the second quarter, so for us too.

Get the.

More productivity.

Productivity.

Speaker 3: On the OLED side, as you said, we said we're expecting more new foundry coming online in the later part of this year. So right now, the projection is based on supply constraints.

On the OLED side as you said, we said.

Are we expecting more new.

Foundry coming online in the later part of this year. So those so right now the projection is based on supply constraints.

Speaker 3: and the demand is still higher than what we can supply.

And the demand is still higher than the what we can supply.

Okay Fantastic and then the new non Korean.

Speaker 1: Okay, fantastic. And then the new non-Korean OLED customer, can you talk about what the timeframe for that turning into material revenue is to understand how far off that would be as an incremental element to revenue?

The customer can you talk about what the timeframe.

For that turning into material revenue is just to understand how far off that would be the incremental element to your revenue.

Speaker 3: So, again, so we are, you know, I think we said that the OLED revenue will be flat to up than last year, so that kind of gives you what may happen in the second part of the year, and that will coincide with our new foundry as well as new customer coming online. Okay. Thanks for that, Colin.

So again, so we are I think.

We said that the OLED revenue will be flat to up 10 last year. So that kind of gave you and what may happen in the second part of the year.

And that will clean coincide with.

Sure.

New foundry as well as new customer coming online.

Okay. Thanks for that color, what J J, thanks for that.

Thank you again, ladies and gentlemen, if you like to ask a question. Please press Star then one on you touched on the telephone.

Speaker 6: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then one on your touchstone telephone. Again, to ask a question...

Again to ask a question. Please press Star then one.

One moment please.

Yeah.

Our next question comes from Andrew more kind of Oppenheimer <unk> co. Your line is open.

Speaker 6: Our next question comes from Andrew Northcutt of Oppenheimer and Co.

Speaker 7: All right, thanks for taking the question. This is Andrew Northcote, still again for Martin Yang. Just one question for you. When you're thinking about the quarterly revenue, how are you thinking about the seasonality for 2022 and how does that compare to 2021?

Alright, Thanks for your question.

So again for Martin Yang.

Just one question for you.

When you're thinking about the quarterly revenue how are you thinking about the seasonality for 2022 and has that pie compared to two.

2021.

Well.

Speaker 3: I think we are just saying that the seasonality is there, typically, but right now our revenue is actually limited by the supply constraints, so the curve is actually...

I think we are just saying that the seasonality is there.

Typically but right now our revenue is actually limited by the supply constraints. So.

The curve is actually.

Speaker 3: limited by the supply constraint rather than the seasonality. But normally our pattern has been Q3 in the peak, Q4 down and Q1 down, and go up in Q2, Q3's. But that's the normal seasonality. But right now our revenue has been kept by the supply constraint on both OLED and power side.

Limited by the supply constraint rather than the seasonality, but normally our pattern has been Q3 and the peak Q4 down in Q1 down and go up in Q2, Q3's, but thats normal seasonality, but right now our revenue has been kept by the supply constraints.

On both OLED and power side.

Got it thank you so much.

Speaker 6: Thank you. This does conclude our call today. I'd like to turn the call back over to management for any closing remarks.

Thank you.

That concludes our call today I'd like to turn the call back over to management for any closing remarks.

Thank you operator that concludes our fourth quarter 2021 earnings Conference call. Please look for details of our future events on Magna chips Investor Relations website. Thank you for joining us today.

Speaker 2: Thank you, operator. This concludes our fourth quarter 2021 earnings conference call. Please look for details of our future events on Magna Chip's investor relations website. Thank you for joining us today. Goodbye.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect have a great day.

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Yes.

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Speaker 8: ?

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Speaker 8: you

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Thank you for standing by and welcome to the Q4 2021 magnitude semiconductor Corporation, earning conference call. At this time all participants are in a listen only mode.

Speaker 6: Thank you for standing by and welcome to the Q4 2021 Magnachip Semiconductor Corporation Earning Conference Call. At this time, all participants are in listen-only mode. After this feature presentation, there will be a question and answer session. To ask a question at that time, please press star then 1 when you touch the telephone.

After the Speakers' presentation there'll be a question and answer session to ask a question at that time was by far than one when you touch tone telephone.

And the amount of today's conference call is being recorded.

Speaker 6: As a reminder, today's conference call is being recorded. I would now like to welcome to the conference room your host, Ms. Sue John . Ma'am, you may begin.

I would now like turn the call for your house with two young John Ma'am you may begin.

Thank you Hello, everyone. Thank you for joining us to discuss financial results for the fourth quarter ended December 31st 2021, 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 of today's call will be.

Speaker 2: Thank you. Hello, everyone. Thank you for joining us to discuss MagnaChip's financial results for the fourth quarter ended December 31, 2021. 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 of today's call will be available shortly after 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.

[noise] available shortly after 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.

Speaker 2: Joining me today are Y.J. Kim, Magna Chief Executive Officer, and Shin Young Park, our Chief Financial Officer.

Joining me today are YJ, Kim Midnight Chip, Chief Executive Officer, and Shin Young Park, our Chief Financial Officer.

YJ will discuss the company's recent an annual operating performance and business overview and Shin Young will review financial results for the quarter R&D year and provide guidance for the first quarter of 2022.

Speaker 2: There will be a Q&A session following the prepared remarks.

There will be a Q&A session following the prepared remarks.

Speaker 2: During the course of this conference call, we may make forward-looking statements about MagnaChip's business outlook and expectations. Our forward-looking statements and all other statements that are not historical facts reflect our beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the safe harbor statement found in our SEC filings.

And the Safe Harbor statement found in our SEC filings.

Speaker 2: during the call. We also will discuss non-GAAP financial measures.

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 <unk> chips operating performance that maybe useful.

Speaker 2: The non-GAAT measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate an alternative measure of MagneCIP's operating performance that may be useful.

Speaker 2: A reconciliation of the non-GET financial measures to the most directly comparable GET measures can be found in our fourth quarter earnings release available on our website under the investors section at www.magnachip.com.

Speaker 2: I now will turn the call over to YJ Kim. YJ?

I now will turn the call over to YJ Kim YJ.

Speaker 3: Hello everyone. Thank you for joining our call today.

Hello, everyone. Thank you for joining our call today.

Speaker 3: For the first quarter, the demand and signals from our customers remain strong across the board.

For the first quarter the demand signals from our customers remained strong across the board. However.

Speaker 3: severe supply constraints continue to significantly limit our oil revenue potential, which was partially upset by our stronger power business.

The supply constraints continued to significantly limit our OLED revenue potential, which was partially offset by a stronger power business, we reported $110 3 million in revenue and <unk>.

Speaker 3: We reported $110.3 million in revenue and $0.31 in non-GAAP diluted EPS. Our revenue decreased 13.1% sequentially and 22.8% year-over-year as a result of the supply constraints.

<unk> non-GAAP diluted EPS revenue decreased 13, 1% sequentially and 22, 8% year over year.

<unk> of the supply constraints. The shortage was felt more severely for 28 nanometer 12 inch wafers, where we have been producing most of our new OLED products winning numerous designs.

Happily expanding market share in the past few years.

Speaker 3: Case in point, the revenue from 28nm products grew 80% to $174 million in 2021 from $97 million in 2020.

Case in point the revenue from 28 nanometer products grew 80% 274 million in 2021 from 97 million in 2020, representing 90% of the total OLED revenue in 2021.

How does it compare to only 34% in 2020.

The success of our 28 nanometer product line has been and we expect we will continue to be one of the critical growth enabler for us.

Unfortunately.

Speaker 3: A severe shortage of 28-nanometer OLED wafers adversely affected our OLED business as a major limiting factor, adding tremendous pressure to an already difficult supply environment.

Avs shortage, you have 28 nanometer OLED wafers adversely.

Affected our OLED business as a major limiting factor, adding tremendous pressure to an already difficult supply environment. Fortunately, we enhanced our supply chain for and an additional 28 nanometer capacity last year, which we expect will start to come.

Speaker 3: Fortunately, we enhanced our supply chain for an additional 20 nanometer capacity last year, which we expect will start to come online in the later part of this year.

Online in the later part of this year.

Looking at the full year, while our revenue for 2021 declined six 5% year over year due to the wafer supply shortage, partially offset by outstanding growth in our power business.

Speaker 3: Looking at the full year, while our revenue for 2021 declined 6.5 percent year-over-year due to the wafer supply shortage, partially offset by outstanding growth in our power business, I am pleased that we delivered solid profitability for the full 2021 year.

I'm pleased that we delivered solid profitability for the full 2021 year gross profit margin reached 32, 4% representing an increase of 700 110 basis points from 2020.

Speaker 3: Gross profit margin reached 32.4%, representing an increase of 710 basis points.

Speaker 3: from 2020. Adjusted operating income margin increased to reach 11.8 percent of total revenue from 8.2 percent in 2020. Adjusted net income was 10.8 percent of total revenue versus 5.6 percent from the year before. And Adjusted EBITDA also grew to 70.7 million from 52.9 million in 2020.

Adjusted operating income margin increased to reach 11, 8% of total revenue from eight 2% in 2020.

Adjusted net income was 10, 8% of total revenue versus five 6% from the year before and adjusted EBITDA also grew to $70 7 million from $52 9 million in 2020.

Speaker 3: 2021 has certainly presented its share of unique challenges for us. However, our team steadfastly pressed forward with our plan to achieve not only healthy profitability, but also critical milestones to fuel future growth, upon which I will elaborate shortly. I deeply appreciate every magnitude team member for their unwavering commitment and dedication.

2021 has certainly presented its share of unique challenges for us. However, our team steadfastly press forward with our plan to achieve not only healthy profitability, but also critical milestones to fuel future growth upon which I will elaborate shortly.

I deeply appreciate every magazine chip team member for their unwavering commitment and dedication.

Speaker 3: I'm most grateful that we could achieve solid results.

Most grateful that we could achieve solid results, while protecting and safeguarding our employee health and safety amidst the global COVID-19 pandemic.

Speaker 3: while protecting and safeguarding our employee health and safety amidst the global COVID-19 pandemic.

Speaker 3: Now, let's move to a detailed review of our product business starting with the OLED business.

Speaker 3: Our OLED revenue in Q4 was 37.7 million, down 31.8% sequentially, and down 53.1% from our historical record revenue level in Q4 2020. Against severe supply constraints, we have been protecting our profitability by strategically focusing on high-value, high-margin design activity.

In Q4, 2020, again Cvs supply constraints, we have been protecting our profitability by strategically focusing on high value high margin design activities.

Speaker 3: including the newly launched flagship smartphone model of a major smartphone OEM. Also, revenue from 5G smartphones and high frame rate products continue to grow represents over 93% of our 2021 OLED revenue.

<unk> the newly launched flagship smartphone model of a major smartphone OEM.

Revenue from <unk> smartphones and high frame rate products continue to grow represent over 93% of our 2021 OLED revenue.

Speaker 3: Turning to the full year review, OLD revenue was 192.8 million, down 32.3 percent year-over-year, as we unfortunately had to forego some demand. Our demand was more than 50 percent higher than what we shipped in 2021. However, I am pleased to report some critical milestones that we achieved.

Turning to the full year review OLED revenue was $192 8 million down 32 three.

3% year over year as we unfortunately had to forego some demand.

Demand was more than 50% higher than what we shipped in 2021. However, I am pleased to report some critical milestones that we achieved.

Speaker 3: One, we have successfully broadened our customer base to include a top-tier panel maker outside Korea. Initial revenue is expected to start in the later part of this year. We are well-aligned with top-tier panel makers in the world and positioned to benefit from increasing OLED adoption in multiple countries.

Two we enhanced our supply chain for additional 20 nanometer manufacturing capacity, which is expected to come online in the later part of this year. In addition, we are in discussions with our foundry partners regarding a multi year supply agreement in order to secure long term capacity.

We have also been working on a more use and supply agreements with key customers some of which have been already signed three we expanding into new areas. We have successfully comment initial mass production of OLED TV dvi's during the fourth quarter and we continue to.

Speaker 3: Three, we are expanding into new areas. We have successfully commenced initial mass production of OLED TV DDIC during the fourth quarter, and we continue to expand our large...

Span our large.

Display OLED TV business by addressing Nextgen premium Tvs with micro OLED technology, we used to have over 30% market share in TV application with LCD DDI C.

With a particular vendor during peak times before strategically the focus from the business a few years ago. In addition, we are also expanding our OLED DDI product lineup for automotive display applications in summary.

Speaker 3: Really the business is winning new customers and expanding into new applications.

OLED business is winning new customers and expanding into new applications. The demand from our current customers is strong in fact, we are getting numerous Arab skus from Korean panel makers, although supply constraints continue to be the gating factor with additional supply capacity expect.

Speaker 3: the demand from our current customers is strong. In fact, we are getting numerous RFQs from Korean panel makers, although supply constraints continue to be the gating factor.

Speaker 3: With additional supply capacity expected beginning in the later part of this year, we are very optimistic about the rejuvenated growth in our oil business in the coming years.

Beginning in the later part of this year, we are very optimistic about the rejuvenated growth in our OLED business in the coming years now lets turn to the power business power revenue in Q4 came in at $58 2 million, which was slightly lower than our record revenue in Q3 2021.

Speaker 3: Now, let's turn to the power business. Power revenue in Q4 came in at 58.2 million, which was slightly lower than our record revenue in Q3 2021, and a solid quarterly revenue growth of 24.2 percent year-over-year.

One and a solid quarterly revenue growth of 24, 2% a year over year. The overall demand for our Govt medium voltage MOSFET.

Speaker 3: The overall demand for our IGBT, medium-voltage MOSFET and battery-fed products in the industry and wireless applications remains strong.

MOSFET and battery FET product in the industry and wireless applications remained strong, especially alloy GBT products for solar inverter demonstrated solid traction in Q4 bolstered by growing interest in alternative energy.

Speaker 3: Especially our IGBT products for solar inverters demonstrated solid traction in Q4, bolstered by growing interest in alternative energy.

Speaker 3: For full year 2021, our power business delivered a record high revenue of $227.8 million.

For full year 2021, our power business deliver record high revenue of about $227 8 million.

Speaker 3: an increase of 36.8 percent year-over-year. Driven by solid demand across, most of our product families are coupled with increased internal capacity, resulting from our timely investment in PHEV-3. Clearly, we are approaching our target ahead of our plan, and we are working to further improve PHEV-3 capacity. Shin Yong will provide more details shortly.

An increase of 36, 8% year over year, driven by solid demand across most of our product families are coupled with increased internal capacity, resulting from our timely investment in fab three clearly we are approaching our target well ahead of our plan and we are working through.

Further improved fab three capacity Shin young will provide more details shortly.

One notable highlight of for 2021 is a exciting momentum we are seeing in premium power products. Our premium product group grew remarkably in 2021, $217 1 million from $82 5 million a year ago Super Junction MOSFET.

Speaker 3: One notable highlight for 2021 is the exciting momentum we are seeing in premium power products. Our premium product group grew remarkably in 2021 to $117.2 million from $82.5 million a year ago.

Speaker 3: Super Junction must not only maintain its solid position in Korean TV markets, but also expand it into PC power, lighting and other industrial applications.

Not only maintain a solid position in Korean TV markets, but also expanded into PC power lighting and other industrial applications power IC revenue grew over 60% year over year since the first penetration into solid state disk related application in two <unk>.

Speaker 3: PowerIC revenue grew over 60% year-over-year since the first penetration into solid-state disk-related applications in 2020. IGBT revenue grew significantly driven by strong demand for renewable energy. I'll go to market strategy.

In 'twenty.

<unk> revenue grew significantly driven by strong demand for renewable energy our go to market strategy.

Efficient R&D and timely investment in fab three led us to achieve record quarterly revenues three quarters in a row during 2021 and also accelerated development and introduction of new products.

In summary, we will continue to execute the growth plan of our power business by strengthening in fab, three productivity and introducing new products with superior performance and improved cost, which we expect will further drive healthy growth for many years.

Speaker 3: In summary, we will continue to execute the growth plan of our power business by strengthening Fab 3 productivity and introducing new products with superior performance and improved cost, which we expect will further drive healthy growth for many years.

Before I turn the floor over to <unk> I will take a few minutes to comment on our capital allocation plan given our current business condition.

Our near term cash use is focused on three areas.

Speaker 3: First, we target to maintain 100 million plus cash on the balance sheet. This is mainly for working capital, but it also reflects our customers' desire to see a solid cash balance. Now, we target to maintain 100 million plus cash on the balance sheet.

First we target to maintain $100 million plus cash on the balance sheet. This is mainly for working capital, but it also reflects our customers' desire to see a solid cash balance too.

Speaker 3: As we have already demonstrated, we are committed to share the return. In December 2021, our board authorized a $75 million stock repurchase program.

As we have already demonstrated we are committed to shareholder return in December 2021, our board authorized a $75 million stock repurchase program.

Three.

Speaker 3: the remainder of the cash on our balance sheet will be allocated for flexible optionality.

Remainder of the cash on our balance sheet will be allocated for flexible optionality.

Speaker 3: At the present time, we believe that supply is the fundamental limiter of a potential growth. Therefore, enhancing our supply chain is currently deemed one of the imminent capital allocation options. Possible options include, but not limited to, securing additional 20-nanometer manufacturing capacity and locking in multi-year long-term supply agreements, which typically require strong commitments from us and our customers, including prepayments.

In locking in multiyear long term supply agreements, which typically requires strong commitment from us and our customers, including prepayments. We are also expanding additional manufacturing capacity at fab <unk> III for our power business to address continuously increasing demand.

Speaker 3: We are also expanding additional manufacturing capacity at FAFSA-3 for our power business to address continuously increasing demand.

Speaker 3: In conclusion, we're expanding our customer base, penetrating new applications. Our ability to supply is anticipated to improve in the later part of this year. While our near-term outlook is still being challenged by persisting supply constraints,

In conclusion, we're expanding our customer base penetrating new applications.

Speaker 3: We expect OLED revenue to be flat to slightly up in 2022 compared to 2021, with significant growth coming during later part of the year.

Into 2022 compared to 2021 with significant growth coming during later part of the year.

Speaker 3: As a whole company, we expect modest revenue increase in 2022, driven by the oil lead recovery, as well as decent growth in our power business.

The whole company, we expect modest revenue increase in 2022, driven by the OLED recovery as well as decent growth in our power business recent developments and critical milestones we have achieved reinforce.

Speaker 3: Recent developments and critical milestones we have achieved reinforce our confidence and optimism about our long-term growth. Now I will turn the call over to Xinyang and come back for the Q&A session.

Conference and optimism about our long term growth now I will turn the call over to Shin young and come back for the Q&A session. Shannon. Thank you Ajay and welcome to everyone on the call, let's start with key financial metrics for the full year 2021, and Q4 revenue.

Speaker 4: Xinyoung? Thank you, IJ, and welcome to everyone on the call. Let's start with key financial metrics for the full year 2021 and Q4.

Speaker 4: Revenue in 2021 was $474.2 million, down 6.5% from 2020. The decrease was primarily due to a decrease in revenue from our OLED DDIC products, stemming from a continued severe supply shortage, which was offset in part by strong revenue growth from our power business.

In 2021 was $474 2 million down six 5% from 2020. The decrease was primarily due to a decrease in revenue from our OLED <unk> IC products.

From a continued CVR sub supply shortage, which was offset in part by strong revenue growth from our power business.

<unk> revenue was $205 $3 million down 31, 3% from 2020, whereas power business revenue was up 36, 8% from 2020 to $227 $8 million.

Speaker 4: Display business revenue was $205.3 million, down 31.3% from 2020, whereas power business revenue was up 36.8% from 2020 to $227.8 million.

However, this revenue growth was driven by solid demand across most product families coupled with increased internal capacity, Richard Kim from our timely investment in factory.

Speaker 4: Power business revenue growth was driven by solid demand across most product families coupled with increased internal capacity resulting from our timely investment in Web3.

Speaker 4: Despite the decline in revenue year-over-year due mainly to the global shortage in manufacturing capacity, gross profit margin in 2021 improved 710 basis points year-over-year to reach 32.4%, which flowed through to non-GAAP metrics of adjusted operating income, adjusted net income, and adjusted EBITDA, all of which improved year-over-year as highlighted by YJ earlier.

Adjusted net income and adjusted EBITDA, all of which improved year over year as highlighted by YJ earlier.

Speaker 4: Our non-get diluted earnings per share was $1.09 in 2021, up from $0.73 in 2020.

Yes.

Our non-GAAP diluted earnings per share was $1 <unk> in 2021 up from 73% in 2020.

Speaker 4: Now, turning to Q4 reserves. Total revenue in Q4 was $110.3 million, down 13.1% from Q3, and down 22.8% from Q4 a year ago.

Now turning to Q4 reserve.

Total revenue in Q4 was $110 $3 million down 13, 1% from Q3 and down 22, 8% from Q4 a year ago.

Speaker 4: Revenue from the Standard Proc Business was $99.5 million, down 15.2 percent from Q3 and down 23.2 percent from the same quarter a year ago.

Revenue from this in our product business was $99 $5 million down 15, 2% from Q3 and down 23, 2% from the same quarter a year ago.

Speaker 4: Both the sequential and year-over-year decrease was driven mainly by a significant decrease in revenue from our OLED products due to the previously mentioned supply shortage.

Both the sequential and year over year decrease was driven mainly by a significant decrease in revenue from our OLED products due to the previously mentioned the supply shortage.

Power revenue in Q4 was $58 2 million down one 1% sequentially, but up 24, 2% year over year. Despite the fact that Q4, usually is a seasonally soft quarter.

Speaker 4: Power revenue in Q4 was $58.2 million, down 1.1% sequentially but up 24.2% year-over-year despite the fact that Q4 usually is a seasonally soft quarter.

Speaker 4: The significant increase year-over-year was due to strong demand across most product families as well as from the increased internal capacity at our best rate.

The significant increase year over year was due to strong demand across most product families as well as from the increase in total capacity at our factory.

Speaker 4: Gross profit margin in Q4 was 35%, down 170 basis points from Q3, but up 810 basis points from Q4 a year ago.

Gross profit margin in Q4 was 35% down 170 basis points from Q3, but up 810 basis points from Q4, a year ago.

But year over year increase was attributable to an improved product mix combined with an increase in average selling price under a favorable pricing environment at a higher utilization rate factory.

In Q3 2021 gross profit margin was favorably impacted by the shipment of certain products that were manufactured at a lower cost in the previous quarter.

Speaker 4: In Q3 2021, gross profit margin was favorably impacted by the shipment of certain products that were manufactured at a lower cost in the previous quarter.

Speaker 4: The higher gross profit margin combined with the higher revenue resulted in a significant improvement in all profitability metrics in Q3.

The higher gross profit margin combined with the higher revenue resulted in a significant improvement in all profitability metrics in Q3.

Now turning to operating expenses.

Speaker 4: SG&A in Q4 was $13.3 million as compared to $12.6 million in Q3 and $12.6 million in Q4 last year.

G&A in Q4 was $13 $3 million as compared to $12 $6 million in Q3, and $12 $6 million in Q4 last year.

Speaker 4: R&D in Q4 was $20.2 million as compared to $12.3 million in Q3 and $11.6 million in Q4 last year.

R&D in Q4 was $22 million as compared to $12 3 million in Q3, and $11 $6 million in Q4 last year.

Speaker 4: Stock compensation charges included in operating expenses were $1.6 million in Q4, $1.9 million in Q3, and $1.9 million in Q4 2020.

Stock compensation charges included in operating expenses were $1 $6 million in Q4, $1 9 million in Q3, and $1 9 million in Q4 of 2020.

[laughter].

In Q4, our operating income of $63 $9 million included net gain of $49 $4 million that represent an income of $72 million.

From the recognition of a reverse termination fee net of professional service fees and expenses incurred in connection with the contemplated merger transaction of the company that was terminated in December 2021.

Speaker 4: Of that $70.2 million, we received $51 million in cash in December 2021, and the remaining $19.2 million is expected to be received by the end of March 2022. This remaining portion was recorded as out-of-receivables on our balance sheet as of December 31, 2021.

Of that $72 million, we received $51 million in cash in December 2021, and the remaining $19 $2 million is expected to be received by the end of March 2022.

This remaining portion was recorded as other receivables on our balance sheet as of December 31, 2021.

Our adjusted operating income in Q4 was $14 4 million down from $22 7 million in Q3 down from $15 $4 million in Q4, a year ago.

Speaker 4: adjusted operating income in Q4 was $14.4 million, down from $22.7 million in Q3, down from $15.4 million in Q4 a year ago.

Speaker 4: adjusted EBITDA in Q4 was $18.1 million, down from $26.4 million in Q3, and down from $18.6 million in Q4 a year ago.

So the EBITDA in Q4 was $18 $1 million down from $62 62.

$26 4 million in Q3 and down from $18 $6 million in Q4, a year ago.

Speaker 4: The sequential decline in these non-GAIM metrics was primordally attributable to the higher than usual gross profit in Q3 as explained above.

Sequential decline in these non-GAAP metrics was primarily attributable to the higher than usual gross profit in Q3 as explained above.

Net income in Q4 was $53 6 million as compared with $10 8 million in Q3, and $66 $6 million in Q4, a year ago.

Speaker 4: Net income in Q4 was $53.6 million as compared with $10.8 million in Q3 and $66.6 million in Q4 a year ago.

The sharp sequential increase in Q4 in 2021 was due primarily to the recognition of income from the $72 million reverse termination fee discussed earlier.

Speaker 4: The sharp sequential increase in Q4 in 2021 was due primarily to the recognition of income from the $70.2 million reverse termination fee discussed earlier.

As a reminder, net income in Q4 2020 was favorably impacted by the recognition of income tax benefits of $47 1 million.

Primarily from recognizing differences between GAAP and cash tax expense of $43 $9 million.

Speaker 4: Our gap diluted earnings per share in Q4 was $1.12 as compared with $0.23 in Q3 and $1.45 in Q4 a year ago.

Our GAAP diluted earnings per share in Q4 was $1.12 as compared with 23% in Q3 and $1 45 in Q4 a year ago.

Our non-GAAP diluted earnings per share in Q4 was 31 down.

Speaker 4: Our non-get diluted earnings per share in Q4 was $0.31, down from $0.42 in Q3, down from $0.40 in Q4 last year.

Down from 40% in Q3 down from 40 in Q4 last year.

Speaker 4: The difference between our GAAP and non-GAAP EPS in Q4 this year was primarily due to the elimination of income from the $70.2 million reverse termination fee and related professional service fees and expenses and income tax effect in connection with these non-GAAP adjustments relating to the contemplated merger transaction of the company that was terminated in December 2021.

Any that was terminated in December 2021.

There were $47 7 million shares outstanding in Q4 calculated on a diluted weighted average basis.

Speaker 4: There were 47.7 million shares outstanding in Q4, calculated on a diluted weighted average basis.

Speaker 4: On December 21, 2021, our board authorized the repurchase of up to $75 million of the company's stock, and as an immediate step, we entered into a $37.5 million accelerated stock repurchase agreement and received an initial delivery of 994,695 shares under the agreement.

On December 21, 2021, our board authorized the repurchase of up to $75 million of the company's stock and as an immediate step we entered into a $37 $5 million accelerated stock repurchase agreement and received an initial delivery of 994.

695 shares under the agreement.

Our stock buyback under the accelerated stock repurchase agreement expected to be completed by the end of March 2022.

Speaker 4: Our stock flyback under the Accelerated Stock Repurchase Agreement is expected to be completed by the end of March 2022.

Now moving to the balance sheet.

Speaker 4: Cash was $279.5 million at the end of Q4. This compares to $276.3 million at the end of Q3 and $279.9 million at the end of 2020.

Cash was $279 5 million at the end of Q4. This compares to $276 $3 million at the end of Q3 and $279 $9 million at the end of 2020.

During Q4, we received $51 million out of the $72 million reverse termination fee and spent merger related expenses of about $14 million. We also used $37 $5 million of our cash to enter into the accelerated stock repurchase program that I just mentioned.

Accounts receivable net quarter at $51 million.

Speaker 4: Account receivable net totaled $51 million, a decrease of 3% from Q3.

A decrease of 3% from Q3.

Speaker 4: Our daily sales are standing for Q4 was 42 days.

Our days sales outstanding for Q4 was 42 days.

Inventories net ordered $39 4 million an increase of one 5% from Q3.

Speaker 4: Inventories net totaled $39.4 million, an increase of 1.5% from Q3. Our average days in the inventory for Q4 was 50 days.

Our average days in inventory for Q4 was 50 days.

Capex was $18 $8 million in Q4.

Capex of $32 $2 million in 2021 included approximately $17 million of one time investments, both our phase III, which came in lower than the previously disclosed capex trends as a result of our cost reduction efforts and negotiating better prices to pricing terms.

As YJ mentioned earlier, while we are approaching our target capacity of phase III ahead of our plan the demand for our power products has been outstripping our entire capacity.

Speaker 4: As Y.J. mentioned earlier, while we are approaching our target capacity of F3 ahead of our plan, the demand for our power products has been outstripping our internal capacity.

Speaker 4: In 2022, we'll invest about $8 million for special CAPEX to further improve factory capacity within an expected payback period of less than two years.

In 2022, we'll invest about $8 million for special Capex to further improve battery capacity, we had unexpected a payback period of less than two years.

Excluding the special Capex, our normalized Capex for 2022 is expected to be at around 4% of total revenue.

Speaker 4: Excluding this special capex, our normalized capex for 2022 is expected to be at around 4% of total risk.

Speaker 4: Now, moving to the first quarter guidance. Our near-term outlook is still being challenged by persisting supply constraints.

Now moving to the first quarter guidance.

Our near term outlook is still being challenged by persisting supply constraints.

Speaker 4: While actual results may vary, looking into the next quarter, which typically presents seasonal softness, Magnitude anticipates Q1 2022 to be the bottom and currently expects revenue to be in the range of $102 million to $108 million, including about $9 million of transitional factory foundry services.

Actual results may vary looking into the next quarter, which typically present seasonal softness magnitude. We anticipate Q1 2022 to be the bottom and currently expect revenue to be in the range of $102 million to $108 million, including about $9 million of transition.

Of that three foundry services.

Speaker 4: Gross profit margin to be in the range of 34.5% to 36.5%.

Gross profit margin to be in the range of 34, 5% to 36, 5%.

With that I'll turn the call over to Korea.

Speaker 4: With that, I'll turn the call over to Soyeon. Soyeon?

Sure.

Thank you Jay Thank you Sheena.

Speaker 2: Thank you, YJ. Thank you, Shinyoung. So, operator, this concludes our prepared remarks, and we'll now open the call for questions.

Operator. This concludes our prepared remarks, and we'll now open the call for questions.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your Touchstone telephone again to ask a question. Please press Star then one.

Speaker 6: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then one.

One moment for our first question.

Speaker 6: Our first question comes from Raji Gill of Needham & Company. Your line is open.

Our first question comes from Rajiv Gill of Needham <unk> Company. Your line is open.

Yes, Thank you and thanks for all the insight on the quarter and what you can expect throughout the year, while the supply constraint.

Speaker 5: Yes, thank you, and thanks for all the insight on the quarter and what you can expect throughout the year. Liza, on the supply constraint issue affecting your OLED revenue, you mentioned, and you and Shin Young mentioned, that Q1 will be the bottom in terms of your overall revenue, and OLED revenue specifically.

Your OLED revenue you mentioned.

<unk> mentioned that Q1 will be the bottom in terms of your overall revenue and OLED revenue specifically.

I'm wondering how the capacity.

Speaker 5: I'm wondering how the capacity that's coming online, you know, from this new partnership, how that will kind of flow throughout the year. Are we expecting, you know, more supply coming online in the third and fourth quarter?

Thats coming online from this new new partnership.

How that will kind of flow throughout the year.

Are we expecting.

More.

More supply coming on line in the third and fourth quarter.

Speaker 5: And then, you know, to match the revenue ramp, and are you kind of confident that you're going to match the timing between the new supply coming online and you ramping with OLED with the new non-Korean panel?

And then to match the revenue ramp and are you kind of confident that youre going to match the timing between the new supply coming online and you're ramping with OLED.

New non Korean panel maker, it's really more about the cadence and timing of the demand and supply.

Speaker 5: It's really more about the cadence and timing of the demand and supply.

Yeah. So rod thanks for the question. So I think we gave kind of a framework.

No.

To comment one quarter at a time, but we wanted to give some.

Framework to all so that you have added.

Kind of understanding and so yes, we are bringing a new 20 nanometer foundry and usually when you bring a new 28 nano foundry you will go through a typical learning curve. So we are currently being cautious.

Speaker 3: So yes, we are bringing a new 20 nanometer foundry. And usually, when you bring a new

Speaker 3: 28-nano foundry, you will go through a typical e-learning curve. So we are currently being cautious.

Speaker 3: So, that's why we're saying that we expect the revenue to start towards the later part of the year. And I think we'll give you more clarity in the second quarter, but you know, we are associating the typical year learning curve, bring a new foundry and the process. But we are very excited about this.

So that's why we're saying that we expect the revenue to start towards the later part of the year end.

I think we will give you more clarity.

The second.

Second quarter, but.

We are associating the typical learning curve bring a new foundry in and.

And the process, but.

We are very excited about this.

Speaker 3: additional Foundry partnership as well as the

Additional foundry partnership as well as the.

Speaker 3: uh... did new customer uh... that uh... very world-class

New customer, that's a very world class and Thats outside Korea. So so so.

Speaker 3: and that's outside Korea. So we expect, based on supply constraints, we frame that the OLED revenue be flat to up.

So we expect based on supply constraints.

We frame that the OLED revenue be flat to up and the I think power to grow more than the.

Speaker 3: and the, I think, power to grow more than the market. And so that's what we see.

The market and so that that's what we see.

Okay.

So that implies a pretty big ramp in OLED in the second half.

Speaker 5: So that implies a pretty big ramp in OLED in the second half. So I would assume by that time, third or fourth quarter, you would have...

So I would assume by that time third or fourth quarter you would have.

Speaker 5: been, you know, overcome some of the learning curves in terms of bringing the capacity.

Ben.

Overcome from the learning curve in terms of bringing the capacity.

Speaker 5: How do we think about the gross margins? Because the gross margins have really been really good the last few quarters, and you're guiding it to 35.5% at the midpoint.

How do we think about the gross margin because the gross margins have really been.

Really good.

A few quarters.

You're guiding to 35, 5% at the midpoint.

Speaker 5: When more supply comes online from this new foundry, how would that affect your margins, if at all?

When more supply comes online from this new foundry, how would that affect your margins if at all maybe.

Speaker 5: Let's maybe talk quickly about the pricing environment. Is that affecting your margins positively? What about the mixed shift within power to premium power?

Maybe talk quickly about the pricing environment is that affecting your margins positively what about the mix shift within power to premium power.

Speaker 5: because the margins have been moving up despite some of the revenue declines in OLED.

Because the margins have been moving up despite despite some of the revenue declines in OLED.

Yes, so we have continued to work on.

Speaker 3: Yeah, so we are continuing to work on the, you know, high value, high margin product. So that's how we've done.

High value high margin product, so that that's how we done.

Speaker 3: in view of the shortages. Also when you bring the new process, again we'll go through yield learning curves. So initially we've been cautious. We think that will have impact on the margin. So that's already baked into our forecast.

And in lieu of the shortages.

Also when you bring the.

New process again, we will go through a learning curve. So initially we are being cautious we think that will have no.

Impac on.

The margin so that's already baked into our forecast.

Speaker 3: So, again, we will let you know how it progresses, but right now, I think it's best to put some conservative, cautious...

So again, we will.

We will let you know how it progresses, but right now I think it's best that put some conservative cautious because when you bring a new foundry new process, there's a yield learning curve.

Speaker 3: Because when you bring a new foundry, a new process, there's a yield learning curve.

Okay. Thank you.

Thank you.

Speaker 6: Our next question comes from Suji De Silva of Roth Capital. Your line is open. Hi, YJ. Hi, Shin Young. So maybe perhaps a quick follow-up on Roger's question on gross margin. What was the impact on the sale of written-off product in this quarter?

Our next question comes with Davita Silva of Roth Capital. Your line is open hi.

YJ, Hi, Shin young so maybe perhaps a quick follow up on Roger's question on gross margin.

What was the impact on the sale of written off product in this quarter.

It was this is just regular theres not really the particular, the special kind of write off that we took in.

Speaker 4: It was just regular, there's not really the particular, the special kind of write-off that we took. I see. In QR. So, it's just regular quarter as in the normal, you know, circumstances. Okay. So, it happens periodically. Okay. And then...

<unk> does just irregular quarter.

In the normal.

Okay. Okay. So happens periodically okay and then.

What we're seeing on the comment about Q2 being the bottom can you just talk about the two or three key elements that give you the confidence to say that going forward at this point because it sounds like the foundry capacity new value won't be coming on until the end of the year. So.

I'm just curious on the comments beyond that beyond that.

Yes so.

Speaker 3: Yes, so there are a couple of points. On the power side, as Shin-Young mentioned, we are putting special $8 million in capex. The goal is to bring that additional capacity within six months. We will work on the productivity in the second quarter to get more productivity.

A couple of points on the power side Shang mentioned, we are putting.

Special $8 million of Capex. So the goal is to.

Bring that additional capacity within six months, so and so and we will work on the productivity in the second quarter So for us too.

Get the.

More.

The activity.

Speaker 3: On the OLED side, as you said, we're expecting more new foundry coming online in the later part of this year. So right now, the projection is based on supply constraints.

On the OLED side as you said, we said.

Are we expecting more new.

Foundry coming online in the later part of this year. So those so right now the.

Projection is based on supply constraints.

Speaker 3: and the demand is still higher than what we can supply.

And the demand is still higher than.

What we can supply.

Okay Fantastic and then the new non Korean OLED customer can you talk about what the timeframe.

Speaker 1: Okay, fantastic. And then the new non-Korean OLED customer, he talked about what the timeframe for that turning into material revenue is to understand how far off that would be as an incremental element to revenue.

For that turning into material revenue is just to understand how far off that would be the incremental element to your revenue.

Speaker 3: So again, so we are, you know, I think we said that the OLED revenue will be flat to up than last year. So that kind of gives you what may happen in the second part of the year. And that will coincide with our new foundry as well as new customer coming online. Okay. Thanks for that, Colin.

So again, so we are I think.

We said that the OLED revenue will be flat to up 10 last year. So that kind of gave you and what may happen in the second part of the year.

And that will clean coincide with our new.

New foundry as well as a new customer coming online.

Okay. Thanks for that color. Thanks, YJ. Thanks for now.

Thank you again, ladies and gentlemen, if you like to ask a question. Please press Star then one on you touched on the telephone.

Speaker 6: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then one on your touchstone telephone. Again, to ask a question...

Again to ask a question. Please press Star then one.

Yeah.

One moment please.

Yeah.

Our next question comes from Andrew North kind of Oppenheimer <unk> co. Your line is open.

Speaker 6: Our next question comes from Andrew Northcutt of Oppenheimer and Co., your line is open.

Alright, Thanks for your question.

So again for Martin Yang.

Just one question for you.

When you're thinking about the quarterly revenue how are you thinking about the seasonality for 2022 and has probably compared to two.

2021.

Well.

Speaker 3: I think we are just saying that the seasonality is there, typically. But right now, our revenue is actually limited by the supply constraints. So the curve is actually...

I think we are just saying that the seasonality is there.

Typically but right now our revenue is actually limited by the supply constraints. So.

The curve is actually.

Speaker 3: limited by the supply constraint rather than the seasonality. But normally, our pattern has been Q3 in the peak, Q4 down, and Q1 down, and go up in Q2, Q3s. But that's the normal seasonality. But right now, our revenue has been kept by the supply constraints on both OLED and power side.

Limited by the supply constraint rather than the seasonality, but normally our pattern has been Q3 and the peak Q4 down in Q1 down and go up in Q2, Q3's, but thats no normal seasonality, but right now our revenue has been kept by the supply constraints.

On both OLED and power side.

Got it thank you so much.

Speaker 6: Thank you. This does conclude our call today. I'd like to turn the call back over to management for any closing remarks.

Thank you.

I'll conclude our call today I'd like to turn the call back over to management for any closing remarks.

Thank you operator that concludes our fourth quarter 2021 earnings Conference call. Please look for details of our future events on Magna Chip Investor Relations website. Thank you for joining us today.

Speaker 2: Thank you, operator. This concludes our fourth quarter 2021 earnings conference call. Please look for details of our future events on MagnaChip's Investor Relations website. Thank you for joining us today. Goodbye.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect have a great day.

Speaker 6: Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.

Q4 2021 MagnaChip Semiconductor Corp Earnings Call

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