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What changed in MAGNACHIP SEMICONDUCTOR Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MAGNACHIP SEMICONDUCTOR Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+301 added−332 removedSource: 10-K (2024-03-08) vs 10-K (2023-02-22)

Top changes in MAGNACHIP SEMICONDUCTOR Corp's 2023 10-K

301 paragraphs added · 332 removed · 251 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

71 edited+16 added−6 removed105 unchanged
Biggest changeThe following table summarizes the features of our products, both in mass production and in customer qualification, which is the final stage of product development: Product Key Features Applications Low Voltage MOSFET • Voltage options of 12V-30V • Advanced Trench MOSFET Process • High cell density • Advanced packages to enable reduction of PCB mounting area • Smartphones, mobile phones, and wearable devices • Tablet PCs, Notebooks • Desktop PCs, Servers • LCD/LED TVs • Industrial applications • Automotive* 10 Table of Contents Product Key Features Applications Medium Voltage MOSFET • Voltage options of 40V-200V • Advanced Trench MOSFET Process • High cell density • High system efficiency • Advanced packages to enable reduction of PCB mounting area • e-Bikes and Motor controls • Battery Management Systems • Power tools and Servers • Energy Storage System • Other computing applications (Tablet PCs, Notebooks, Desktops) • Consumer applications (TV) • Industrial applications • Automotive High Voltage MOSFET • Voltage options of 200V-650V • R2FET (rapid recovery) option to shorten reverse diode recovery time • Zener diode option for MOSFET protection for abnormal input • Advanced Planar MOSFET Process • Advanced packages to enable reduction of PCB mounting area • Adaptors for tablet PC/mobile phone/smartphone • Power supplies • Lighting (ballast, HID, LED) • Industrial applications • LCD/LEDTVs Super Junction MOSFET • Voltage options of 500V-900V • Low R DS(ON) • Epi stack process • Zener diode option for MOSFET protection for abnormal input • Advanced SJ MOSFET process • Advanced packages to enable reduction of PCB mounting area • Low power loss by high speed switching • LCD/LED/UHD TVs • Lightings applications (ballast, HID, LED) • Smartphones • Power supplies • Servers and Telecom powers • Industrial applications • EV charging station* • On board charger* IGBTs • Voltage options of 650V/1200V • Field Stop Trench IGBT • Current options from 15A to 100A • Automotive • Solar inverters • Industrial applications • Consumer appliances 11 Table of Contents Product Key Features Applications AC-DC/DC-DC Converter • Wide control range for high power application (>150W) • Advanced BCDMOS process • High Precision Voltage Reference • Very low startup current consumption • Fast load and line regulation • Accurate output voltage • OCP, SCP and thermal protections • LCD/LED/UHD TVs • Power supplies • Smartphones • Mobile phones • Notebooks • Set-top boxes LED Backlighting Drivers • High efficiency, wide input voltage range • Advanced BCDMOS process • OCP, SCP, OVP and UVLO protections • Accurate LED current control and multi-channel matching • Programmable current limit, boost up frequency • Tablet PCs • Notebooks • Smartphones • LED/UHD TVs • LED monitors Digital Controlled LED Driver • Multi-channel constant current control • 12Bit gray scale with SPI • Digital signage LED Lighting Drivers • High efficiency, wide input voltage range • Simple solutions with external components fully integrated • Advanced high voltage BCDMOS process • Accurate LED current control and high power factor and low THB • AC and DC LED lighting Regulators • Single and multi-regulators • Low Noise Output regulators • Wide range of input voltage and various output current • CMOS and BCDMOS processes • LDO (Low Drop Out — Linear Regulator) • Smartphones and Mobile phones • Notebooks • Computing applications SSD PMIC • High current buck • PFM function • High frequency switching • High efficiency • High integration technology • Small QFN package • Computing applications 12 Table of Contents Product Key Features Applications Logic PMIC • High current boost • Integrated pass transistor • LDO • 3channel high current buck • Negative Charge Pump • 2channel buffer Op-Amp. • Tiny Wafer Level CSP • Notebooks • Tablet PCs * In customer qualification stage Sales and Marketing We focus our sales and marketing strategy on continuing to grow and leverage our existing relationships with leading consumer electronics OEMs, while expanding into industrial and automotive end markets.
Biggest changeThe following table summarizes the features of our products, both in mass production and in customer qualification, which is the final stage of product development: Product Key Features Applications Low Voltage MOSFET • Voltage options of 12V-30V • Advanced Trench MOSFET Process • High cell density • Advanced packages to enable reduction of PCB mounting area • Smartphones, mobile phones, and wearable devices • Tablet PCs, Notebooks • Desktop PCs, Servers • LCD/LED TVs • Industrial applications • Automotive Medium Voltage MOSFET • Voltage options of 40V-200V • Advanced Trench MOSFET Process • High cell density • e-Bikes and Motor controls • Battery Management Systems • Power tools and Servers 10 Table of Contents Product Key Features Applications • High system efficiency • Advanced packages to enable reduction of PCB mounting area • Energy Storage System • Other computing applications (Tablet PCs, Notebooks, Desktops) • Consumer applications (TV) • Industrial applications • Automotive High Voltage MOSFET • Voltage options of 200V-650V • R2FET (rapid recovery) option to shorten reverse diode recovery time • Zener diode option for MOSFET protection for abnormal input • Advanced Planar MOSFET Process • Advanced packages to enable reduction of PCB mounting area • Adaptors for tablet PC/mobile phone/smartphone • Power supplies • Lighting (ballast, HID, LED) • Industrial applications • LCD/LEDTVs • Automotive Super Junction MOSFET • Voltage options of 250V-900V • Low R DS(ON) • Epi stack process • Zener diode option for MOSFET protection for abnormal input • Advanced SJ MOSFET process • Advanced packages to enable reduction of PCB mounting area • Low power loss by high speed switching • LCD/LED/UHD TVs • Lightings applications (ballast, HID, LED) • Smartphones • Power supplies • Servers and Telecom powers • Industrial applications • EV charging station • On board charger IGBTs • Voltage options of 650V/1200V • Field Stop Trench IGBT • Current options from 15A to 100A • Automotive • Solar inverters • Industrial applications • Consumer appliances AC-DC/DC-DC Converter • Wide control range for high power application (>150W) • Advanced BCDMOS process • High Precision Voltage Reference • Very low startup current consumption • Fast load and line regulation • Accurate output voltage • OCP, SCP and thermal protections • LCD/LED/UHD TVs • Power supplies • Smartphones • Mobile phones • Notebooks • Set-top boxes 11 Table of Contents Product Key Features Applications LED Backlighting Drivers • High efficiency, wide input voltage range • Advanced BCDMOS process • OCP, SCP, OVP and UVLO protections • Accurate LED current control and multi-channel matching • Programmable current limit, boost up frequency • Tablet PCs • Notebooks • Smartphones • LED/UHD TVs • LED monitors Digital Controlled LED Driver • Multi-channel constant current control • 12Bit gray scale with SPI • Digital signage LED Lighting Drivers • High efficiency, wide input voltage range • Simple solutions with external components fully integrated • Advanced high voltage BCDMOS process • Accurate LED current control and high power factor and low THB • AC and DC LED lighting Regulators • Single and multi-regulators • Low Noise Output regulators • Wide range of input voltage and various output current • CMOS and BCDMOS processes • LDO (Low Drop Out — Linear Regulator) • Smartphones and Mobile phones • Notebooks • Computing applications SSD PMIC • High current buck • PFM function • High frequency switching • High efficiency • High integration technology • Small QFN package • Computing applications Logic PMIC • High current boost • Integrated pass transistor • LDO • 3channel high current buck • Negative Charge Pump • 2channel buffer Op-Amp. • Tiny Wafer Level CSP • Notebooks • Tablet PCs Sales and Marketing We focus our sales and marketing strategy on continuing to grow and leverage our existing relationships with leading consumer electronics OEMs, while expanding into industrial and automotive end markets.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this Report for an explanation of our use of Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income and a reconciliation to net income (loss) and operating income (loss) prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”).
Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this Report for an explanation of our use of Adjusted EBITDA, Adjusted Operating Income (Loss) and Adjusted Net Income (Loss) and a reconciliation to net loss and operating loss prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”).
Our current portfolio of OLED solutions address a wide range of resolutions ranging from HD (High Definition) to WQHD (Wide Quadruple High Definition) for wide range of applications including smartphones, TVs, automotive and IT applications such as monitors, notebook PCs, tablet PCs as well as AR/VRs.
Our current portfolio of OLED solutions address a wide range of resolutions ranging from HD (High Definition) to WQHD (Wide Quadruple High Definition) for wide range of applications including smartphones, TVs, automotive applications and IT applications such as monitors, notebook PCs, tablet PCs as well as AR/VRs.
The table below sets forth the features of our products, both in mass production and in customer qualification, which is the final stage of product development, for large-sized displays: Product Key Features Applications TFT-LCD Source Drivers • 480 to 1,542 output channels • 6-bit (262 thousand colors), 8-bit (16 million colors), 10-bit (1 billion colors) • Output voltage ranging from 9V to 18V • Low power consumption and low EMI • COF package types • EPI, m-LVDS, USI interface technologies • LCD/LED TVs • Notebooks • LCD/LED monitors • Automotive TFT-LCD Gate Drivers • 272 to 960 output channels • Output voltage ranging from 30V to 45V • COF and COG package types • Tablet PCs • LCD/LED TVs • Notebooks • Automotive Timing Controllers • Wide range of resolutions • EPI, m-LVDS, MIPI, USI-T interface technologies • Input voltage ranging from 1.6V to 3.6V • Tablet PCs • Public information display OLED Source Drivers • 960 output channels • 10 bit (1 billion colors) • Output voltage: 18V • COF package type • EPI interface technology • OLED TVs Micro LED Drivers* • 552 output channels (3 Mux) • 10 bit (1 billion colors) • Output voltage: max 18V • COF package type • USI interface technology • Micro LED TVs * In customer qualification stage Mobile Display Solutions.
The table below sets forth the features of our products, both in mass production and in customer qualification, which is the final stage of product development, for large-sized displays: Product Key Features Applications TFT-LCD Source Drivers • 480 to 1,542 output channels • 6-bit (262 thousand colors), 8-bit (16 million colors), 10-bit (1 billion colors) • Output voltage ranging from 9V to 18V • Low power consumption and low EMI • COF package types • EPI, m-LVDS, USI interface technologies • LCD/LED TVs • Notebooks • LCD/LED monitors • Automotive TFT-LCD Gate Drivers • 272 to 960 output channels • Output voltage ranging from 30V to 45V • COF and COG package types • Tablet PCs • LCD/LED TVs • Notebooks • Automotive Timing Controllers • Wide range of resolutions • EPI, m-LVDS, MIPI, USI-T interface technologies • Input voltage ranging from 1.6V to 3.6V • Tablet PCs • Public information display OLED Source Drivers • 960 output channels • 10 bit (1 billion colors) • Output voltage: 18V • COF package type • EPI interface technology • OLED TVs Micro LED Drivers • 480 to 552 output channels (3 Mux) • 10 bit (1 billion colors) • Output voltage: max 18V • COF package type • USI interface technology • Micro LED TVs Mobile Display Solutions.
The Notification Regarding Designation of National Core Technologies issued by the MOTIE was amended on July 14, 2021 to add certain technologies to the list of National Core Technology designated by the MOTIE, and the amended list includes the design technology for OLED Display Driver IC for driving display panels (“OLED DDI”).
The Notification Regarding Designation of National Core Technologies issued by the MOTIE was amended on July 14, 2021 to add certain technologies to the list of National Core Technology designated by the MOTIE, and the amended list includes the OLED Display Driver IC (“OLED DDI”) design technology for driving display panels.
Our patents expire at various times approximately over the next 19 years. While these patents are in the aggregate important to our competitive position, we do not believe that any single registered or pending patent is material to us. See “Item 1A.
Our registered patents expire at various times approximately over the next 19 years. While these patents are, in the aggregate, important to our competitive position, we do not believe that any single registered patent or pending application is material to us. See “Item 1A.
We manufacture most of our Display Solutions products at external foundries. Through a strategic cooperation with external foundries, we are able to adapt dynamically to changing customer requirements and address growing markets without substantial capital investments.
We manufacture most of our Display Solutions products at external foundries. Through strategic cooperation with external foundries, we are able to adapt dynamically to changing customer requirements and address growing markets without substantial capital investments.
Risk Factors—Risks Related to Our Business—Our ability to compete successfully and achieve future growth will depend, in part, on our ability to protect our intellectual property, proprietary technology and know-how, as well as our ability to operate without infringing the proprietary rights of others.” National Core Technology Under the Act on Prevention of Leakage and Protection of Industrial Technology of Korea (the “ITA”), any export (including various means of outflow such as sale or transfer outside Korea) of technology designated as “national core technology” (“National Core Technology” or “NCT”) by the Korean Ministry of Trade, Industry and Energy (the “MOTIE”) requires the filing of a prior-report with, and the acceptance of the same by, the MOTIE.
Risk Factors—Risks Related to Our Business—Our ability to compete successfully and achieve future growth will depend, in part, on our ability to protect our intellectual property, proprietary technology and know-how, as well as our ability to operate without infringing the proprietary rights of others.” 13 Table of Contents National Core Technology Under the Act on Prevention of Leakage and Protection of Industrial Technology of Korea (the “ITA”), any export (including various means of outflow such as sale or transfer outside Korea) of technology designated as “national core technology” (“National Core Technology” or “NCT”) by the Korean Ministry of Trade, Industry and Energy (the “MOTIE”) requires the filing of a prior-report with, and the acceptance of the same by, the MOTIE.
Item 1. Business General We are a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, Internet of Things (“IoT”) applications, consumer, computing, industrial and automotive applications. We have a proven record with more than 40 years of operating history, a portfolio of approximately 1,100 registered patents and pending applications and extensive engineering and manufacturing process expertise.
Item 1. Business General We are a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communication, Internet of Things (“IoT”), consumer, computing, industrial and automotive applications. We have a proven record with more than 40 years of operating history, a portfolio of approximately 1,100 registered patents and pending applications and extensive engineering and manufacturing process expertise.
As a result, we have been able to strengthen our technology and develop products that are in high demand by our customers and end consumers. We sold approximately 400 distinct products in the year ended December 31, 2022 with a substantial portion of our revenues derived from a concentrated number of customers.
As a result, we have been able to strengthen our technology and develop products that are in high demand by our customers and end consumers. We sold approximately 400 distinct products in the year ended December 31, 2023 with a substantial portion of our revenues derived from a concentrated number of customers.
The products include MOSFETs, IGBTs, AC-DC/DC-DC converters, LED drivers, regulators, power management integrated circuits (PMICs) for a range of devices, including LCD, LED, and UHD televisions, digital signage, smartphones, mobile phones, wearable devices, desktop PCs, notebooks, tablet PCs, other consumer electronics, consumer appliances, automotive, and industrial applications such as power suppliers, e-bikes, photovoltaic inverters, LED lighting and motor drives. • MOSFETs.
The products include MOSFETs, IGBTs, AC-DC/DC-DC converters, LED drivers, regulators, PMICs for a range of devices, including LCD, LED, and UHD televisions, digital signage, smartphones, mobile phones, wearable devices, desktop PCs, notebooks, tablet PCs, other consumer electronics, consumer appliances, automotive, and industrial applications such as power suppliers, e-bikes, photovoltaic inverters, LED lighting and motor drives. • MOSFETs.
We provide display solutions for a wide range of flat panel display sizes used in LCD TVs, OLED TVs, Micro LED TVs as well as IT applications such as monitors, notebook PCs, tablet PCs, automotives and public information displays.
We provide display solutions for a wide range of flat panel display sizes used in LCD TVs, OLED TVs, Micro LED TVs as well as IT applications such as monitors, notebook PCs, tablet PCs, automobiles and public information displays.
Electronics manufacturers are continuously implementing advanced technologies in new generations of electronic devices using analog and mixed-signal semiconductor components, such as display drivers that enable display of high resolution images, encoding and decoding devices that allow playback of high definition audio 3 Table of Contents and video, and power semiconductors that increase power efficiency, thereby improving heat dissipation and extending battery life.
Electronics manufacturers are continuously implementing advanced technologies in new generations of electronic devices using analog and mixed-signal semiconductor components, such as display drivers that enable display of high resolution images, encoding and decoding devices that allow playback of high definition audio and video, and power semiconductors that increase power efficiency, thereby improving heat dissipation and extending battery life.
Magnachip prohibits all forms of discrimination based on gender, race, nationality, religion and age to ensure all employees work in a safe and fair environment. 15 Table of Contents Empowering Great Talent We offer a variety of offline training programs, including courses in the areas of design, engineering and technology, as well as courses at different job levels and leadership education.
Magnachip prohibits all forms of discrimination based on gender, race, nationality, religion and age to ensure all employees work in a safe and fair environment. Empowering Great Talent We offer a variety of offline training programs, including courses in the areas of design, engineering and technology, as well as courses at different job levels and leadership education.
Lee began his career as a memory semiconductor design engineer and served as Vice President of Memory Strategy & Marketing Team at Samsung 18 Table of Contents Electronics Co., Ltd. until 2009. Mr. Lee received the prestigious “Proud Samsung Employee Award” in 2005 and holds a B.S. degree in Electronic Engineering from Inha University.
Lee began his career as a memory semiconductor design engineer and served as Vice President of Memory Strategy & Marketing Team at Samsung Electronics Co., Ltd. until 2009. Mr. Lee received the prestigious “Proud Samsung Employee Award” in 2005 and holds a B.S. degree in Electronic Engineering from Inha University.
Further, we are building a distinctive intellectual property portfolio that allows us to provide features that reduce power consumption, such as CABC and ACL. This intellectual property portfolio 8 Table of Contents will also support our power management product development initiatives, as we leverage our system level understanding of power efficiency.
Further, we are building a distinctive intellectual property portfolio that allows us to provide features that reduce power consumption, such as CABC and ACL. This intellectual property portfolio will also support our power management product development initiatives, as we leverage our system level understanding of power efficiency.
As we expanded our design capabilities to products that require lower geometries unavailable at our existing manufacturing facilities, we began outsourcing manufacturing of certain OLED display driver ICs to external 12-inch foundries starting in the second half of 2015 and we have started outsourcing 8-inch wafer for OLED TV ICs after the sale of our fabrication facility located in Cheongju, Korea in 2020.
As we expanded our design capabilities to products that require lower geometries unavailable at our existing manufacturing facilities, we began outsourcing manufacturing of certain OLED display driver ICs to external 12-inch foundries starting in the second half of 2015 and we started outsourcing 8-inch wafer 5 Table of Contents for OLED TV ICs after the sale of our fabrication facility located in Cheongju, Korea in 2020.
In addition, our Corporate Governance Guidelines, Code of Business Conduct and Ethics, Clawback Policy, Audit Committee Charter, Compensation Committee Charter, Nominating and Governance Committee Charter and Risk Committee Charter are available on our website.
In addition, our Corporate Governance Guidelines, Code of Business Conduct and Ethics, Compensation Recovery Policy, Audit Committee Charter, Compensation Committee Charter, Nominating and Governance Committee Charter and Risk Committee Charter are available on our website.
Our product development efforts are supported by a team of over 220 engineers as of the date of this Annual Report. Our platform allows us to develop and introduce new products quickly and integrate 4 Table of Contents numerous functions into a single product.
Our product development efforts are supported by a team of over 220 engineers as of the date of this Annual Report. Our platform allows us to develop and introduce new products quickly and integrate numerous functions into a single product.
In the ordinary course of business, our Korean subsidiary may provide certain information relating to its products, including OLED DDI, to customers, suppliers or vendors, and such disclosure of information may be subject to the NCT-related regulations under the ITA, and therefore the MOTIE’s acceptance of prior-reports.
In the ordinary course of business, our Korean subsidiary may provide certain information relating to its products, including OLED DDI, to customers, suppliers or vendors, and such disclosure of information may be subject to the NCT-related regulations under the ITA and NHST-related regulations under the Special Act, and therefore the MOTIE’s acceptance of prior-reports (under the ITA) and the MOTIE’s prior approval (under the Special Act).
Our Display Solutions products represented 21.2%, 43.3% and 59.0% of our total revenues for the fiscal years ended December 31, 2022, 2021 and 2020, respectively. We expanded our business and market opportunity by establishing our Power Solutions product line in late 2007.
Our Display Solutions products represented 14.0%, 21.2% and 43.3% of our total revenues for the fiscal years ended December 31, 2023, 2022 and 2021, respectively. We expanded our business and market opportunity by establishing our Power Solutions product line in late 2007.
For the years ended December 31, 2022, 2021 and 2020, our ten largest customers accounted for 69.4%, 79.8% and 87.6% of net sales from our standard products business, respectively. Our arrangements with and reliance on key customers, particularly customers for our display products, may make it less practicable to pursue certain opportunities with other potential new and existing customers.
For the years ended December 31, 2023, 2022 and 2021, our ten largest customers accounted for 69.2%, 69.4% and 79.8% of net sales from our standard products business, respectively. Our arrangements with and reliance on key customers, particularly customers for our display products, may make it less practicable to pursue certain opportunities with other potential new and existing customers.
These products include metal oxide semiconductor field effect transistors (MOSFETs), insulated-gate bipolar transistors (IGBTs), AC-DC/DC-DC converters, LED drivers, regulators and power management integrated circuits (PMICs) for a range of devices, including televisions, smartphones, mobile phones, wearable devices, desktop PCs, notebooks, tablet PCs, other consumer electronics, automotive, and industrial applications such as power suppliers, e-bikes, photovoltaic inverters, LED lighting and motor drives.
These products include metal oxide semiconductor field effect transistors (“MOSFETs”), insulated-gate bipolar transistors (“IGBTs”), AC-DC/DC-DC converters, LED drivers, regulators and power management integrated circuits (“PMICs”) for a range of devices, including televisions, smartphones, mobile phones, wearable devices, desktop PCs, notebooks, tablet PCs, other consumer electronics, automotive, and industrial applications such as power suppliers, e-bikes, photovoltaic inverters, LED lighting and motor drives.
We believe our close collaboration with customers allows us to align our product and technology development with our customers’ existing and future needs. Because our customers often service multiple end markets, our product sales teams are organized by customers within the major geographies.
We believe our close collaboration with customers allows us to align our product and technology development with 12 Table of Contents our customers’ existing and future needs. Because our customers often service multiple end markets, our product sales teams are organized by customers within the major geographies.
Our Power Solutions products include discrete and integrated circuit solutions for power management in communications, consumer, computing, servers, automotive, and industrial applications. Our wide variety of analog and mixed-signal semiconductor products allow us to address multiple high-growth end markets and rapidly develop and introduce new products in response to market demands.
Our Power Solutions products include discrete and integrated circuit solutions for power management in communication, consumer, computing, servers, automotive, and industrial applications. The wide variety of our analog and mixed-signal semiconductor products allows us to address multiple high-growth end markets and rapidly develop and introduce new products in response to market demands.
For 9 Table of Contents example, computing solutions focus on delivering efficient controllers and MOSFETs for power management in VCORE, DDR and chipsets for audio, video and graphics processing systems. • IGBTs. Our IGBTs include 650V to 1200V field stop trench IGBTs.
For example, computing solutions focus on delivering efficient controllers and MOSFETs for power management in VCORE, DDR and chipsets for audio, video and graphics processing systems. • IGBTs. Our IGBTs include 650V to 1200V field stop trench IGBTs.
The principal types of interface technologies are embedded clock point to point interface (EPI), mini-low voltage differential signaling (m-LVDS), unified standard interface (USI) and mobile industry processor interface (MIPI). • Package Type. The assembly of display drivers typically uses COF, COG and COP package types. • Large Display Solutions.
The principal types of interface technologies are embedded clock point to point interface (EPI), mini-low voltage differential signaling (m-LVDS), unified standard interface (USI) and mobile industry processor interface (“MIPI”). • Package Type. The assembly of display drivers typically uses COF, COG and COP package types. 7 Table of Contents • Large Display Solutions.
We believe the location of our primary manufacturing and research and development facilities in Asia and the relatively low need for ongoing capital expenditures provide us with a number of cost advantages. Since 2007, we had designed and manufactured OLED display driver ICs in our internal manufacturing facilities.
We believe the location of our primary manufacturing and research and development facilities in Asia and the relatively low need for ongoing capital expenditures provide us with a number of cost advantages. Since 2007, we design and manufacture OLED display driver ICs in our internal manufacturing facilities.
Our mobile display solutions incorporate the industry’s most advanced display technologies, such as OLED and LTPS, as well as high-volume technologies such as a-Si TFT. Our mobile display products offer specialized capabilities, including high speed serial interfaces, such as mobile display digital interface (MDDI), MIPI, reduced swing differential signaling interface (RSDS) and logic-based OTP memory.
Our mobile display solutions incorporate the industry’s most advanced display technologies, such as OLED and LTPS, as well as high-volume technologies such as a-Si TFT. Our mobile 8 Table of Contents display products offer specialized capabilities, including high speed serial interfaces, such as mobile display digital interface (“MDDI”), MIPI, reduced swing differential signaling interface (RSDS) and logic-based OTP memory.
We expect to continue to expand our global customer base, particularly in China, Hong Kong, and Taiwan, which we collectively refer to as Greater China, and other high-growth geographies, to penetrate new accounts. In addition, we intend to introduce new products and variations of existing products to address a broader customer base.
We expect to continue to expand our global customer base, particularly in China, Hong Kong, and Taiwan, and other high-growth geographies, to penetrate new accounts. In addition, we intend to introduce new products and variations of existing products to address a broader customer base.
Our Display Solutions products support the industry’s most advanced display technologies, such as OLEDs, and low temperature polysilicon thin film transistor (LTPS TFT), as well as high-volume display technologies such as amorphous silicon thin film transistors (a-Si TFTs). Since 2007, we have designed and manufactured OLED display driver integrated circuit (IC) products.
Our Display Solutions products support the industry’s most advanced display technologies, such as OLEDs, and low temperature polysilicon thin film transistor (“LTPS TFT”), as well as high-volume display technologies such as amorphous silicon thin film transistors (a-Si TFTs). Since 2007, we have designed and manufactured OLED display driver integrated circuit (“IC”) products.
Our MOSFETs include low-voltage from 12V to 30V, medium-voltage from 40V to 200V, high-voltage planar MOSFETs, 200V through 650V, and super junction MOSFETs, 500V through 900V. MOSFETs are used in applications to switch, shape or transfer electricity under varying power requirements.
Our MOSFETs include low-voltage from 12V to 30V, medium-voltage from 40V to 200V, high-voltage planar MOSFETs, 200V through 650V, and super junction MOSFETs, 250V through 900V. 9 Table of Contents MOSFETs are used in applications to switch, shape or transfer electricity under varying power requirements.
His past roles include marketing, engineering, product development and strategic planning, and his product expertise includes microprocessors, network processors, multi-core processors, FLASH, EPROM, analog, mixed-signal, sensors, wireless base station, workstations and servers. Immediately before joining our company, Mr.
His past roles include marketing, engineering, product development and strategic planning, and his product expertise includes microprocessors, network processors, multi-core processors, FLASH, EPROM, analog, mixed-signal, sensors, 3G/4G/5G base stations, workstations and servers. Immediately before joining our company, Mr.
For the years ended December 31, 2022, 2021 and 2020, we derived 48%, 62% and 75% of net sales from our standard products business through our direct sales force, respectively, and 52%, 38% and 25% of net sales from our standard products business through our network of authorized agents and distributors, respectively.
For the years ended December 31, 2023, 2022 and 2021, we derived 34%, 48% and 62% of net sales from our standard products business through our direct sales force, respectively, and 66%, 52% and 38% of net sales from our standard products business through our network of authorized agents and distributors, respectively.
Certain of our OLED products are produced using external 12-inch foundries. Through a strategic cooperation with external 12-inch foundries, we strive to outsource wafers at competitive prices and produce quality products. We have a long history of supplying and collaborating on product and technology development with leading innovators in the consumer electronics market.
Certain of our organic light emitting diodes (“OLEDs”) products are produced using external foundries. Through a strategic cooperation with external foundries, we strive to outsource wafers at competitive prices and produce quality products. We have a long history of supplying and collaborating on product and technology development with leading innovators in the consumer electronics market.
Approximately 433 and 52 of our patents and pending applications, respectively, are novel in that they are not a foreign counterpart of an existing patent or patent application. Because we file patents in multiple jurisdictions, we additionally have approximately 528 registered patents and 92 pending applications that relate to identical technical claims in our base patent portfolio.
Approximately 394 and 54 of our registered patents and pending applications, respectively, are novel in that they are not a foreign counterpart of an existing registered patent or pending application. Because we file patents in multiple jurisdictions, we additionally have approximately 533 registered patents and 116 pending applications that relate to identical technical claims in our base patent portfolio.
We have a global customer base consisting of leading consumer electronics OEMs that sell into multiple end markets. We intend to continue to strengthen our 5 Table of Contents relationships with our customers by collaborating on critical design and product development in order to improve our design-win rates.
We have a global customer base consisting of leading consumer electronics original equipment manufacturers (“OEMs”) that sell to multiple end markets. We intend to continue to strengthen our relationships with our customers by collaborating on critical design and product development in order to improve our design-win rates.
Our competitive strengths enable us to offer our customers solutions to solve their key challenges. We believe our strengths include: • Advanced Analog and Mixed-Signal Semiconductor Technology. Our long operating history, large patent portfolio, extensive engineering and manufacturing process expertise and analog and mixed-signal intellectual property allow us to leverage our technology and develop new products across multiple end markets.
We believe our strengths include: • Advanced Analog and Mixed-Signal Semiconductor Technology. Our long operating history, large patent portfolio, extensive engineering and manufacturing process expertise and analog and mixed-signal intellectual property allow us to leverage our technology and develop new products across multiple end markets.
Labor Unions As disclosed in previous reports, we have a labor union at our Korean subsidiary (the “First Union”). On September 16, 2021, the formation of a second labor union at our Korean subsidiary (the “Second Union”) was approved by local authorities (the First Union and the Second Union are collectively referred to as the “Magnachip Semiconductor Labor Unions”).
On September 16, 2021, the formation of a second labor union at our Korean subsidiary (the “Second Union”) was approved by local authorities (the First Union and the Second Union are collectively referred to as the “Magnachip Semiconductor Labor Unions”).
Our Power Solutions products represented 68.3%, 48.0% and 32.8% of our total revenues for the fiscal years ended December 31, 2022, 2021 and 2020, respectively. Market Opportunity The semiconductor market is large and is expanding its applications.
Our Power Solutions products represented 71.1%, 68.3% and 48.0% of our total revenues for the fiscal years ended December 31, 2023, 2022 and 2021, respectively. 3 Table of Contents Market Opportunity The semiconductor market is large and is expanding its applications.
Information About Our Executive Officers The following table sets forth certain information regarding our current executive officers: Name Age Position Young-Joon (YJ) Kim 58 Director and Chief Executive Officer Shin Young Park 42 Chief Financial Officer Theodore Kim 53 Chief Compliance Officer, General Counsel and Secretary Woung Moo Lee 60 General Manager of Worldwide Sales Chan Ho Park 59 General Manager of Power Solutions 17 Table of Contents Young-Joon (YJ) Kim, Board of Directors, Member of the Risk Committee and Chief Executive Officer.
Information About Our Executive Officers The following table sets forth certain information regarding our current executive officers: Name Age Position Young-Joon (YJ) Kim 59 Director and Chief Executive Officer Shin Young Park 43 Chief Financial Officer Theodore Kim 54 Chief Compliance Officer, General Counsel and Secretary Woung Moo Lee 61 General Manager of Mixed-Signal Solutions Chan Ho Park 60 Co-General Manager of Power Analog Solutions 17 Table of Contents Young-Joon (YJ) Kim, Director on the Board of Directors, Member of the Risk Committee and Chief Executive Officer.
For the year ended December 31, 2022, sales to Samsung Display represented 19.0% of net sales from our standard products business and 80.2% of net sales from our Display Solutions business line, and SAMT represented 13.8% of net sales from our standard products business and 18.1% of net sales from our Power Solutions business line.
For the year ended December 31, 2022, sales to Samsung Display represented 19.0% of net sales from our standard products business, and SAMT represented 13.8% of net sales from our standard products business.
For the year ended December 31, 2021, sales to Samsung Display represented 42.5% of net sales from our standard products business and 89.7% of net sales from our Display Solutions business line, and SAMT represented 10.4% of net sales from our standard products business and 19.8% of net sales from our Power Solutions business line.
For the year ended December 31, 2021, sales to Samsung Display represented 42.5% of net sales from our standard products business, and SAMT represented 10.4% of net sales from our standard products business.
We offer various employee benefits under the company philosophy that ensuring employees enjoy a happier life with their families is as critical as promoting their own health and well-being. All employees and their family members have access to annual medical checkup programs.
Additionally, we have long-and mid-term retention programs to attract and retain high-performing key talent. We offer various employee benefits under the company philosophy that ensuring employees enjoy a happier life with their families is as critical as promoting their own health and well-being. All employees and their family members have access to annual medical checkup programs.
We also provide logic power management integrated circuits (PMICs) for organic light-emitting diode (OLED) display panel.
We also provide logic PMICs for organic light-emitting diode (OLED) display panel.
As of December 31, 2022, of the 866 employees at our Korean subsidiary, 387 were represented by the First Union, and 98 employees were represented by the Second Union. Approximately 56% of our employees at our Korean subsidiary were represented by the Magnachip Semiconductor Labor Unions. See “Item 1A.
As of December 31, 2023, of the 857 employees at our Korean subsidiary, 387 were represented by the First Union, and 83 employees were represented by the Second Union. Approximately 55% of our employees at our Korean subsidiary were represented by the Magnachip Semiconductor Labor Unions. See “Item 1A.
All information pertaining to the geographic source of revenues is with respect to the geographic location to which our products are billed. 13 Table of Contents Intellectual Property As of December 31, 2022, our portfolio of intellectual property assets included approximately 961 registered patents and 144 pending patent applications.
All information pertaining to the geographic source of revenues is with respect to the geographic location to which our products are billed. Intellectual Property As of December 31, 2023, our portfolio of intellectual property assets included approximately 927 registered patents and 170 pending applications.
These products include source and gate drivers and timing controllers that cover a wide range of flat panel displays used in mobile communications, automotives, entertainment devices, notebook PCs, monitors and liquid crystal display (LCD), organic light emitting diodes (OLED) and Micro light emitting diode (Micro LED) televisions.
These products include source and gate drivers and timing controllers that cover a wide range of flat panel displays used in mobile communications, automobiles, entertainment devices, notebook PCs, monitors and liquid crystal display (“LCD”), OLEDs and micro light emitting diode (“Micro LED”) televisions.
He rejoined Samsung Electronics, System LSI Business in 2011 as the Vice President of Discrete Development Team, where he led R&D, PE, FAE and high voltage power IC technologies for IGBTs, super-junction MOSFETs, split gate MOSFETs and driver ICs.
Afterwards, he worked for Fairchild Semiconductor in West Jordan, Utah and for Vishay Siliconix in San Jose, California. He rejoined Samsung Electronics, System LSI Business in 2011 as the Vice President of Discrete Development Team, where he led R&D, PE, FAE and high voltage power IC technologies for IGBTs, super-junction MOSFETs, split gate MOSFETs and driver ICs.
Mr. YJ Kim became our Chief Executive Officer in May 2015 and has also served as a director on our Board since that time. In February 2020, Mr. Kim assumed the additional role of General Manager of the Display business to capitalize on attractive growth opportunities in OLED display and other relevant emerging markets.
Mr. YJ Kim became our Chief Executive Officer in May 2015 and has also served as a director on our Board since that time. In February 2023, Mr. Kim held the additional role of Acting Co-General Manager of our Power business to capitalize on the attractive growth opportunities in the Power sector. In February 2020 to February 2023, Mr.
Before joining our company, he was one of the founding executives and served as Vice President of Global Strategy and Marketing, Samsung LED Co., Ltd. from 2009 to 2011. In 1984, Mr.
Prior to that, he served as our Senior Vice 18 Table of Contents President, Korea Sales from 2013 to 2015. Before joining Magnachip, he was one of the founding executives and served as Vice President of Global Strategy and Marketing, Samsung LED Co., Ltd. from 2009 to 2011. In 1984, Mr.
As a result of a global focus on more environmentally friendly products, our customers are seeking analog and mixed-signal semiconductor suppliers that have the technological expertise to deliver solutions that satisfy these ever increasing regulatory and consumer power efficiency demands.
As a result of a global focus on more environmentally friendly products, our customers are seeking analog and mixed-signal semiconductor suppliers that have the technological expertise to deliver solutions that satisfy these ever increasing regulatory and consumer power efficiency demands. 4 Table of Contents Our Competitive Strengths Designing and manufacturing analog and mixed-signal semiconductors capable of meeting the evolving functionality requirements for electronics devices are challenging.
For example, we have 7 Table of Contents implemented several solutions to reduce die size in large display drivers, such as optimizing design schemes and design rules and applying specific technologies that we have developed internally. We are currently focusing on growing display segments such as OLED TVs and automotive.
For example, we have implemented several solutions to reduce die size in large display drivers, such as optimizing design schemes and design rules and applying specific technologies that we have developed internally.
Under K-ETS, our Korean subsidiary was allocated a certain amount of emissions allowance in accordance with the National Allocation Plan prepared by the Korean government and is required to meet its allocated target by either reducing the emission or purchasing the allowances from other participants in the emission trading market. 16 Table of Contents Another example is the newly reinforced regulations on chemicals under Chemicals Control Act and K-REACH, which came into effect on January 1, 2015.
Under K-ETS, our Korean subsidiary was allocated a certain amount of emissions allowance in accordance with the National Allocation Plan prepared by the Korean government and is required to meet its allocated target by either reducing the emission or purchasing the allowances from other participants in the emission trading market.
For the year ended December 31, 2020, we recorded revenues of $5.1 million from customers in the U.S. and $460.4 million from all foreign countries, of which 61.9% was from Greater China, 23.1% from Korea and 10.8% from Vietnam.
For the year ended December 31, 2023, we recorded revenues of $2.8 million from customers in the U.S. and $192.9 million from all foreign countries, of which 41.4% was from Greater China and 34.6% was from Korea.
Our display technology portfolio includes building blocks for display drivers and timing controllers, processor and interface technologies, as well as sophisticated production techniques, such as chip-on-glass (COG), chip-on-film (COF) and chip-on-plastic (COP) for rigid and flexible OLED displays. Our advanced display drivers incorporate Oxide, Low-Temperature Polycrystalline Oxide (LTPO) OLED panel technologies that enable the highest resolution displays.
Our display technology portfolio includes building blocks for display drivers and timing controllers, processor and interface technologies, as well as sophisticated production techniques, such as chip-on-glass 6 Table of Contents (COG), chip-on-film (COF) and chip-on-plastic (COP) for rigid and flexible OLED displays.
Lee served as General Manager of Worldwide Sales and Power Solutions from February 2020. Mr. Lee had been appointed as General Manager of the Standard Products Group in 2015 and prior to that served as our Senior Vice President, Korea Sales from 2013.
Prior to that, Mr. Lee served as General Manager of Worldwide Sales, to which position he was appointed in February 2020. Prior to that, Mr. Lee served as General Manager of Power Solutions from February 2020 to June 2020 and as General Manager of the Standard Products Group from 2015 to 2020.
Kim holds a B.A. degree in Economics and a B.S. degree in Mechanical Engineering from University of California, Irvine, and a J.D. degree from University of California, Los Angeles, School of Law. Woung Moo Lee, General Manager of Worldwide Sales. Mr. Woung Moo Lee was named as General Manager of Worldwide Sales since June of 2020. Prior to that, Mr.
Kim holds a B.A. degree in Economics and a B.S. degree in Mechanical Engineering from University of California, Irvine, and a J.D. degree from University of California, Los Angeles, School of Law. Woung Moo Lee, General Manager of Mixed-Signal Solutions. Mr. Woung Moo Lee was named General Manager of Mixed-Signal Solutions in tandem with the Internal Separation.
For the year ended December 31, 2022, we generated total revenues of $337.7 million, net loss of $8.0 million, operating loss of $5.2 million, Adjusted EBITDA of $19.5 million, Adjusted Operating Income of $4.1 million and Adjusted Net Income of $8.8 million. See “Item 7.
For the year ended December 31, 2023, we generated total revenues of $230.1 million, net loss of $36.6 million, operating loss of $57.6 million, Adjusted EBITDA of negative $24.2 million, Adjusted Operating Loss of $41.2 million and Adjusted Net Loss of $22.5 million. See “Item 7.
Expertise in ultra-high voltage (UHV), high voltage and deep trench BCDMOS process technologies, low power analog and mixed-signal design capabilities and packaging know-how are key requirements in the power management market.
Expertise in ultra-high voltage (UHV), high voltage and deep trench BCDMOS process technologies, low power analog and mixed-signal design capabilities and packaging know-how are key requirements in the power management market. We are currently leveraging our capabilities in these areas with products such as AC-DC/DC-DC converters, LED drivers, regulators, PMICs, power MOSFETs and IGBTs.
For the year ended December 31, 2020, sales to Samsung Display represented 56.2% of net sales from our standard products business and 87.5% of net sales from our Display Solutions business line.
For the year ended December 31, 2023, sales to SAMT represented 16.7% of net sales from our standard products business, and Samsung Display represented 13.4% of net sales from our standard products business.
We periodically evaluate market practices for compensation and benefits, including with respect to job function, role and responsibility, job level and region, and regularly review whether our compensation levels and distribution methods are fair and equitable. Additionally, we have long- and mid-term retention programs to attract and retain high-performing key talent.
Compensation and Benefits We strive to reward employees with competitive compensation based on contribution and performance. We periodically evaluate market practices for compensation and benefits, including with respect to job function, role and responsibility, job level and region, and regularly review whether our compensation levels and distribution methods are fair and equitable.
Under these laws, our Korean subsidiary is required to comply with various requirements to report, evaluate, manage and ensure the safe usage of the chemicals used in its facilities.
Another example is the newly reinforced regulations on chemicals under Chemicals Control Act and K-REACH, which came into effect on January 1, 2015. Under these laws, our Korean subsidiary is required to 16 Table of Contents comply with various requirements to report, evaluate, manage and ensure the safe usage of the chemicals used in its facilities.
Our Competitive Strengths Designing and manufacturing analog and mixed-signal semiconductors capable of meeting the evolving functionality requirements for electronics devices are challenging. In order to grow and succeed in the industry, we believe semiconductor suppliers must have a broad, advanced intellectual property portfolio, product design expertise, comprehensive product offerings and specialized manufacturing process technologies and capabilities.
In order to grow and succeed in the industry, we believe semiconductor suppliers must have a broad, advanced intellectual property portfolio, product design expertise, comprehensive product offerings and specialized manufacturing process technologies and capabilities. Our competitive strengths enable us to offer our customers solutions to solve their key challenges.
Our employees leverage their extensive expertise in engineering, design and process to accelerate the advancement of technology and be leaders in our industry. We pride our company on being a great workplace where employees from diverse backgrounds can reach their full potential.
Our employees leverage their extensive expertise in engineering, design and process to accelerate the advancement of technology and be leaders in our industry.
Employees also have access to other benefits such as personal pensions, housing assistance, medical reimbursement plans and educational assistance programs. Safety and Wellness During the ongoing COVID-19 pandemic, our priority has been ensuring the health and safety of our employees and their families.
Employees also have access to other benefits such as personal pensions, housing assistance, medical reimbursement plans and educational assistance programs. Safety and Wellness We appreciate the fact that our employees constitute one of the most critical assets of Magnachip, and therefore, their safety and wellness are key factors to our success.
To ensure R&D technical professionals continue to advance their skills and knowledge, we have technology committees that attend regular seminars and conduct periodic research. We have a reward program for exemplary research. We also offer a Vision Seminar, which is led by our CEO and is designed to share our company’s vision, strategy and the management’s key messages to employees.
To ensure R&D technical professionals continue to advance their skills and knowledge, we have technology committees that attend regular seminars and conduct periodic research.
These variables include the timeliness with which we can develop new products and technologies, product performance and quality, manufacturing yields, capacity availability, customer service, pricing, industry trends and general economic trends. 14 Table of Contents Human Capital Our worldwide workforce consisted of 897 employees (full- and part-time) as of December 31, 2022, of which 202 were involved in sales, marketing, general and administrative, 222 in research and development (including 87 with advanced degrees), 44 in quality, reliability and assurance, and 429 in manufacturing (comprised of 46 in engineering and 383 in operations, maintenance and others).
Human Capital Our worldwide workforce consisted of 891 employees (full- and part-time) as of December 31, 2023, of which 201 were involved in sales, marketing, general and administrative, 228 in research and development (including 78 with advanced degrees), 40 in quality, reliability and assurance, and 422 in manufacturing (comprised of 40 in engineering and 382 in operations, maintenance and others).
In connection with our initial public offering, we converted from a Delaware limited liability company to a Delaware corporation. 2 Table of Contents On December 30, 2020, we changed our name from “MagnaChip Semiconductor Corporation” to “Magnachip Semiconductor Corporation.” Legacy Foundry Services Group Business On September 1, 2020, we completed the sale of our Foundry Services Group business and our fabrication facility located in Cheongju, Korea (known as “Fab 4”) to Key Foundry Co., Ltd.
Both companies are indirect wholly-owned subsidiaries of the Company. Legacy Foundry Services Group Business On September 1, 2020, we completed the sale of our Foundry Services Group business and our fabrication facility located in Cheongju, Korea (known as “Fab 4”) to SK keyfoundry Inc.
Park started his professional career in 1986 as a design engineer in the field of BJT, J-FET, and Schottky Diode at Samsung Electronics, located in Bucheon, Korea. Afterwards, he worked for Fairchild Semiconductor in West Jordan, Utah and for Vishay Siliconix in San Jose, California.
He developed cutting-edge technology platforms for low voltage MOSFETs having 1.5 giga-cell density and provided high and low side MOSFETs for DrMOS to various power stage solutions. Mr. Park started his professional career in 1986 as a design engineer in the field of BJT, J-FET and Schottky Diode at Samsung Electronics, located in Bucheon, Korea.
Chan Ho Park , General Manager of Power Solutions. Dr. Chan Ho Park became our General Manager of Power Solutions in June 2020 with over 30 years of hands-on experience in the development of discrete power devices and market insights throughout the power semiconductor industry.
Park has over 30 years of hands-on experience in the development of discrete power devices and market insights throughout the power semiconductor industry. Prior to joining Magnachip, he was a senior staff at Vishay Intertechnology Inc. since March, 2014.
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We are currently leveraging our capabilities in these areas with products such as AC-DC/DC-DC converters, LED drivers, regulators, power management integrated circuits (PMICs), power MOSFETs 6 Table of Contents and IGBTs.
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In connection with our initial public offering, we converted from a Delaware limited liability company to a Delaware corporation. 2 Table of Contents On December 30, 2020, we changed our name from “MagnaChip Semiconductor Corporation” to “Magnachip Semiconductor Corporation.” On May 30, 2023, we announced a plan to separate our standard products business, consisting of Display Solutions and Power Solutions business lines, into two different entities to better align our product strategies by enabling each entity to allocate its resources more effectively to the specific needs of its customers, as well as to enhance transparency, accountability and flexibility in business (the “Internal Separation”).
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We have recently introduced a number of new display driver ICs for OLED TV and automotive.
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To effectuate the Internal Separation, we reorganized our standard products business into two distinct businesses: (i) our Display IC and Power IC businesses, which are fabless businesses, were grouped together to form the Mixed-Signal Solutions (“MSS”) business, and (ii) our Power Discrete business, which is an integrated device manufacturing (“IDM”) business, became the Power Analog Solutions (“PAS”) business.
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Additionally, the CEO and management regularly communicate with employees through CEO letters and town hall meetings. Compensation and Benefits We strive to reward employees with competitive compensation based on contribution and performance.
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On January 10, 2024, we completed the Internal Separation by forming a new Korean limited liability company named “Magnachip Mixed-Signal, Ltd.” and transferring the MSS business into such subsidiary. Following the Internal Separation, our MSS business is primarily operated by Magnachip Mixed-Signal, Ltd., and our PAS business is primarily operated by Magnachip Semiconductor, Ltd., our already-existing Korean operating company.
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We built a companywide control tower to provide appropriate response guidance as the pandemic has evolved, and have secured internal/external capabilities to respond to emergencies systematically. In response to the ongoing COVID-19 pandemic, we quickly instituted infrastructure to support remote working, so that our employees could work from home in a safe and stable environment.
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Our advanced display drivers incorporate Oxide, Low-Temperature Poly Silicon (LTPS), Low-Temperature Polycrystalline Oxide (LTPO) OLED panel technologies that enable the highest resolution displays.
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In addition, we have installed safety facilities within our business sites.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

53 edited+9 added−19 removed183 unchanged
Biggest changeIn addition, in the event that there is any M&A transaction with respect to our Korean subsidiary that results in non-Korean ownership of 50% or more, or exertion of control over the appointment of officers/management 29 Table of Contents by a non-Korean person or entity as the largest shareholder, a prior-report with and the acceptance by the MOTIE is required under the ITA.
Biggest changeIn the event that any future prior-report or application is not accepted or not approved, we may be unable to continue our business with the overseas customers, suppliers or vendors, including the manufacturing and delivery of our OLED DDI products. 29 Table of Contents In addition, in the event that there is any M&A transaction with respect to our Korean subsidiary that results in non-Korean ownership of 50% or more, or exertion of control over the appointment of officers/management by a non-Korean person or entity as the largest shareholder, a prior-report with and the acceptance by the MOTIE is required under the ITA and a prior approval from the MOTIE is required under the Special Act.
Risk Factors Summary The following is a summary of the risk factors included herein. • We manufacture our products based on our estimates of customer demand, and if our estimates are incorrect, our financial results could be negatively impacted. • A significant portion of our sales comes from a relatively limited number of customers, the loss of which could adversely affect our financial results. • The average selling prices of our semiconductor products have at times declined rapidly and will likely do so in the future, which could harm our revenue and gross profit. • We are subject to risks associated with currency fluctuations, and changes in the exchange rates of applicable currencies could impact our results of operations. • Global shortages in manufacturing capacities could interrupt or negatively affect our operations, increase cost to manufacture and negatively impact our results of operations. • Expanded trade restrictions may limit our ability to sell to certain customers. • Recent changes in international trade policy and the imposition and threats of international tariffs, including tariffs applied to goods traded between the United States and China, could materially and adversely affect our business and results of operations. • Our Korean subsidiary has been designated as a regulated business under Korean environmental law, and such designation could have an adverse effect on our financial position and results of operations. • Our compliance with the Serious Accidents Punishment Act (the “SAPA”) could require significant expenditures and management time and expose us to liability for violations. 19 Table of Contents • Our business depends on international customers, suppliers and operations in Asia, and as a result we are subject to regulatory, operational, financial and political risks, which could adversely affect our financial results. • We cannot guarantee that our share repurchase program will be successfully consummated, or that it will enhance shareholder value, and share repurchases could affect the price of our common stock. • Provisions in our charter documents and Delaware Law may make it difficult for a third party to acquire us and could depress the price of our common stock. • We have not historically paid dividends and do not currently have any dividend or distribution policy, and therefore, investors may need to rely on sales of their common stock as the only way to realize any future gains on their investments.
Risk Factors Summary The following is a summary of the risk factors included herein. • We manufacture our products based on our estimates of customer demand, and if our estimates are incorrect, our financial results could be negatively impacted. • A significant portion of our sales comes from a relatively limited number of customers, the loss of which could adversely affect our financial results. • The average selling prices of our semiconductor products have at times declined rapidly and will likely do so in the future, which could harm our revenue and gross profit. • We are subject to risks associated with currency fluctuations, and changes in the exchange rates of applicable currencies could impact our results of operations. • Global shortages in manufacturing capacities could interrupt or negatively affect our operations, increase cost to manufacture and negatively impact our results of operations. • Expanded trade restrictions may limit our ability to sell to certain customers. • Recent changes in international trade policy and the imposition and threats of international tariffs, including tariffs applied to goods traded between the United States and China, could materially and adversely affect our business and results of operations. 19 Table of Contents • Our Korean subsidiary has been designated as a regulated business under Korean environmental law, and such designation could have an adverse effect on our financial position and results of operations. • Our compliance with the Serious Accidents Punishment Act (the “SAPA”) could require significant expenditures and management time and expose us to liability for violations. • Our business depends on international customers, suppliers and operations in Asia, and as a result we are subject to regulatory, operational, financial and political risks, which could adversely affect our financial results. • We cannot guarantee that our share repurchase program will be successfully consummated, or that it will enhance shareholder value, and share repurchases could affect the price of our common stock. • Provisions in our charter documents and Delaware Law may make it difficult for a third party to acquire us and could depress the price of our common stock. • We have not historically paid dividends and do not currently have any dividend or distribution policy, and therefore, investors may need to rely on sales of their common stock as the only way to realize any future gains on their investments.
If we underestimate our costs when determining pricing, our margins and results of operations would be adversely affected. 21 Table of Contents Our fab manufacturing depends on high utilization of our manufacturing capacity, a reduction of which could have a material adverse effect on our business, financial condition and the results of our operations.
If we 21 Table of Contents underestimate our costs when determining pricing, our margins and results of operations would be adversely affected. Our fab manufacturing depends on high utilization of our manufacturing capacity, a reduction of which could have a material adverse effect on our business, financial condition and the results of our operations.
Current and prospective customers for our products and services evaluate our capabilities against the merits of our competitors. Some of our competitors are well established as independent companies and have substantially 22 Table of Contents greater market share and manufacturing, financial, research and development and marketing resources than we do.
Current and prospective customers for our products and services evaluate our capabilities against the merits of our 22 Table of Contents competitors. Some of our competitors are well established as independent companies and have substantially greater market share and manufacturing, financial, research and development and marketing resources than we do.
Any such transaction would be accompanied by risks that may harm our business, such as difficulties in assimilating the operations, personnel and products of an acquired business or in realizing the projected benefits, disruption of our ongoing business, 25 Table of Contents potential increases in our indebtedness and contingent liabilities and charges if the acquired company or assets are later determined to be worth less than the amount paid for them in an earlier original acquisition.
Any such transaction would 25 Table of Contents be accompanied by risks that may harm our business, such as difficulties in assimilating the operations, personnel and products of an acquired business or in realizing the projected benefits, disruption of our ongoing business, potential increases in our indebtedness and contingent liabilities and charges if the acquired company or assets are later determined to be worth less than the amount paid for them in an earlier original acquisition.
In general, those provisions prohibit a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless: • the transaction is approved by the board of directors before the date the interested stockholder attained that status; • upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or 37 Table of Contents • on or after such date, the business combination is approved by the board of directors and authorized at a meeting of stockholders, and not by written consent, by at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.
In general, those provisions prohibit a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless: • the transaction is approved by the board of directors before the date the interested stockholder attained that status; 36 Table of Contents • upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or • on or after such date, the business combination is approved by the board of directors and authorized at a meeting of stockholders, and not by written consent, by at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.
We cooperate with independent foundries to produce certain Display Solutions and Power Solutions products, and the failure of such independent foundries to satisfy our demand could materially disrupt our business. We use independent foundry services for certain of our OLED Display Solutions products and Power Solutions products.
We cooperate with independent foundries to produce certain Display Solutions and Power Solutions products, and the failure of such independent foundries to satisfy our demand could materially disrupt our business. We use independent foundry services for certain of our Display Solutions products and Power Solutions products.
In general, DGCL Section 203 defines a business combination to include the following: • any merger or consolidation involving the corporation and the interested stockholder; • any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; • subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; • any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or • the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
In general, DGCL Section 203 defines a business combination to include the following: • any merger or consolidation involving the corporation and the interested stockholder; • any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; • subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; 37 Table of Contents • any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or • the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
It is anticipated that the Carbon Neutrality Framework Act, which aims to promote the harmonious development of the economy and the environment in conjunction with active greenhouse gas reduction measures, will serve as the foundation for the government’s climate change response policy going forward.
It is anticipated that the Carbon Neutrality Framework Act and the Basic Plan, which aims to promote the harmonious development of the economy and the environment in conjunction with active greenhouse gas reduction measures, will serve as the foundation for the government’s climate change response policy going forward.
Moreover, our foreign currency gain or loss would be affected by changes in the exchange rate between the Korean won and the 24 Table of Contents U.S. dollar as a substantial portion of non-cash translation gain or loss is associated with the intercompany long-term loans to our Korean subsidiary, which is denominated in U.S. dollars.
Moreover, our foreign currency gain or loss would be affected by changes in the exchange rate between the Korean won and the U.S. dollar as a substantial portion of non-cash translation gain or loss is associated with the intercompany long-term loans to our Korean subsidiary, which is denominated in U.S. dollars.
Expanded trade restrictions imposed by the United States may limit our ability to sell to certain customers. On August 17, 2020, the U.S. Department of Commerce expanded the scope of export restrictions as applied to products directed to Huawei and its affiliates listed on the Bureau of Industry and Security’s Entity List 28 Table of Contents (collectively, “Huawei”).
Expanded trade restrictions imposed by the United States may limit our ability to sell to certain customers. On August 17, 2020, the U.S. Department of Commerce expanded the scope of export restrictions as applied to products directed to Huawei and its affiliates listed on the Bureau of Industry and Security’s Entity List (collectively, “Huawei”).
You may not receive a positive return on your investment when you sell your shares, and you could lose some or the entire amount of your investment. We cannot guarantee that our share repurchase program will be successfully consummated, or that it will enhance shareholder value, and share repurchases could affect the price of our common stock.
You may not receive a positive return on your investment when you sell your shares, and you could lose some or the entire amount of your investment. 35 Table of Contents We cannot guarantee that our share repurchase program will be successfully consummated, or that it will enhance shareholder value, and share repurchases could affect the price of our common stock.
Any such compromise of our information security could also result in the unauthorized publication of our confidential business or proprietary information or that of other parties with which we do business, an interruption in our operations, the unauthorized transfer of cash or 34 Table of Contents other assets, the unauthorized release of customer or employee data or a violation of privacy or other laws in the jurisdictions in which we operate.
Any such compromise of our information security could also result in the unauthorized publication of our confidential business or proprietary information or that of other parties with which we do business, an interruption in our operations, the unauthorized transfer of cash or other assets, the unauthorized release of customer or employee data or a violation of privacy or other laws in the jurisdictions in which we operate.
While prior restrictions had minimal effect on our ability to supply to customers, the newly expanded restrictions would limit our ability to supply to a variety of customers who we believe incorporate our products to those customers’ products directly or indirectly sold to Huawei.
While prior restrictions had minimal effect on our ability to supply to customers, the 28 Table of Contents newly expanded restrictions would limit our ability to supply to a variety of customers who we believe incorporate our products to those customers’ products directly or indirectly sold to Huawei.
The Notification Regarding Designation of National Core Technologies issued by the MOTIE was amended on July 14, 2021 to add certain technologies to the list of National Core Technology designated by the MOTIE, and the amended list includes the design technology for OLED DDI.
The Notification Regarding Designation of National Core Technologies issued by the MOTIE was amended on July 14, 2021 to add certain technologies to the list of National Core Technology designated by the MOTIE, and the amended list includes the OLED DDI design technology for driving display panels.
Our ability to compete will depend on a number of factors, including the following: • our ability to offer cost-effective and high quality products and services on a timely basis using our technologies; • our ability to accurately identify and respond to emerging technological trends and demand for product features and performance characteristics; • our ability to continue to rapidly introduce new products that are accepted by the market; • our ability to adopt or adapt to emerging industry standards; • the number and nature of our competitors and competitiveness of their products and services in a given market; • entrance of new competitors into our markets; and • our ability to enter the highly competitive power management market.
Our ability to compete will depend on a number of factors, including the following: • our ability to offer cost-effective and high quality products and services on a timely basis using our technologies; • our ability to accurately identify and respond to emerging technological trends and demand for product features and performance characteristics; • our ability to continue to rapidly introduce new products that are accepted by the market; • our ability to adopt or adapt to emerging industry standards; • the number and nature of our competitors and competitiveness of their products and services in a given market; • entrance of new competitors into our markets; • our ability to enter the highly competitive power management market; and • our ability to supply power products to our customers reliably through our own fabrication facility.
In addition, our arrangements with and reliance on key customers may make it less practicable to pursue certain opportunities with other potential new and existing customers. For the years ended December 31, 2022, 2021 and 2020, our ten largest customers accounted for 69.4%, 79.8% and 87.6% of net sales from our standard products business, respectively.
In addition, our arrangements with and reliance on key customers may make it less practicable to pursue certain opportunities with other potential new and existing customers. For the years ended December 31, 2023, 2022 and 2021, our ten largest customers accounted for 69.2%, 69.4% and 79.8% of net sales from our standard products business, respectively.
Our subsidiaries’ ability to make payments to us will depend on: • their earnings; • covenants contained in any debt agreements to which we may then be subject, including any debt agreements of our subsidiaries; • covenants contained in other agreements to which we or our subsidiaries are or may become subject; • business and tax considerations; and • applicable law, including any restrictions under Korean law that may be imposed on our Korean subsidiary that would restrict its ability to make payments on intercompany loans from our Dutch subsidiary.
Our subsidiaries’ ability to make payments to us will depend on: • their earnings; • covenants contained in agreements to which we or our subsidiaries are or may become subject; • business and tax considerations; and 34 Table of Contents • applicable law, including any restrictions under Korean law that may be imposed on our Korean subsidiary that would restrict its ability to make payments on intercompany loans from our Dutch subsidiary.
As of December 31, 2022, the outstanding intercompany loan balance including accrued interests between our Korean subsidiary and our Dutch subsidiary was $311.0 million. Our Dutch subsidiary uses the U.S. dollar as their functional currency. As a result of foreign currency fluctuations, it could be more difficult to detect underlying trends in our business and results of operations.
As of December 31, 2023, the outstanding intercompany loan balance including accrued interests between our Korean subsidiary and our Dutch subsidiary was $285.1 million. Our Dutch subsidiary uses the U.S. dollar as their functional currency. As a result of foreign currency fluctuations, it could be more difficult to detect underlying trends in our business and results of operations.
Since the law applies to businesses in Korea with 50 or more full-time employees starting from January 27, 2022, our Korean subsidiary becomes subject to the law after the effective date.
Since the law applies to businesses in Korea with 50 or more full-time employees starting from January 27, 2022, our Korean subsidiary becomes subject to the law after the effective 32 Table of Contents date.
Under the ITA, any export (including various means of outflow, such as sale or transfer outside Korea) of National Core Technology by MOTIE requires the filing of a prior-report with, and the acceptance of the same by, the MOTIE.
Under the ITA, any export (including various means of outflow, such as sale or transfer outside Korea) of National Core Technology by the MOTIE requires the filing of a prior-report with, and the acceptance of the same by, the MOTIE. Under the Special Act, any export of NHST requires prior approval from the MOTIE.
Additionally, if there was negligence of the company in giving due attention and supervision to prevent such accident, the company will be 32 Table of Contents subject to a fine up to KRW 5 billion under joint penalty provisions.
Additionally, if there was negligence of the company in giving due attention and supervision to prevent such accident, the company will be subject to a fine up to KRW 1 billion (in case of death, a fine up to KRW 5 billion) under joint penalty provisions.
There is no assurance that any report for an M&A transaction involving non-Korean acquirers or investors will be accepted by the MOTIE when such transaction is pursued in the future.
There is no assurance that any report for an M&A transaction involving non-Korean acquirers or investors will be accepted by the MOTIE, nor we can assure approval for the M&A transaction from the MOTIE when such transaction is pursued in the future.
In the ordinary course of business, our Korean subsidiary may provide certain information relating to its products, including OLED DDI, to customers, suppliers or vendors, and such disclosure of information may be subject to the NCT-related regulations under the ITA, and therefore the MOTIE’s acceptance of prior reports.
In the ordinary course of business, our Korean subsidiary may provide certain information relating to its products, including OLED DDI, to customers, suppliers or vendors, and such disclosure of information may be subject to both NCT and NHST restrictions, and therefore the MOTIE’s acceptance of prior reports and prior approval.
Although we do not derive any revenue from, nor sell any products in, North Korea, any future increase in tensions between South Korea and North Korea that may occur, for example, if North Korea experiences a leadership crisis, high-level contacts between South Korea and North Korea break down, or military hostilities occur, could have a material adverse effect on the South Korean economy and on our business, financial condition, results of operations and the market value of our common stock.
North Korea’s economy also faces severe challenges, and any adverse economic developments may further aggravate social and political tensions within North Korea. 33 Table of Contents Although we do not derive any revenue from, nor sell any products in, North Korea, any future increase in tensions between South Korea and North Korea that may occur, for example, if North Korea experiences a leadership crisis, high-level contacts between South Korea and North Korea break down, or military hostilities occur, could have a material adverse effect on the South Korean economy and on our business, financial condition, results of operations and the market value of our common stock.
For the year ended December 31, 2022, sales to Samsung Display represented 19.0% of net sales from our standard products business and 80.2% of net sales from our Display Solutions business line, and SAMT represented 13.8% of net sales from our standard products business and 18.1% of net sales from our Power Solutions business line.
For the year ended December 31, 2022, sales to Samsung Display represented 19.0% of net sales from our standard products business, and SAMT represented 13.8% of net sales from our standard products business.
For the year ended December 31, 2021, sales to Samsung Display represented 42.5% of net sales from our standard products business and 89.7% of net sales from our Display Solutions business line, and SAMT represented 10.4% of net sales from our standard products business and 19.8% of net sales from our Power Solutions business line.
For the year ended December 31, 2021, sales to Samsung Display represented 42.5% of net sales from our standard products business, and SAMT represented 10.4% of net sales from our standard products business.
We are also subject to regular reviews, examinations and audits by the IRS and other taxing authorities, including the Korean National Tax Service, with respect to income and non-income based taxes both within and outside the U.S.
We will continue to monitor as new information and guidance becomes available. We are also subject to regular reviews, examinations and audits by the IRS and other taxing authorities, including the Korean National Tax Service, with respect to income and non-income based taxes both within and outside the U.S.
Additionally, South Korea became one of the first countries to enact minimum tax rules. At this time, we do not anticipate that changes in the tax laws will have a material impact to our consolidated tax provision for the year ending December 31, 2022 or December 31, 2023. We will continue to monitor as new information and guidance becomes available.
Additionally, South Korea became one of the first countries to enact global minimum tax rules. At this time, we do not anticipate that changes in the tax laws will have a material impact to our consolidated tax provision for the year ending December 31, 2023 or December 31, 2024.
This may cause us to be unable to recoup our investments in our semiconductor products, which would harm our business. 23 Table of Contents We have lengthy and expensive design-to-mass production and manufacturing process development cycles that may cause us to incur significant expenses without realizing meaningful sales, the occurrence of which would harm our business.
We have lengthy and expensive design-to-mass production and manufacturing process development cycles that may cause us to incur significant expenses without realizing meaningful sales, the occurrence of which would harm our business.
As of December 31, 2022, 485 employees, or approximately 56% of our employees, were represented by the Magnachip Semiconductor Labor Unions.
As of December 31, 2023, 470 employees, or approximately 55% of our employees, were represented by the Magnachip Semiconductor Labor Unions.
Global shortages in manufacturing capacities could interrupt or negatively affect our operations, increase cost to manufacture and negatively impact our results of operations. Increases in demand for semiconductor products resulted in a global shortage of manufacturing capacity over the prior two years.
Global shortages in manufacturing capacities could interrupt or negatively affect our operations, increase cost to manufacture and negatively impact our results of operations. Increases in demand for semiconductor products have in the past and may again in the future result in a global shortage of manufacturing capacity.
The IRA provisions are effective for tax years beginning after December 31, 2022. On December 12, 2022, the European Union member states agreed to implement the OECD’s Pillar 2 global corporate minimum tax rate of 15% on companies with revenues of at least EUR 750 million, which will be effective for fiscal years beginning on January 1, 2024.
On December 12, 2022, the European Union member states agreed to implement the OECD’s Pillar 2 global minimum effective tax rate of 15% on multinational enterprise (“MNE”) groups with consolidated revenues of at least EUR 750 million during two of the four preceding fiscal years, which will be effective for fiscal years beginning on January 1, 2024.
The adoption of new environmental, health and safety laws, the failure to comply with new or existing laws, or issues relating to hazardous substances could subject us to material liability (including substantial fines or penalties), impose the need for additional capital equipment or other process requirements upon us, curtail our operations or restrict our ability to expand operations. 31 Table of Contents Our Korean subsidiary has been designated as a regulated business under Korean environmental law, and such designation could have an adverse effect on our financial position and results of operations.
The adoption of new environmental, health and safety laws, the failure to comply with new or existing laws, or issues relating to hazardous substances could subject us to material liability (including substantial fines or penalties), impose the 31 Table of Contents need for additional capital equipment or other process requirements upon us, curtail our operations or restrict our ability to expand operations.
We have experienced these conditions in our business in the past and may experience renewed, and possibly more severe and prolonged, downturns in the future as a result of such cyclical changes. This may reduce our results of operations. Over the prior two years, increases in demand for semiconductor products resulted in a global shortage of manufacturing capacities.
We have experienced these conditions in our business in the past and may experience renewed, and possibly more severe and prolonged, downturns in the future as a result of such cyclical changes. This may reduce our results of operations.
In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources advertising and marketing new brands. Further, we cannot assure you that competitors will not infringe our trademarks, or that we will have adequate resources to enforce our trademarks.
In the event that our trademarks are successfully challenged, we 30 Table of Contents could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources advertising and marketing new brands.
These factors could cause a negative impact on our results of operations. We depend on successful parts and materials procurement for our manufacturing processes, and a shortage or increase in the price of these materials could interrupt our operations and result in a decline of revenues and results of operations.
We depend on successful parts and materials procurement for our manufacturing processes, and a shortage or increase in the price of these materials could interrupt our operations and result in a decline of revenues and results of operations. We procure materials and electronic and mechanical components from international sources and original equipment manufacturers.
These routine matters typically fall into broad categories such as those involving customers, employment and labor and intellectual property. Even if the final outcome of these legal claims does not have a material adverse effect on our financial position, results of operations or cash flows, defense and settlement costs can be substantial.
Even if the final outcome of these legal claims does not have a material adverse effect on our financial position, results of operations or cash flows, defense and settlement costs can be substantial.
As a result, we experienced increases in the costs to manufacture our products. We are not able to foresee when the current shortage of manufacturing capacity will subside. If we are unable secure manufacturing capacities from our current subcontractors, our ability to deliver our products to our customers may be negatively impacted.
As a result, we may experience increases in the costs to manufacture our products and may not be able to manufacture and deliver all of the orders placed by our customers. If we are unable to secure manufacturing capacities from our current subcontractors, our ability to deliver our products to 26 Table of Contents our customers may be negatively impacted.
If we fail to achieve initial design-wins in a customer’s qualification process, we may lose the opportunity for significant sales to that customer for a number of products and for a lengthy period of time.
If we fail to achieve initial design-wins in a customer’s qualification process, we may lose the 23 Table of Contents opportunity for significant sales to that customer for a number of products and for a lengthy period of time. This may cause us to be unable to recoup our investments in our semiconductor products, which would harm our business.
Since 2015, our Korean subsidiary has been subject to K-ETS, a new set of greenhouse gas emissions regulations, under the Act on Allocation and Trading of Greenhouse Gas Emission Allowances.
Our Korean subsidiary has been designated as a regulated business under Korean environmental law, and such designation could have an adverse effect on our financial position and results of operations. Since 2015, our Korean subsidiary has been subject to K-ETS, a new set of greenhouse gas emissions regulations, under the Act on Allocation and Trading of Greenhouse Gas Emission Allowances.
All industries, including the semiconductor industry, are subject to legal claims, with and without merit, that may be particularly costly and which may divert the attention of our management and our resources in general. 35 Table of Contents We are involved in a variety of legal matters, most of which we consider routine matters that arise in the normal course of business.
We are subject to litigation risks, which may be costly to defend and the outcome of which is uncertain. All industries, including the semiconductor industry, are subject to legal claims, with and without merit, that may be particularly costly and which may divert the attention of our management and our resources in general.
For the year ended December 31, 2020, sales to Samsung Display represented 56.2% of net sales from our standard products business and 87.5% of net sales from our Display Solutions business line.
For the year ended December 31, 2023, sales to SAMT represented 16.7% of net sales from our standard products business, and Samsung Display represented 13.4% of net sales from our standard products business.
For example, foreign currency fluctuations had an unfavorable impact on our reported profit margins and operating income from operations for the fiscal year ended December 31, 2021 due to a relatively stronger Korean won during the period, while we had a favorable impact on our reported profit margins and operating income from operations for the fiscal year ended December 31, 2022 due to a relatively weaker Korean won during the period.
The converse is true if the U.S. dollar were to appreciate relative to the Korean won. For example, foreign currency fluctuations had a favorable impact on our reported profit margins and operating income from 24 Table of Contents operations for the fiscal year ended December 31, 2023 and 2022 due to a relatively weaker Korean won during the periods.
We may need to file lawsuits to enforce our patents or intellectual property rights, and we may need to defend against claimed infringement of the rights of others. Any litigation could result in substantial costs to us and divert our resources, and we cannot assure you that we will prevail.
Any litigation could result in substantial costs to us and divert our resources, and we cannot assure you that we will prevail.
Tensions with North Korea could have an adverse effect on us and the market value of our shares. Relations between South Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events.
These risks may lead to increased costs or decreased revenue growth, or both. Tensions with North Korea could have an adverse effect on us and the market value of our shares. Relations between South Korea and North Korea have been tense throughout Korea’s modern history.
There is no assurance, however, that any future prior-reports for the export of our product-related information will be accepted by the MOTIE. In the event that any future prior-report is not accepted, we may be unable to continue our business with the overseas customers, suppliers or vendors, including the manufacturing and delivery of our OLED DDI products.
There is no assurance, however, that any future prior-reports for the export of our product-related information will be accepted by the MOTIE or we will obtain any future prior approval for the export from the MOTIE.
In particular, in recent years, there have been heightened security concerns stemming from North Korea’s nuclear weapon and long-range missile programs and increased uncertainty regarding North Korea’s actions and possible responses from the international community. North Korea’s economy also faces severe challenges, and any adverse economic developments may further aggravate social and political tensions within North Korea.
The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In particular, in recent years, there have been heightened security concerns stemming from North Korea’s nuclear weapon and long-range missile programs and increased uncertainty regarding North Korea’s actions and possible responses from the international community.
Our ability to compete successfully depends on our ability to operate without infringing the proprietary rights of others. We have no means of knowing what patent applications have been filed until they are published. 30 Table of Contents In addition, the semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights.
Further, we cannot assure you that competitors will not infringe our trademarks, or that we will have adequate resources to enforce our trademarks. Our ability to compete successfully depends on our ability to operate without infringing the proprietary rights of others. We have no means of knowing what patent applications have been filed until they are published.
If we are unable secure manufacturing capacities from our current subcontractors, our ability to deliver our products to our customers may be negatively impacted. Also, our subcontractors may increase their fees, which would result in an increase in our 26 Table of Contents manufacturing costs, which we may not be fully able to pass to our customers.
Also, our subcontractors may increase their fees, which would result in an increase in our manufacturing costs, which we may not be fully able to pass to our customers. These factors could cause a negative impact on our results of operations.
The IRA enacted in August 2022 imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The total taxable value of shares repurchased is reduced by the fair market 36 Table of Contents value of any newly issued shares during the taxable year.
This share repurchase program could affect the price of our common stock, increase volatility and diminish our cash reserves. The IRA enacted in August 2022 imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022.
We are assessing the potential impact of the stock repurchase excise tax. Based on our preliminary assessment, we do not expect a material impact on our overall share repurchase program or our consolidated financial statements. See “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 13. Stockholders’ Equity and Stock-Based Compensation” for more information.
The total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year. See “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 12. Stockholders’ Equity and Stock-Based Compensation” for more information.
These factors could cause a negative impact on our results of operations. However, we are beginning to see some indicators of improvement of such supply shortage situation. Current global macroeconomic conditions, including COVID-19 pandemic, higher inflation and interest rates and uncertainty caused by the Russian-Ukraine war, have led to weaker end-market demand and an oversupply of inventory.
Current global macroeconomic conditions, including higher inflation and interest rates and uncertainty caused by the Russian-Ukraine war, Israel-Hamas war, sustained military action and conflict in the Red Sea, and trade tensions between the U.S. and China have led to weaker end-market demand and unstable supply chain.
Removed
The converse is true if the U.S. dollar were to appreciate relative to the Korean won.
Added
The IRA provisions are effective for tax years beginning after December 31, 2022.
Removed
As a result, we may experience increases in the costs to manufacture our products and may not be able to manufacture and deliver all of the orders placed by our customers. We are not able to foresee when the current shortage of manufacturing capacity will subside.
Added
Any such export of NHST without the prior approval from the MOTIE may be subject to corrective orders by the relevant authorities and may also be subject to criminal sanctions.
Removed
We procure materials and electronic and mechanical components from international sources and original equipment manufacturers.
Added
On June 2, 2023, the MOTIE designated 17 technologies, including the OLED DDI design technology for driving display panels, as NHST under the Special Act.
Removed
These risks may lead to increased costs or decreased revenue growth, or both. Our business, results of operations and financial condition and prospects may be materially and adversely affected by the ongoing COVID-19 pandemic or any future pandemic, epidemic or outbreak of any other highly infectious disease.
Added
In addition, the semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. We may need to file lawsuits to enforce our patents or intellectual property rights, and we may need to defend against claimed infringement of the rights of others.
Removed
As a result of COVID-19, including the emergence of various variants, governments in affected countries have imposed travel bans, quarantines and other emergency public health measures.
Added
Based on that, On April 11, 2023, the Korean government published the 1st National Basic Plan for Carbon Neutrality and Green Growth (the “Basic Plan”). The Basic Plan is a national plan for responding to the climate crisis and sustainable development.
Removed
In response to the virus, national and local governments in numerous countries around the world have implemented substantial business restrictions and lockdown measures and may continue to impose similar policies in the future from time to time in response to further outbreaks of the virus.
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Including annual reduction goals and implementation measures for each sector (e.g., industry and transportation), the Basic Plan will be updated every five years over the next 20 years between 2023 and 2042.
Removed
Private sector companies have also taken precautionary measures, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses and facilities. These restrictions have had, and these and future prevention and mitigation measures, may continue to have, an adverse impact on global economic conditions, which could materially adversely affect our future operations.
Added
We are involved in a variety of legal matters, most of which we consider routine matters that arise in the normal course of business. These routine matters typically fall into broad categories such as those involving customers, employment and labor and intellectual property.
Removed
These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners.
Added
From September 2022 to June 2023, we repurchased 4,941,093 shares of common stock under the expanded stock repurchase program using the remaining $50 million through open market purchases. On July 19, 2023, the Board of Directors authorized a new $50 million stock buyback program.
Removed
The disruptions to our operations caused by the COVID-19 outbreak may result in inefficiencies, delays and additional costs in our research and development, sales and marketing, and customer service efforts that we cannot fully mitigate through remote or 33 Table of Contents other alternative work arrangements.
Added
Purchases have been and will be made in the open market or through privately negotiated transactions, depending upon market conditions and other factors. In connection with the repurchase program, we established a stock trading plan with Needham & Company, LLC in accordance with Rule 10b5-1 under the Securities Exchange Act.
Removed
Also, some suppliers of materials used in the production of our products may have been or will be more severely impacted by COVID-19, which could limit our ability to obtain sufficient materials for our products.
Removed
In addition, the severe global economic disruption caused by COVID-19 may cause our customers and end-users of our products to suffer significant economic hardship, which could result in decreased demand for our products in the future and materially adversely affect our business, results of operations, financial condition (including liquidity) and prospects.
Removed
The full extent to which COVID-19, or any future pandemic, epidemic or outbreak of any other highly infectious disease, impacts our operations and causes disruptions on our customers, end-users, overall demand for our products, supply chain, and the related financial impact to us, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the emergence and characteristics of new variants, the actions taken to contain the pandemic or mitigate its impact, including the adoption, administration and effectiveness of available COVID-19 vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others.
Removed
Should such disruptions continue for an extended period of time, the impact could have a more severe adverse effect on our business, results of operations and financial condition (including liquidity). Additionally, weaker economic conditions generally could result in impairment in value of our tangible or intangible assets, or our ability to raise additional capital, if needed.
Removed
We are subject to litigation risks, which may be costly to defend and the outcome of which is uncertain.
Removed
In connection with the repurchase program, we established a stock trading plan with Oppenheimer & Co. Inc. in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. This share repurchase program could affect the price of our common stock, increase volatility and diminish our cash reserves.
Removed
Significant ownership of our common stock by certain stockholders could adversely affect our other stockholders. The concentration of ownership of our common stock by certain stockholders may limit the ability of other stockholders to influence corporate matters and, as a result, we may take actions that our public stockholders do not view as beneficial.
Removed
For example, any concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could cause the market price of our common stock to decline or prevent our stockholders from realizing a premium over the market price for their shares of our common stock.
Removed
Under our certificate of incorporation, our non-employee directors and non-employee holders of five percent or more of our outstanding common stock do not have a duty to refrain from engaging in a corporate opportunity in the same or similar activities or lines of business as those engaged in by us, our subsidiaries and other related parties.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe our facilities are suitable and adequate for the conduct of our business for the foreseeable future and that we have sufficient production capacity to service our business as currently contemplated without significant capital investment.
Biggest changeMaintaining manufacturing control enables us to develop proprietary, differentiated products and results in higher production yields, as well as shortened design and production cycles. We believe our facilities are suitable and adequate for the conduct of our business for the foreseeable future and that we have sufficient production capacity to service our business as currently contemplated without significant capital investment.
Item 2. Properties Our manufacturing operations take place in a single fabrication facility located in Korea in Gumi. Our facility has a capacity of approximately 36,000 eight-inch equivalent wafers per month. We manufacture wafers utilizing geometries ranging from 0.35 to 0.50 microns. The Gumi facility has one main building with 41,022 square meters devoted to manufacturing, testing and packaging.
Item 2. Properties Our manufacturing operations take place in a single fabrication facility located in Korea in Gumi. Our facility has a capacity of approximately 36,000 eight-inch equivalent wafers per month. We manufacture wafers utilizing geometries ranging from 0.18 to 0.35 microns. The Gumi facility has one main building with 41,022 square meters devoted to manufacturing, testing and packaging.
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Maintaining manufacturing control enables us to develop proprietary, differentiated products and results in 38 Table of Contents higher production yields, as well as shortened design and production cycles.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRisk Factors” in this Report for additional information. Item 4. Mine Safety Disclosures Not applicable. 39 Table of Contents PART II
Biggest changeRisk Factors” in this Report for additional information. Item 4. Mine Safety Disclosures Not applicable. 40 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn connection with the repurchase program, the Company has established a stock trading plan with Oppenheimer & Co. Inc. in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. See “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 13.
Biggest changeIn connection with the repurchase program, the Company established a stock trading plan with Needham & Company, LLC in accordance with Rule 10b5-1 under the Exchange Act. 42 Table of Contents Item 6. [Reserved]
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange under the symbol “MX.” Stock Performance Graph The graph and table below compare the cumulative total stockholder return of our common shares with the cumulative total return of the S&P 500 Index and the Philadelphia Semiconductor Index (PHLX) from December 29, 2017 (the last trading day before the beginning of our fifth preceding fiscal year) through December 30, 2022.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange under the symbol “MX.” Stock Performance Graph The graph and table below compare the cumulative total stockholder return of our common shares with the cumulative total return of the S&P 500 Index and the Philadelphia Semiconductor Index (PHLX) from December 29, 2017 (the last trading day before the beginning of our fifth preceding fiscal year) through December 31, 2023.
Issuer Purchases of Equity Securities The following table shows the monthly activity related to our repurchases of common stock for the quarter ended December 31, 2022.
Issuer Purchases of Equity Securities The following table shows the monthly activity related to our repurchases of common stock for the quarter ended December 31, 2023.
The graph assumes that $100 was invested on December 29, 2017 in our common shares and in each index and that any dividends were reinvested. No cash dividends have been declared on our common shares during the five-year period ended December 30, 2022.
The graph assumes that $100 was invested on December 29, 2017 in our common shares and in each index and that any dividends were reinvested. No cash dividends have been declared on our common shares during the five-year period ended December 31, 2023.
Comparison of Cumulative Total Return* Among Magnachip Semiconductor Corporation, the S&P 500 Index and the PHLX * The stock performance included in this graph is not necessarily indicative of future stock performance. 40 Table of Contents Total Return to Stockholders (Including Reinvestment of Dividends) Indexed Returns Company/Index Base Period 12/29/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/30/2022 Magnachip Semiconductor Corporation 100 62.41 116.68 135.88 210.75 94.37 S&P 500 Index 100 93.76 121.85 140.49 178.27 143.61 Philadelphia Semiconductor Index 100 92.19 147.61 223.10 314.93 202.08 Holders The approximate number of record holders of our outstanding common stock as of February 10, 2023 was 70.
Comparison of Cumulative Total Return* Among Magnachip Semiconductor Corporation, the S&P 500 Index and the PHLX * The stock performance included in this graph is not necessarily indicative of future stock performance. 41 Table of Contents Total Return to Stockholders (Including Reinvestment of Dividends) Indexed Returns Company/Index Base Period 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/30/2022 12/29/2023 Magnachip Semiconductor Corporation 100 186.96 217.71 337.68 151.21 120.77 S&P 500 Index 100 129.96 149.83 190.13 153.16 190.27 Philadelphia Semiconductor Index 100 160.12 242.00 341.61 219.20 361.46 Holders The approximate number of record holders of our outstanding common stock as of February 29, 2024 was 67.
Removed
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) Approximate dollar value of Shares that may yet be Purchased under the Plans or Programs (in thousands)(1) October 2022 403,823 $ 10.24 403,823 $ 42,625 November 2022 314,041 $ 9.65 314,041 $ 39,195 December 2022 193,143 $ 8.83 193,143 $ 37,489 Total 911,007 $ 9.74 911,007 $ 37,489 (1) On August 31, 2022, the Company’s Board of Directors authorized an expansion of the Company’s previously announced stock repurchase program from $75 million to $87.5 million of the Company’s common stock.
Added
Period Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) Approximate dollar value of Shares that may yet be Purchased under the Plans or Programs (in thousands)(2) October 2023 904,977 $ 7.78 904,977 $ 37,594 November 2023 153,699 $ 7.53 153,699 $ 36,437 December 2023(1) 72,595 $ 7.50 — $ 36,437 Total 1,131,271 $ 7.73 1,058,676 $ 36,437 (1) Includes 72,595 shares withheld to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued under our equity incentive plans.
Removed
The Company has already repurchased shares worth $37.5 million under the program through an accelerated stock repurchase agreement on December 21, 2021 with JPMorgan Chase Bank, National Association. The remaining $50.0 million of the expanded $87.5 million program will be repurchased in the open market or through privately negotiated transactions.
Added
(2) On July 19, 2023, the Company’s Board of Directors authorized a new $50 million stock buyback program. Purchases have been and will be made in the open market or through privately negotiated transactions, depending upon market conditions and other factors.
Removed
Stockholders’ Equity and Stock-Based Compensation” in this Report for a description of the Accelerated Stock Repurchase Program. 41 Table of Contents Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

115 edited+23 added−51 removed80 unchanged
Biggest changeOur forecasts for our inventory may differ from actual inventory use. 55 Table of Contents Results of Operations Comparison of Years Ended December 31, 2022 and 2021 The following table sets forth consolidated results of operations for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 Year Ended December 31, 2021 Amount % of Total revenues Amount % of Total revenues Change Amount (Dollars in millions) Revenues Net sales—standard products business $ 301.9 89.4 % $ 433.1 91.3 % $ (131.2 ) Net sales—transitional Fab 3 foundry services 35.8 10.6 41.1 8.7 (5.4 ) Total revenues 337.7 100.0 474.2 100.0 (136.6 ) Cost of sales Cost of sales—standard products business 202.3 59.9 283.5 59.8 (81.2 ) Cost of sales—transitional Fab 3 foundry services 34.0 10.1 37.2 7.8 (3.1 ) Total cost of sales 236.4 70.0 320.7 67.6 (84.3 ) Gross profit 101.3 30.0 153.5 32.4 (52.3 ) Selling, general and administrative expenses 50.9 15.1 52.4 11.1 (1.6 ) Research and development expenses 52.3 15.5 51.2 10.8 1.1 Merger-related income, net — — (35.5 ) (7.5 ) 35.5 Other charges, net 3.3 1.0 2.0 0.4 1.3 Operating income (loss) (5.2 ) (1.6 ) 83.4 17.6 (88.7 ) Interest income 6.0 1.8 2.6 0.6 3.4 Interest expense (1.2 ) (0.3 ) (1.4 ) (0.3 ) 0.2 Foreign currency loss, net (3.0 ) (0.9 ) (11.9 ) (2.5 ) 8.8 Others, net 0.6 0.2 1.2 0.2 (0.6 ) 2.4 0.7 (9.4 ) (2.0 ) 11.8 Income (loss) before income tax expense (2.9 ) (0.9 ) 74.0 15.6 (76.8 ) Income tax expense 5.2 1.5 17.3 3.6 (12.1 ) Net income (loss) $ (8.0 ) (2.4 )% $ 56.7 12.0 % $ (64.7 ) Results by business line Year Ended December 31, 2022 Year Ended December 31, 2021 Amount % of Total revenues Amount % of Total revenues Change Amount (Dollars in millions) Revenues Net sales—standard products business Display Solutions 71.4 21.2 205.3 43.3 (133.9 ) Power Solutions 230.5 68.3 227.8 48.0 2.7 Total standard products business 301.9 89.4 433.1 91.3 (131.2 ) Net sales—transitional Fab 3 foundry services 35.8 10.6 41.1 8.7 (5.4 ) Total revenues $ 337.7 100.0 % $ 474.2 100.0 % $ (136.6 ) 56 Table of Contents Year Ended December 31, 2022 Year Ended December 31, 2021 Amount % of Net Sales Amount % of Net Sales Change Amount (Dollars in millions) Gross Profit Gross profit—standard products business 99.5 33.0 149.6 34.5 (50.0 ) Gross profit—transitional Fab 3 foundry services 1.7 4.8 3.9 9.6 (2.2 ) Total gross profit $ 101.3 30.0 % $ 153.5 32.4 % $ (52.3 ) Revenues Total revenues were $337.7 million for the year ended December 31, 2022, a $136.6 million, or 28.8%, decrease compared to $474.2 million for the year ended December 31, 2021.
Biggest changeOur forecasts for our inventory may differ from actual inventory use. 54 Table of Contents Results of Operations Comparison of Years Ended December 31, 2023 and 2022 The following table sets forth consolidated results of operations for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 Year Ended December 31, 2022 Amount % of Total revenues Amount % of Total revenues Change Amount (Dollars in millions) Revenues Net sales—standard products business $ 195.7 85.1 % $ 301.9 89.4 % $ (106.2 ) Net sales—transitional Fab 3 foundry services 34.4 14.9 35.8 10.6 (1.4 ) Total revenues 230.1 100.0 337.7 100.0 (107.6 ) Cost of sales Cost of sales—standard products business 143.8 62.5 202.3 59.9 (58.6 ) Cost of sales—transitional Fab 3 foundry services 34.6 15.1 34.0 10.1 0.6 Total cost of sales 178.4 77.6 236.4 70.0 (58.0 ) Gross profit 51.6 22.4 101.3 30.0 (49.6 ) Selling, general and administrative expenses 48.5 21.1 50.9 15.1 (2.4 ) Research and development expenses 51.6 22.4 52.3 15.5 (0.8 ) Early termination and other charges, net 9.3 4.0 3.3 1.0 6.0 Operating loss (57.6 ) (25.1 ) (5.2 ) (1.6 ) (52.4 ) Interest income 10.4 4.5 6.0 1.8 4.5 Interest expense (0.8 ) (0.4 ) (1.2 ) (0.3 ) 0.3 Foreign currency gain (loss), net 0.5 0.2 (3.0 ) (0.9 ) 3.5 Others, net 0.0 0.0 0.6 0.2 (0.5 ) 10.1 4.4 2.4 0.7 7.7 Loss before income tax expense (benefit) (47.6 ) (20.7 ) (2.9 ) (0.9 ) (44.7 ) Income tax expense (benefit) (10.9 ) (4.8 ) 5.2 1.5 (16.1 ) Net loss $ (36.6 ) (15.9 )% $ (8.0 ) (2.4 )% $ (28.6 ) Results by business line Year Ended December 31, 2023 Year Ended December 31, 2022 Amount % of Total revenues Amount % of Total revenues Change Amount (Dollars in millions) Revenues Net sales—standard products business Display Solutions 32.1 14.0 71.4 21.2 (39.3 ) Power Solutions 163.6 71.1 230.5 68.3 (66.9 ) Total standard products business 195.7 85.1 301.9 89.4 (106.2 ) Net sales—transitional Fab 3 foundry services 34.4 14.9 35.8 10.6 (1.4 ) Total revenues $ 230.1 100.0 % $ 337.7 100.0 % $ (107.6 ) 55 Table of Contents Year Ended December 31, 2023 Year Ended December 31, 2022 Amount % of Net Sales Amount % of Net Sales Change Amount (Dollars in millions) Gross Profit Gross profit—standard products business 51.9 26.5 99.5 33.0 (47.6 ) Gross profit—transitional Fab 3 foundry services (0.3 ) (0.8 ) 1.7 4.8 (2.0 ) Total gross profit $ 51.6 22.4 % $ 101.3 30.0 % $ (49.6 ) Revenues Total revenues were $230.1 million for the year ended December 31, 2023, a $107.6 million, or 31.9%, decrease compared to $337.7 million for the year ended December 31, 2022.
Our wide variety of analog and mixed-signal semiconductor products combined with our mature technology platform allow us to address multiple high-growth end markets and rapidly develop and introduce new products and services in response to market demands. Our design center and substantial manufacturing operation in Korea place us at the core of the global electronics device supply chain.
Our wide variety of analog and mixed-signal semiconductor products combined with our mature technology platform allow us to address multiple high-growth end markets and rapidly develop and introduce new products and services in response to market demands. Our design center in Korea and substantial manufacturing operation in global place us at the core of the global electronics device supply chain.
As these adjustments meaningfully impacted our operating results and are not expected to represent an ongoing operating expense or income to us, we believe our operating performance results are more usefully compared if these adjustments are excluded.
As these adjustments meaningfully impacted our operating results and are not expected to represent an ongoing operating expense or income to us, we believe our operating performance results are more usefully compared if these adjustments are excluded.
We prepare Adjusted Operating Income by adjusting operating income (loss) to eliminate the impact of equity-based compensation expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance.
We prepare Adjusted Operating Income (Loss) by adjusting operating income (loss) to eliminate the impact of equity-based compensation expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance.
Although we expect to incur non-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information.
Although we expect to incur non-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information.
We prepare Adjusted Net Income (including on a per share basis) by adjusting income (loss) to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance.
We prepare Adjusted Net Income (Loss) (including on a per share basis) by adjusting income (loss) to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance.
Although we expect to incur non-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information.
Although we expect to incur non-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information.
(b) This adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables.
(b) This adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables.
Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, which we cannot control.
Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, which we cannot control.
Depreciation rates vary from 30-40 years on buildings to 3 to 12 years for certain equipment and assets. Our evaluation of carrying values is based on various analyses including cash flow and profitability projections.
Depreciation rates vary from 30-40 years on buildings to 3-12 years for certain equipment and assets. Our evaluation of carrying values is based on various analyses including cash flow and profitability projections.
We present Adjusted Net Income (including on a per share basis) for a number of reasons, including: • we use Adjusted Net Income (including on a per share basis) in communications with our Board of Directors concerning our consolidated financial performance without the impact of non-cash expenses and the other items as we discussed below since we believe that it is a more consistent measure of our core operating results from period to period; and • we believe that reporting Adjusted Net Income (including on a per share basis) is useful to readers in evaluating our core operating results because it eliminates the effects of non-cash expenses as well as the other items we discuss below, such as foreign currency gains and losses, which are out of our control and can vary significantly from period to period.
We present Adjusted Net Income (Loss) (including on a per share basis) for a number of reasons, including: • we use Adjusted Net Income (Loss) (including on a per share basis) in communications with our Board of Directors concerning our consolidated financial performance without the impact of non-cash expenses and the other items as we discussed below since we believe that it is a more consistent measure of our core operating results from period to period; and • we believe that reporting Adjusted Net Income (Loss) (including on a per share basis) is useful to readers in evaluating our core operating results because it eliminates the effects of non-cash expenses as well as the other items we discuss below, such as foreign currency gains and losses, which are out of our control and can vary significantly from period to period.
Some of these limitations are: • Adjusted Net Income does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted Net Income does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees; • Adjusted Net Income does not reflect the costs of holding certain assets and liabilities in foreign currencies; and • other companies in our industry may calculate Adjusted Net Income differently than we do, limiting its usefulness as a comparative measure.
Some of these limitations are: • Adjusted Net Income (Loss) does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted Net Income (Loss) does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees; • Adjusted Net Income (Loss) does not reflect the costs of holding certain assets and liabilities in foreign currencies; and • other companies in our industry may calculate Adjusted Net Income (Loss) differently than we do, limiting its usefulness as a comparative measure.
(f) For the year ended December 31, 2022, this adjustment eliminates $2.8 million of one-time employee incentives and professional service fees and expenses of $1.0 million incurred in connection with certain strategic evaluations, which was offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi.
For the year ended December 31, 2022, this adjustment eliminates $2.8 million of one-time employee incentives and professional service fees and expenses of $1.0 million incurred in connection with certain strategic evaluations, which was offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi.
(d) For the year ended December 31, 2022, this adjustment eliminates $2.8 million of one-time employee incentives and professional service fees and expenses of $1.0 million incurred in connection with certain strategic evaluations, which was offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi.
For the year ended December 31, 2022, this adjustment eliminates $2.8 million of one-time employee incentives and professional service fees and expenses of $1.0 million incurred in connection with certain strategic evaluations, which was offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi.
(f) For the year ended December 31, 2022, this adjustment eliminates $2.8 million of one-time employee incentives and professional service fees and expenses of $1.0 million incurred in connection with certain strategic evaluations, which was offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi.
For the year ended December 31, 2022, this adjustment eliminates $2.8 million of one-time employee incentives and professional service fees and expenses of $1.0 million incurred in connection with certain strategic evaluations, which was offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi.
As we expanded our design capabilities to products that require lower geometries unavailable at our existing manufacturing facilities, we began outsourcing manufacturing of certain OLED display driver ICs to external 12-inch foundries starting in the second half of 2015 and we have started outsourcing 8-inch wafer for OLED TV IC after the sale of our fabrication facility located in Cheongju, Korea in 2020.
As we expanded our design capabilities to products that require lower geometries unavailable at our existing manufacturing facilities, we began outsourcing manufacturing of certain OLED display driver ICs to external 12-inch foundries starting in the second half of 2015 and we have started outsourcing 8-inch wafer for OLED TV ICs after the sale of our fabrication facility located in Cheongju, Korea in 2020.
The financing cash outflow for the year ended December 31, 2022 was primarily attributable to a payment of $12.1 million for the repurchases of our common stock in 2022 pursuant to our stock repurchase program and a payment of $1.8 million for the repurchase of our common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock units, which was offset in part by $1.8 million of proceeds received from the issuance of common stock in connection with the exercise of stock options.
The financing cash outflow for the year ended December 31, 2022 was primarily attributable to a payment of $12.1 million for the repurchases of our common stock in 2022 pursuant to our prior stock repurchase program and a payment of $1.8 million for the repurchase of our common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock units, which was offset in part by $1.8 million of proceeds received from the issuance of common stock in connection with the exercise of stock options.
Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only supplementally. We present Adjusted Operating Income as supplemental measures of our performance.
Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only supplementally. We present Adjusted Operating Income (Loss) as supplemental measures of our performance.
GAAP and should not be construed as an alternative to operating income or any other performance measure derived in accordance with 48 Table of Contents U.S GAAP. We encourage you to evaluate each adjustment and the reasons we consider them appropriate.
GAAP and should not be construed as an alternative to operating income (loss) or any other performance measure derived in accordance with U.S. GAAP. We encourage you to evaluate each adjustment and the reasons we consider them 48 Table of Contents appropriate.
Other companies in our industry may calculate Adjusted Operating Income differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Operating Income, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation.
Other companies in our industry may calculate Adjusted Operating Income (Loss) differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Operating Income (Loss), you should be aware that in the future we may incur expenses (income) similar to the adjustments in this presentation.
If our projections indicate that future undiscounted cash flows are not sufficient to recover the carrying values of the related long-lived assets, the carrying value of the assets is impaired and will be reduced, with the reduction charged to expense so that the carrying value is equal to fair value. Selling Expenses.
If our projections indicate that future undiscounted cash flows are not sufficient to recover the carrying value of the related long-lived assets, the carrying value of the assets is impaired and will be reduced, with the reduction charged to expense so that the carrying value is equal to fair value. Selling Expenses.
We believe that Adjusted Operating Income is useful to investors to provide a supplemental way to understand our underlying operating performance and allows investors to monitor and understand changes in our ability to generate income from ongoing business operations. Adjusted Operating Income is not a measure defined in accordance with U.S.
We believe that Adjusted Operating Income (Loss) is useful to investors to provide a supplemental way to understand our underlying operating performance and allows investors to monitor and understand changes in our ability to generate income from ongoing business operations. Adjusted Operating Income (Loss) is not a measure defined in accordance with U.S.
Because of these limitations, Adjusted Net Income should not be considered as a measure of profitability of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted Net Income only as a supplement. Factors Affecting Our Results of Operations Net Sales.
Because of these limitations, Adjusted Net Income (Loss) should not be considered as a measure of profitability of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted Net Income (Loss) only as a supplement. Factors Affecting Our Results of Operations Net Sales.
Foreign currency translation gain or loss from intercompany balances were included in determining our consolidated net income since the intercompany balances were not considered long-term investments in nature because management intended to settle these intercompany balances at their respective maturity dates. Others, Net.
Foreign currency translation gain or loss from intercompany balances were included in determining our consolidated net income since the intercompany balances were not considered long-term investments in nature because management intended to settle these intercompany balances at their respective maturity dates.
GAAP Measures Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income We use the terms Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income (including on a per share basis) in this Report. Adjusted EBITDA, as we define it, is a non-U.S. GAAP measure.
GAAP Measures Adjusted EBITDA, Adjusted Operating Income (Loss) and Adjusted Net Income (Loss) We use the terms Adjusted EBITDA, Adjusted Operating Income (Loss) and Adjusted Net Income (Loss) (including on a per share basis) in this Report. Adjusted EBITDA, as we define it, is a non-U.S. GAAP measure.
We believe that Adjusted Net Income (including on a per share basis) is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance.
We believe that Adjusted Net Income (Loss) (including on a per share basis) is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance.
EBITDA for the periods indicated is defined as net income (loss) before interest income, interest expense, income tax expense, and depreciation and amortization. See the footnotes to the table below for further information regarding these items.
EBITDA for the periods indicated is defined as net loss before interest income, interest expense, income tax expense (benefit), and depreciation and amortization. See the footnotes to the table below for further information regarding these items.
In addition, in evaluating Adjusted Net Income (including on a per share basis), you should be aware that in the future we may incur expenses similar to the adjustments in this presentation.
In addition, in evaluating Adjusted Net Income (Loss) (including on a per share basis), you should be aware that in the future we may incur expenses (income) similar to the adjustments in this presentation.
We present Adjusted EBITDA as a supplemental measure of our performance because: • we believe that Adjusted EBITDA, by eliminating the impact of a number of items that we do not consider to be indicative of our core ongoing operating performance, provides a more comparable measure of our operating performance from period-to-period and may be a better indicator of future performance; • we believe that Adjusted EBITDA is commonly requested and used by securities analysts, investors and other interested parties in the evaluation of a company as an enterprise level performance measure that eliminates the effects of financing, income taxes and the accounting effects of capital spending, as well as other one time or recurring items described above; and • we believe that Adjusted EBITDA is useful for investors, among other reasons, to assess a company’s period-to-period core operating performance and to understand and assess the manner in which management analyzes operating performance.
We present Adjusted EBITDA as a supplemental measure of our performance because: • we believe that Adjusted EBITDA, by eliminating the impact of a number of items that we do not consider to be indicative of our core ongoing operating performance, provides a more comparable measure of our operating performance from period-to-period and may be a better indicator of future performance; • we believe that Adjusted EBITDA is commonly requested and used by securities analysts, investors and other interested parties in the evaluation of a company as an enterprise level performance measure that 46 Table of Contents eliminates the effects of financing, income taxes and the accounting effects of capital spending, as well as other one time or recurring items described above; and • we believe that Adjusted EBITDA is useful for investors, among other reasons, to assess a company’s period-to-period core operating performance and to understand and assess the manner in which management analyzes operating performance.
Since 2007, we have designed and manufactured OLED display driver integrated circuit (IC) products. Our current portfolio of OLED solutions address a wide range of resolutions ranging from HD (High Definition) to UHD (Ultra High Definition) for a wide range of applications including smartphones, TVs, automotive and IT applications such as monitors, notebook PCs, tablet PCs as well as AR/VRs.
Since 2007, we have designed and manufactured OLED display driver integrated circuit (“IC”) products. Our current portfolio of OLED solutions address a wide range of resolutions ranging from HD (High Definition) to UHD (Ultra High Definition) for a wide range of applications including smartphones, TVs, automotive and IT applications such as monitors, notebook PCs, tablet PCs as well as AR/VRs.
Net sales for our standard products business are driven by design wins in which we are selected by an electronics original equipment manufacturer (OEM) or other potential customer to supply its demand for a particular product. A customer will often have more than one supplier designed into multi-source components for a particular product line.
Net sales for our standard products business are driven by design wins in which we are selected by an electronics original equipment manufacturer (“OEM”) or other potential customer to supply its demand for a particular product. A customer will often have more than one supplier designed into multi-source components for a particular product line.
The capital expenditures for the years ended December 31, 2022 and 2021 were related to meeting our customer demand and supporting technology and facility improvement at our fabrication facility. Critical Accounting Policies and Estimates Preparing financial statements in conformity with U.S.
The capital expenditures for the years ended December 31, 2023 and 2022 were related to meeting our customer demand and supporting technology and facility improvement at our fabrication facility. Critical Accounting Policies and Estimates Preparing financial statements in conformity with U.S.
For the year ended December 31, 2022, we recorded a $2.8 million of one-time employee incentives and professional service fees and expenses of $1.0 million incurred in connection with certain strategic evaluations, which was offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi.
For the year ended December 31, 2022, we recorded $2.8 million of one-time employee incentives 57 Table of Contents and $1.0 million of professional service fees and expenses incurred in connection with certain strategic evaluations, which was offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi.
We believe this enables us to quickly and efficiently respond to our customers’ needs, and allows us to better serve and capture additional demand from existing and new customers. Certain of our OLED products are produced using external 12-inch foundries.
We believe this enables us to quickly and efficiently respond to our customers’ needs, and allows us to better serve and capture additional demand from existing and new customers. Certain of our OLED products are produced using external foundries.
The new cost base related to the sale of inventory that was previously written down totaled $3.6 million and $5.3 million in the fiscal years ended December 31, 2022 and 2021, respectively.
The new cost base related to the sale of inventory that was previously written down totaled $5.5 million and $3.6 million in the fiscal years ended December 31, 2023 and 2022, respectively.
Recent Accounting Pronouncements See Note 1 “Business, Basis of Presentation and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Item 8 of Part II of this Report, for a full description of recent accounting pronouncements, including the expected dates of adoption, which is incorporated herein by reference. 63 Table of Contents
Recent Accounting Pronouncements See Note 1 “Business, Basis of Presentation and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Item 8 of Part II of this Report, for a full description of recent accounting pronouncements, including the expected dates of adoption, which is incorporated herein by reference.
As our derivative transactions are limited to a certain portion of our expected cash flows denominated in U.S. dollars, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.
As our derivative transactions are limited to a certain portion of our expected cash flows denominated in U.S. dollars, and we do not enter into derivative transactions for trading 50 Table of Contents or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.
We derive substantially all of our sales (net of sales returns and allowances) from our standard products business. We outsource manufacturing of mobile OLED products to external 12-inch foundries. Our 52 Table of Contents product inventory is primarily located in Korea and is available for drop shipment globally.
We derive substantially all of our sales (net of sales returns and allowances) from our standard products business. We outsource manufacturing of mobile OLED products to external 12-inch foundries. Our product inventory is primarily located in Korea and is available for drop shipment globally.
Our Power Solutions business line produces power management semiconductor products including discrete and integrated circuit solutions for power management in communications, consumer, computing, servers, automotive, and industrial applications.
Our Power Solutions business line produces power management semiconductor products including discrete and integrated circuit solutions for power management in communication, consumer, computing, servers, automotive, and industrial applications.
Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and 62 Table of Contents accruals.
Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals.
Outside of Korea, we maintain limited product inventory, and our sales representatives generally relay orders to our factories in Korea for fulfillment. We have strategically located our sales offices near concentrations of major customers. Our sales offices are located in Korea, Japan, Taiwan and Greater China.
Outside of Korea, we maintain limited product inventory, and our sales representatives generally relay orders to our fabrication facility in Korea for fulfillment. We have strategically located our sales offices near concentrations of major customers. Our sales offices are located in Korea, Japan, Taiwan and Greater China.
As these adjustments meaningfully impacted our operating results and are not expected to represent an ongoing operating expense or income to us, we believe our operating performance results are more usefully compared if these adjustments are excluded. 49 Table of Contents We present Adjusted Net Income (including on a per share basis) as a further supplemental measure of our performance.
As these adjustments meaningfully impacted our operating results and are not expected to represent an ongoing operating expense or income to us, we believe our operating performance results are more usefully compared if these adjustments are excluded. We present Adjusted Net Income (Loss) (including on a per share basis) as a further supplemental measure of our performance.
Additionally, on October 21, 2022, the Bureau of Industry and Security brought into effect a series of new Foreign Direct Product (FDP) rules and various new controls on advanced computing items, significantly expanding the scope of items that are subject to export control under the U.S. Export Regulations. Based on our understanding of the current U.S.
Additionally, on October 21, 2022, the Bureau of Industry and Security brought into effect a series of new Foreign Direct Product (FDP) rules and various new controls on advanced computing items, significantly expanding the scope of items that are subject to export control under the U.S. Export Regulations.
As of December 31, 2022, we did not have any accounts payable on extended terms or payment deferment with our vendors.
As of December 31, 2023, we did not have any accounts payable on extended terms or payment deferment with our vendors.
As our derivative transactions are limited to a certain portion of our expected cash flows denominated in U.S. dollars, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.
We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in U.S. dollars, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.
The rapid technological change and product obsolescence that characterize our industry require us to make continuous investments in research and development. Product development time frames vary but, in general, we incur research and development costs one to two years before generating sales from the associated new products.
The rapid technological change and product obsolescence that characterize our industry require us to make continuous investments in research and development. Product development time frames vary but, in general, we incur research and development costs one to two years before generating sales 52 Table of Contents from the associated new products.
Our network of authorized agents and distributors is in the U.S., Europe and the Asia Pacific region. We recognize revenue when a customer obtains control of the product, which is generally upon product shipment, delivery at the customer’s location or upon customer acceptance, depending on the terms of the arrangement.
Our network of authorized agents and distributors is in the United States, Europe and the Asia Pacific region. We recognize revenue when a customer obtains control of the product, which is generally upon product shipment, delivery at the customer’s location or upon customer acceptance, depending on the terms of the arrangement.
These products include metal oxide semiconductor field effect transistors (MOSFETs), insulated-gate bipolar transistors (IGBTs), AC-DC/DC-DC converters, LED drivers, regulators and power management integrated circuits (PMICs) for a range of devices, including televisions, smartphones, mobile phones, wearable devices, desktop PCs, notebooks, tablet PCs, other consumer electrics, automotive, and industrial applications such as power suppliers, e-bikes, solar inverters, LED lighting and motor drives.
These products include metal oxide semiconductor field effect transistors (“MOSFETs”), insulated-gate bipolar transistors (“IGBTs”), AC-DC/DC-DC converters, LED drivers, regulators and power management integrated circuits (“PMICs”) for a range of devices, including televisions, smartphones, mobile phones, wearable devices, desktop PCs, notebooks, tablet PCs, other consumer electrics, automotive, and industrial applications such as power suppliers, e-bikes, solar inverters, LED lighting and motor drives.
Demand for our products and services is driven by overall demand for communications, IoT, consumer and industrial products and can be adversely affected by periods of weak consumer and enterprise spending or by market share losses by our customers.
Demand for our products and services is driven by overall demand for communication, IoT, consumer, industrial and automotive products and can be adversely affected by periods of weak consumer and enterprise spending or by market share losses by our customers.
We exercise significant management judgment in determining our provision for income taxes, deferred tax assets and liabilities. We assess whether it is more likely than not that the deferred tax assets existing at the period-end will be realized in future periods.
We exercise significant 53 Table of Contents management judgment in determining our provision for income taxes, deferred tax assets and liabilities. We assess whether it is more likely than not that the deferred tax assets existing at the period-end will be realized in future periods.
If our hedging activities are not effective, changes in currency exchange rates may have a more significant impact on our results of operations. See “Note 10. Derivative Financial Instruments” to our consolidated financial statements under “Item 8. Financial Statements and Supplementary Data” for additional information regarding our foreign exchange hedging activities. 54 Table of Contents Foreign Currency Gain or Loss.
If our hedging activities are not effective, changes in currency exchange rates may have a more significant impact on our results of operations. See “Note 9. Derivative Financial Instruments” to our consolidated financial statements under “Item 8. Financial Statements and Supplementary Data” for additional information regarding our foreign exchange hedging activities. Foreign Currency Gain or Loss.
As of December 31, 2022, approximately 97% of our employees were eligible for severance benefits. Depreciation Expense. We periodically evaluate the carrying values of long-lived assets, including property, plant and equipment and intangible assets, as well as the related depreciation periods. We depreciated our property, plant and equipment using the straight-line method over the estimated useful lives of our assets.
As of December 31, 2023, 96% of our employees were eligible for severance benefits. Depreciation Expense. We periodically evaluate the carrying values of long-lived assets, including property, plant and equipment and intangible assets, as well as the related depreciation periods. We depreciated our property, plant and equipment using the straight-line method over the estimated useful lives of our assets.
We encourage you to evaluate each adjustment and the reasons we consider them appropriate. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in 46 Table of Contents this presentation. Adjusted EBITDA is not a measure defined in accordance with U.S.
We encourage you to evaluate each adjustment and the reasons we consider them appropriate. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses (income) similar to the adjustments in this presentation. Adjusted EBITDA is not a measure defined in accordance with U.S.
A discussion regarding our financial condition and results of operations for fiscal year 2021 compared to our fiscal year ended December 31, 2020 (“fiscal year 2020”) can be found in Part II, Item 7 of our Annual Report on Form 10-K for fiscal year 2021, filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2022.
A discussion regarding our financial condition and results of operations for fiscal year 2022 compared to our fiscal year ended December 31, 2021 (“fiscal year 2021”) can be found in Part II, Item 7 of our Annual Report on Form 10-K for fiscal year 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2023.
Overview We are a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, IoT applications, consumer, computing, industrial and automotive applications. We have a proven record with more than 40 years of operating history, a portfolio of approximately 1,100 registered patents and pending applications and extensive engineering and manufacturing process expertise.
Overview We are a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communication, Internet of Things (“IoT”), consumer, computing, industrial and automotive applications. We have a proven record with more than 40 years of operating history, a portfolio of approximately 1,100 registered patents and pending applications and extensive engineering and manufacturing process expertise.
In general, we seek to invest in manufacturing capacity that can be used for multiple high-value applications over an extended period of time. In addition, we outsource manufacturing of those products which do require advanced 43 Table of Contents technology and 12-inch and 8-inch wafer capacity, such as organic light emitting diodes (OLED).
In general, we seek to invest in manufacturing capacity that can be used for multiple high-value applications over an extended period of time. In addition, we outsource manufacturing of those products which do require advanced 44 Table of Contents technology and 12-inch and 8-inch wafer capacity, such as OLED.
However, relying on external foundries exposes us to the risk of being unable to secure manufacturing capacity, particularly under the current global shortage of foundry services.
However, relying on external foundries exposes us to the risk of being unable to secure manufacturing capacity, particularly during the global shortage of foundry services.
As of December 31, 2022, the outstanding intercompany loan balance including accrued interest between our Korean subsidiary and our Dutch subsidiary was $311.0 million. As a result of such foreign currency fluctuations, it could be more difficult to detect underlying trends in our business and results of operations.
As of December 31, 2023, the outstanding intercompany loan balance including accrued interest between our Korean subsidiary and our Dutch subsidiary was $285.1 million. As a result of such foreign currency fluctuations, it could be more difficult to detect underlying trends in our business and results of operations.
The following section generally discusses our financial condition and results of operations for our fiscal year ended December 31, 2022 (“fiscal year 2022”) compared to our fiscal year ended December 31, 2021 (“fiscal year 2021”).
The following section generally discusses our financial condition and results of operations for our fiscal year ended December 31, 2023 (“fiscal year 2023”) compared to our fiscal year ended December 31, 2022 (“fiscal year 2022”).
Through a strategic cooperation with external 12-inch foundries, we are managing to ensure outsourcing wafers at competitive price and produce quality products. 42 Table of Contents To maintain and increase our profitability, we must accurately forecast trends in demand for electronics devices that incorporate semiconductor products we produce.
Through a strategic cooperation with external foundries, we manage to ensure outsourcing wafers at competitive price and produce quality products. 43 Table of Contents To maintain and increase our profitability, we must accurately forecast trends in demand for electronics devices that incorporate semiconductor products we produce.
Gross profit as a percentage of total revenues for the year ended December 31, 2022 decreased to 30.0% compared to 32.4% for the year ended December 31, 2021.
Gross profit as a percentage of total revenues for the year ended December 31, 2023 decreased to 22.4% compared to 30.0% for the year ended December 31, 2022.
Gross profit as a percentage of net sales for the year ended December 31, 2022 decreased to 33.0% compared to 34.5% for the year ended December 31, 2021.
Gross profit as a percentage of net sales for the year ended December 31, 2023 decreased to 26.5% compared to 33.0% for the year ended December 31, 2022.
Cash outflow used in investing activities totaled $24.9 million for the year ended December 31, 2022, compared to a $31.4 million of cash outflow used in investing activities for the year ended December 31, 2021.
Cash outflow used in investing activities totaled $7.7 million for the year ended December 31, 2023, compared to a $24.9 million of cash outflow used in investing activities for the year ended December 31, 2022.
(g) For the years ended December 31, 2022 and 2021, income tax effect on non-GAAP adjustments were calculated by calculating the tax expense of each jurisdiction with or without the non-GAAP adjustments.
(e) For the years ended December 31, 2023 and 2022, income tax effect on non-GAAP adjustments were calculated by calculating the tax expense (benefit) of each jurisdiction with or without the non-GAAP adjustments.
A reduction of these inventory reserves may be recorded if previously reserved items are subsequently sold as a result of unexpected changes to certain aforementioned situations. The gross amount of inventory reserves charged to cost of sales totaled $13.3 million and $7.6 million in the fiscal years ended December 31, 2022 and 2021, respectively.
A reduction of these inventory reserves may be recorded if previously reserved items are subsequently sold as a result of unexpected changes to certain aforementioned situations. 60 Table of Contents The gross amount of inventory reserves charged to cost of sales totaled $9.4 million and $13.3 million in the fiscal years ended December 31, 2023 and 2022, respectively.
For the year ended December 31, 2022, income tax effect on non-GAAP adjustments related to our Korean subsidiary and the U.S parent entity were $6.2 million and negative $1.7 million, respectively.
For the year ended December 31, 2023, this adjustment eliminates the income tax effect on non-GAAP adjustments of negative $2.2 million, which mainly related to our Korean subsidiary. For the year ended December 31, 2022, income tax effect on non-GAAP adjustments related to our Korean subsidiary and the U.S. parent entity were $6.2 million and negative $1.7 million, respectively.
General and administrative expenses consist of the costs of various corporate operations, including finance, legal, human resources and other administrative functions. These expenses primarily consist of payroll-related expenses, consulting and other professional fees and office facility-related expenses. Research and Development.
Personnel costs include base salary, benefits and incentive compensation. General and Administrative Expenses. General and administrative expenses consist of the costs of various corporate operations, including finance, legal, human resources and other administrative functions. These expenses primarily consist of payroll-related expenses, consulting and other professional fees and office facility-related expenses. Research and Development.
These products include source and gate drivers and timing controllers that cover a wide range of flat panel displays used in mobile communications, automotives, entertainment devices, IT applications such as monitors, notebook PCs, tablet PC and TVs applied with liquid crystal display (LCD), organic light emitting diodes (OLED) and Micro light emitting diode (Micro LED) panel.
These products include source and gate drivers and timing controllers that cover a wide range of flat panel displays used in mobile communication, automotive, entertainment devices, IT applications such as monitors, notebook PCs, tablet PC and TVs applied with liquid crystal display (“LCD”), organic light emitting diodes (“OLED”) and micro light emitting diode (“Micro LED”) panel.
As of December 31, 2022 and 2021, the outstanding intercompany loan balance including accrued interest between our Korean subsidiary and our Dutch subsidiary was $311.0 million and $344.4 million, respectively.
As of December 31, 2023 and 2022, the outstanding intercompany loan balance including accrued interest between our Korean subsidiary and our Dutch subsidiary was $285.1 million and $311.0 million, respectively.
Additionally, we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results. (c) This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks.
Additionally, we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results. 47 Table of Contents (c) This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents derivatives value changes excluded from the risk being hedged.
Export Regulations and related rules, we do not anticipate that they will have a material impact on our business. Additional changes to the U.S. Export Regulations are expected, but the scope or timing of such changes is unknown.
Export Regulations and related rules currently in effect, we do not anticipate that they will have a material impact on our current business, but we will continue reviewing and assessing these rules and regulations and their potential impact on our business. Additional changes to the U.S. Export Regulations are expected, but the scope or timing of such changes is unknown.
Adjusted Net Income (including on a per share basis) is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to net income or any other performance measure derived in accordance with U.S GAAP, or as an alternative to cash flows from operating activities as a measure of liquidity.
Adjusted Net Income (Loss) (including on a per share basis) is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to net income or any other performance measure 49 Table of Contents derived in accordance with U.S.
We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other companies in our industry may calculate Adjusted Net Income (including on a per share basis) differently than we do, limiting its usefulness as a comparative measure.
GAAP, or as an alternative to cash flows from operating activities as a measure of liquidity. We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other companies in our industry may calculate Adjusted Net Income (Loss) (including on a per share basis) differently than we do, limiting its usefulness as a comparative measure.
This decrease was primarily due to a decrease in revenue related to our standard products business as described below. The standard products business. Net sales from our standard products business were $301.9 million for the year ended December 31, 2022, a $131.2 million, or 30.3%, decrease compared to $433.1 million for the year ended December 31, 2021.
This decrease was primarily due to a decrease in revenue related to our standard products business as described below. The standard products business. Net sales from our standard products business were $195.7 million for the year ended December 31, 2023, a $106.2 million, or 35.2%, decrease compared to $301.9 million for the year ended December 31, 2022.
Operating Income (Loss) As a result of the foregoing, operating loss of $5.2 million was recorded for the year ended December 31, 2022 compared to operating income of $83.4 million the year ended December 31, 2021.
Operating Loss As a result of the foregoing, operating loss of $57.6 million was recorded for the year ended December 31, 2023 compared to operating loss of $5.2 million the year ended December 31, 2022.
Year ended December 31, 2022 compared to year ended December 31, 2021 As of December 31, 2022, our cash and cash equivalents balance was $225.5 million, a $54.1 million decrease compared to $279.5 million as of December 31, 2021.
Year ended December 31, 2023 compared to year ended December 31, 2022 As of December 31, 2023, our cash and cash equivalents balance was $158.1 million, a $67.4 million decrease compared to $225.5 million as of December 31, 2022.
Our working capital balance as of December 31, 2022 was $290.6 million compared to $323.6 million as of December 31, 2021.
Our working capital balance as of December 31, 2023 was $198.5 million compared to $290.6 million as of December 31, 2022.
If net realizable value is less than cost at the balance sheet date, the carrying amount is reduced to the realizable value, and the difference is recognized as a loss on valuation of inventories within cost of sales.
Inventories Inventories are stated at the lower of cost or net realizable value, using the first in, first out method (“FIFO”). If net realizable value is less than cost at the balance sheet date, the carrying amount is reduced to the realizable value, and the difference is recognized as a loss on valuation of inventories within cost of sales.
As of December 31, 2022, the outstanding obligation of this arrangement is approximately $24.8 million for remaining service term through 2028. As of December 31, 2022, cash and cash equivalents held by our Korean subsidiary were $207.9 million, which represents 92% of our total cash and cash equivalents on a consolidated basis.
As of December 31, 2023, the outstanding obligation of this arrangement is approximately $20.4 million for remaining service term through 2028. As of December 31, 2023, cash and cash equivalents held by our Korean subsidiary were $150.2 million, which represents 95% of our total cash and cash equivalents on a consolidated basis.
We routinely make capital expenditures for fabrication facility maintenance, enhancement of our existing facility and reinforcement of our global research and development capability. For the year ended December 31, 2022, capital expenditures for property, plant and equipment were $23.4 million, an $8.8 million, or 27.4%, decrease from $32.2 million for the year ended December 31, 2021.
We routinely make capital expenditures for fabrication facility maintenance, enhancement of our existing facility and reinforcement of our global research and development capability. For the year ended December 31, 2023, capital expenditures for property, plant and equipment were $7.0 million, a $16.4 million, or 70.3%, decrease from $23.4 million for the year ended December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign Currency Exposures We have exposure to foreign currency exchange rate fluctuations on net income from our subsidiaries denominated in currencies other than U.S. dollars, as our foreign subsidiaries in Korea, Taiwan, China, Japan and Hong Kong use local currency as their functional currency. From time to time these subsidiaries have cash and financial instruments in local currency.
Biggest changeIn the normal course of our business, we are subject to market risks associated with currency movements on our assets and liabilities. 61 Table of Contents Foreign Currency Exposures We have exposure to foreign currency exchange rate fluctuations on net income from our subsidiaries denominated in currencies other than U.S. dollars, as our foreign subsidiaries in Korea, Taiwan, China, Japan and Hong Kong use local currency as their functional currency.
However, based on the cash and financial instruments balance at December 31, 2022 for our Korean subsidiary, a 10% devaluation of the Korean won against the U.S. dollar would have resulted in a decrease of $0.7 million in our U.S. dollar financial instruments and cash balances. See “Note 10. Derivative Financial Instruments” to our consolidated financial statements under “Item 8.
However, based on the cash and financial instruments balance at December 31, 2023 for our Korean subsidiary, a 10% devaluation of the Korean won against the U.S. dollar would have resulted in a decrease of $1.7 million in our U.S. dollar financial instruments and cash balances. See “Note 9. Derivative Financial Instruments” to our consolidated financial statements under “Item 8.
Financial Statements and Supplementary Data” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations—Impact of Foreign Currency Exchange Rates on Reported Results of Operations” for additional information regarding our foreign exchange hedging activities. 64 Table of Contents 2021-07-15http://fasb.org/us-gaap/2022#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2022#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesCurrent
Financial Statements and Supplementary Data” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations—Impact of Foreign Currency Exchange Rates on Reported Results of Operations” for additional information regarding our foreign exchange hedging activities. 62 Table of Contents
The amounts held in Japan, Taiwan, Hong Kong and China are not material in regards to foreign currency movements.
From time to time these subsidiaries have cash and financial instruments in local currency. The amounts held in Japan, Taiwan, Hong Kong and China are not material in regards to foreign currency movements.
Removed
In the normal course of our business, we are subject to market risks associated with currency movements on our assets and liabilities.

Other MX 10-K year-over-year comparisons