Magnachip Semiconductor Corporation

Thank you for standing by. Welcome to the Magnet Chip Sunmay Conductor Corporation's third quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. To remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Eugia Zai, Managing Director of the Blue Shirt Group. Please go ahead, sir.

Thanks, Operator. Hello, everyone. Thank you for joining us to discuss MagnetShift's financial results for the third quarter ended September 30, 2023. Third quarter earnings release that was issued today after the market closed can be found on the company's investor relations website. Webcast replay of today's call will be archived on our website shortly afterwards. Joining me today are Y.J. Kim, MagnetChip's Chief Executive Officer, and Shin Young Park, our Chief Financial Officer. Y.J. will discuss the company's recent operating performance and business overview. Shin Young will review financial results for the quarter and provide guidance for the fourth quarter of 2023. There will be a Q&A session following the prepared remarks. During the course of this conference call, we may make forward-looking statements about MagnetChip's business outlook and expectations. Our forward-looking statements and all other statements that are not historical facts reflect our beliefs and predictions as of today and therefore are subject to risks and uncertainties as described in the safe harbor statement found in our SEC filings. During the call, we will also discuss non-GAAP financial measures. Non-GAAP measures are not prepared in accordance with generally accepted accounting principles. We are intended to illustrate an alternative measure of Magnetip's operating performance that may be useful. Reconciliation of the non-GAAP financial measures to the most direct comparable gap measure can be found in our third quarter earnings release in the investor relations section of our website. With that, I will now turn the call over to YJ Kim. YJ?

Hello, everyone. Thank you for joining us today and welcome to MagnetChip's Q3 earnings call. Starting with our financials, our Q3 results were in line with our expectations. Q3 revenue was $61.2 million. down 14% year-over-year and up slightly sequentially. Gross margin was 23.6%, down 60 basis points year-over-year, primarily due to unfavorable product mix and higher FAB costs, but recovered 140 basis points sequentially on higher FAB utilization. Overall, market conditions were challenging, but we remained focused on driving towards smartphone design wins in our display business and launching competitive products in our power business. Let me provide updates to each of our business segments. Beginning with our display business, Q3 revenue was in line with our expectation at $6.4 million, up slightly year-over-year and down 33.7% sequentially. Our OLED revenue remained muted due largely to slow-down planned design wins in China from our large Korean panel customers. During the quarter, we worked to expand our footprints with new global panel makers and smartphone OEMs. We are disappointed that our OLED ramp lagged our original expectations, but our confidence in the longer-term display business remained intact. we are now engaged in projects that span the entire smartphone market spectrum from mass tier to premium tier segments our goal as always is to deliver differentiated and competitive products to drive long-term growth as an industry leader in display at our new global tier one panel customer our third oled ddic chip successfully passed qualification at the end of the quarter and is now in the designing phase with a leading Chinese smartphone OEM for its flagship model that is scheduled to be launched at the end of the year. As previously announced in the second quarter, we successfully qualified a second chip with our global tier one panel customer and entered into the designing stage with a global smartphone maker for smartphones expected to launch in mid-2024. We now have two design-ins at leading smartphone OEMs outside of Korea, and we are optimistic that they will lead to design wins and production treatments that will contribute to revenue in 2024. In the second quarter, we also announced that we began developing a fourth OLED DDIC project with our global TO1 panel maker. This next-gen DDIC provides enhanced features and specs geared towards the growing affordable smartphone market. This quarter, we saw increased interest for this chip by multiple smartphone OEMs, and we are expecting to provide IC samples to our panel customer by early next year. Additionally, our first OLED DDIC chip is now in the final stage of qualification with aftermarket OEMs in China. Finally, during the quarter, we started a new development on our mass market OLED DDIC chip with another Asian panel maker. This fifth product is aimed at expanding market share into the low to mid-range OLED smartphone display market. We currently expect this OLED device to drive revenue growth in the second half of 2024 and beyond. With regards to our OLED automotive business, We began production shipments to our large Korean panel maker for three different car models from two top-tier European car manufacturers between May and July. Revenue from those devices started beginning in May, and we currently expect those devices will continue to contribute to revenue for the remainder of the year. Moving on to our power business. Q3 revenue was $45.2 million, down 19.9% year-over-year, and up 8.4% sequentially. Sequentially, our power business benefited from a higher mix of premium-tier products and strong demand in consumer computing and communication markets, such as TVs, notebooks, and smartphones. However, industrial markets, which had been an area of strength for us, over the past several quarters slowed by double-digit percentages in Q3 as our customers reduced orders to better manage their inventories. Operationally, we continued our strong momentum of design activities, particularly in automotive power products. In Q3, we secured two new design wins and three design-ins with two of the top five automakers in the world, and we expect revenue contribution over the coming quarters. We also continue to innovate. In September, we announced two new IGBTs for the EV market that provide best-in-class efficiency and heat dissipation featuring advanced field stop technology. In October, we unveiled our eighth-generation 150-volt medium-voltage MOSFETs. Finally, power product ASPs continue to remain stable, increasing 11.3% year-over-year, but down slightly by 5% sequentially. In summary, in our power business, our product portfolio is getting stronger as we continue to focus on rolling out next-generation power products to maintain our momentum of design ins and wins. Looking ahead, heightened global geopolitical and macroeconomic uncertainty we expect demand to remain weak driven by normal q4 seasonality and inventory correction in industrial end markets in our display business we are very optimistic about the long-term growth of our oled business we continue to collaborate closely with our new global panel customer and we are excited about the new product and new Asia-based panel customer partnerships. These new products offer compelling competitive advantages and are strategically aimed at tapping into the rapidly expanding OLED market in the Asia region. Finally, a few comments on our previously announced plan to separate our display and power businesses into separate legal entities. As we announced previously, Our internal separation of display and power business will be effectuated by establishing a separate operating company under Magnet Chip Semiconductor Limited, MSK, the company's primary operating subsidiary. In September, we established a limited liability company registered in South Korea named Magnet Chip Mixed Signal Limited, MMS. The separation will include the contribution of assets and liabilities of the display business and the PowerIC business to MMS. Transfer of directly associated resources such as sales, marketing, and R&D, as well as allocation of shared expenses of certain corporate functions, including HR, finance, legal, and IT. This internal separation is expected to be completed and go in effect on January 1, 2024. Thank you to our shareholders for your patience, and we appreciate your support as we work towards our goals. I will now turn the call over to Xunyang to review the financials in detail.