There’s significant damage being done to Magnachip in this downturn, but it is also a smaller supplier in comparison to UDC, for example, which pretty much had a similar experience. However, Magnachip is precisely the kind of company that can see a very big uptick in business with new product launches and it seems to have two lined up for 2H23.
Magnachip’s Reported Financials
The company reported Q1’23 revenue of $57 million, which is a 45.2% decrease YoY primarily due to a 28nm wafer supply shortage that impacted the second half of 2022 and weak consumer demand. The gross profit margin was 21.2%, which was at the lower end of their guidance range.
| Financial Metrics ($ in thousands) | Q1’23 | Q4’22 | QoQ Change | Q1’22 | YoY Change |
|---|---|---|---|---|---|
| Revenue – Display Solutions | 10,841 | 7,556 | up 43.5% | 29,185 | down 62.9% |
| Revenue – Power Solutions | 40,673 | 46,271 | down 12.1% | 64,825 | down 37.3% |
| Revenue – Transitional Fab 3 Foundry Services | 5,491 | 7,163 | down 23.3% | 10,083 | down 45.5% |
| Gross Profit Margin | 21.2% | 26.4% | down 5.2% | 37.5% | down 16.3% |
Magnachip CEO YJ Kim mentioned that the Q1’23 results were affected by OLED wafer shortages and weak consumer demand in both the Display and Power businesses. Despite these challenges, the company remained focused on execution. In the display business, Magnachip delivered its second OLED DDIC project sample ahead of schedule to a large non-Korean panel customer and remained on track for second-half smartphone launches. Additionally, the company completed the tape-out for a high-end smartphone project with a large Korean panel customer, with mass production scheduled for the end of the year.
The company expects financial results to remain soft in the near term but believes both display and power businesses are poised for recovery in the second half of the year based on current customer feedback. For Q2’23, Magnachip expects revenue to be in the range of $58 million to $63 million, including about $8 million from Transitional Fab 3 Foundry Services, and gross profit margin to be in the range of 21% to 23%.
Based on current projections, the company is cautiously optimistic that their key financial metrics have the potential to show sequential improvement in both the third and fourth quarters of 2023.
