Magnachip Semiconductor Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 28, 2024

Key Takeaways

  • MagnaChip is shifting its OLED display focus to China, doubling local resources and securing two smartphone design wins with more expected, aiming for significant revenue growth by 2025.
  • The wind-down of low-margin transitional foundry services at the Gumi fab is expected to depress gross margins until higher-margin power products fully replace that capacity.
  • The company has reorganized into two segments—MSS (display and power IC) and PAS (power discrete)—to enhance transparency and will report separate revenue and margin figures from Q1 2024 onward.
  • Full-year 2024 guidance calls for flat to slightly up revenues with double-digit growth in both MSS and PAS, and a consolidated gross margin of 17%–20%.
  • Power business momentum includes a >3× year-over-year automotive revenue increase in 2023 and plans to roll out multiple next-generation high-efficiency MOSFET and IGBT products throughout 2024.
AI Generated. May Contain Errors.
Earnings Conference Call
Magnachip Semiconductor Q4 2023
00:00 / 00:00

There are 7 speakers on the call.

Operator

Thank you

Speaker 1

for standing by, and welcome to the MagnaChip Semiconductor Corporation's 4th Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Stephen Pelayo, Managing Director of The Blueshirt Group. Please go ahead.

Speaker 1

Great.

Speaker 2

Thank you, Jonathan. Hello, everyone. Thank you for joining us to discuss MagnaChip's financial results for the Q4 full year ended December 31, 2023. The 4th quarter earnings release that was issued today after the market closed can be found on the company's Investor Relations website. The webcast replay of today's call will be archived on our website shortly afterwards.

Speaker 2

Joining me today are YJ Kim, MagnaChip's Chief Executive Officer and Shin Young Park, our Chief Financial Officer. YJ will discuss the company's recent operating performance, business overview and directional guidance for 2024 and Kyung Yong will review the financial results for the quarter and provide guidance for the Q1 and full year 2024. YJ will then briefly recap the company's business strategy. There will be a Q and A session following the prepared remarks. During the course of this conference call, we may make forward looking statements about MagnaChip's business outlook and expectations.

Speaker 2

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. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements. During the call, we also will discuss non GAAP financial measures. The non GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended as supplemental measures of MagnaChip's operating performance that may be useful to investors.

Speaker 2

A reconciliation of the non GAAP financial measures to the most directly comparable GAAP measures can be found in our 4th earnings release in the Investor Relations section of our website. With that, I'll now turn the call over to YJ Kim. YJ?

Speaker 3

Hello, everyone. Thank you for joining us today, and welcome to MagnaChip's Q4 earnings call. First, I believe it's important for investors to understand how our financial results fit into the big picture as we undergo a substantial transformation in our business over the next couple of years. First, we are dramatically shifting priorities in our display business to be laser focused primarily on China. This strategy builds upon 20 years of OLED driver success, primarily in Korea and follows the industry's dramatic shift to China production.

Speaker 3

2nd, we will be working this year and next to fill ideal fab capacity in our Kumi fab as we transition away from supplying non core transitional foundry services to higher margin power products. 3rd, starting early this year, we began operating under a new structure that streamlines our go to market strategy, strengthens the potential for increased shareholder value and also improved transparency for investors. Let me provide more detail on each of these transitions. The first major transition involves China, which is becoming the new center of the OLED display universe. We are executing on a strategy to penetrate this vibrant market with feature rich OLED standard products, and I'm pleased to say we've made tremendous progress so far.

Speaker 3

We've laid the groundwork for success by establishing a China dedicated entity and by building strong working relationship with Chinese panel makers and leading smartphone OEMs. Over the past few quarters, we've doubled our resources and staff in China, amassing a team of more than 20 professionals dedicated specifically to our OLED display business. In addition, we hired senior advisors from a top 5 gs semiconductor company, the financial services sector and the China supply chain to help accelerate our progress. And I now personally travel to China on nearly a weekly basis to meet our strategic customers, partners and strategic OEMs. Our work in China is beginning to pay off.

Speaker 3

We've already secured 2 smartphone design wins with leading OEMs and expect more on the way. It's part of our strategy to serve the full spectrum of models from mainstream to affordables. I'm confident that the results of our strategy will become apparent beginning later this year with more significant revenue growth expected in 2025. The 2nd major transition involves the ideal capacity we expected in our Gumi fab created by the wind down of the our transitional foundry services business. We plan to fill the ideal capacity with our existing power product portfolio as well as a new slate of next generation power products that we will introduce over the next several quarters.

Speaker 3

We believe these products will be on a par with some of the best global suppliers of power products. As we've said previously, this fast transition will depress gross margins until we can adequately replace the legacy transitional foundry services business with higher margin power products, and we intend to share updates on our perspective on this transition on a quarterly basis. To help achieve our goals during these transitions, we have now streamlined the structure of the company by creating 2 main business entities to better align our product strategies and also to provide more transparency to investors through our new MMS mixed signal solutions, which includes display and power IC products and PAS, power analog solutions, our traditional power discrete businesses. To help investors better track our business progress, we will break out MSS and PAS revenue as well as gross margin beginning on the Q1 earnings call. The reasons for deciding to separate the Standard Products business structurally and operate independently, mainly because display and Power IC are fabulous and Power Discrete is an IDM business.

Speaker 3

In addition, the separation allows the following benefits: 1, increase shareholder value by maximizing the valuation of each business. The separation allows a foundation for more efficient and transparent business structure that can fuel sustainable growth through strategic financing and investment. 2, strengthen business performance management by establishing independent and responsible management systems 3, enhance flexibility in business portfolio and increase strategic responsiveness to environment changes. We are confident that the strategies I've outlined will put us on a path to achieve a sustained recovery over the next 2 years. While we typically provide guidance for 1 quarter only, I feel it's important in the current environment to provide directional guidance for 2024.

Speaker 3

We currently expect double digit revenue growth in both the newly organized MSS and PAS businesses. Overall, we expect total company revenue to be flat to up slightly in 2024 over 2023, primarily due to the phase out of the transitional foundry services. Gross margin for the consolidated company is expected to be in the range of 17% to 20% for the year, severely impacted by the ideal capacity when the traditional foundry service revenue winds down. While the near term outcome is disappointing, rest assured that my team and I are committed to working every day on behalf of our shareholders to improve the results. Now that I provided a big picture context, let's review our Q4 results.

Speaker 3

Revenue was $50,800,000 and gross margin was 22.7%, both near the low end of our guidance range. During the quarter, our OLED business was impacted by slower design win progress than expected due to longer OEM evaluation cycles. During Q4, we also embarked on another key OLED project aimed at diversifying our customer base to enter the smartwatch display market. Our power business results were down 20.5% sequentially, primarily due to the ongoing inventory correction in industrial end markets, particularly in China's e bike market and the solar sector. Now let me provide updates to each of our business under the 2023 Financial Reporting Convention.

Speaker 3

Beginning with our display business, Q4 revenue was in line with our expectation at $5,200,000 down 30.8 percent year over year and 18.3% sequentially. We received our 1st pilot production purchase order in China for our first trip from an after service market player during the December quarter, and we are making progress on many additional fronts. Specifically, Q4 marked the beginning of initial shipments in China of our first OLED DDI chip that we taped out in 2022. In Q4 2023, we were awarded our 1st design win and related PO for the after service market. While its immediate financial contribution is expected to be modest, it marks our 1st pilot production PO in China and is a significant step towards the acceptance of our product capabilities as well as our team's efforts.

Speaker 3

Moving on to our current generation of OLED DDIC products. Our 3rd OLED DDIC chips successfully completed design in evaluation at a leading Chinese smartphone OEM and been assigned a high volume model for launch in Q2 2024. This resulted in a design win with obtaining pilot production PO as a second source supplier. For this leading Chinese smartphone OEM, we've been qualified and added to their approved vendor list. Moreover, we've been chosen to also work with them on their phone model with our next generation chip, which we prioritize and will sample next quarter.

Speaker 3

Additionally, our second chip is still going through a design in evaluation phase at a global smartphone OEM. We will provide an update on this once we receive the status from the OEM evaluation. Mid this last year, we announced that we began developing another OLED DDI strip targeted for fast growing portable smartphone market. 3rd party research from China Securities estimates global portable handsets are projected to grow over 50% year over year the next few years and reach over 100,000,000 units by 2027 from just approximately 15,000,000 units today. Finally, we're excited to announce that we partner with a watch solution maker in China during Q4 to develop a new product targeting the OLED smartwatch display market.

Speaker 3

This is an adjacent market we are applying our smartphone DDIC technology know how and development expertise. The delivery of first sample expected in mid-twenty 24. This initiative demonstrates our strategy to expand into new high growth markets with new product offerings that showcase our ability to innovate across segments. With regard to our OLED Automotive business, we began production shipments to our large Korean panel maker for 3 different car models from 2 top tier European car manufacturers between May July 2023. Modest revenue from those devices began in May 23 and is expected to continue for a few years given longer automotive cycles.

Speaker 3

All these efforts underscore our commitment to innovation and market expansion. Moving on to our Power business. Q4 revenue was $36,000,000 down 22.3% year over year and 20.5% sequentially. Sequentially, our power business was impacted by an ongoing inventory correction in industrial end markets, particularly e bike and solar. We also saw weakness in consumer TV and PC power.

Speaker 3

On a positive note, we secured 2 new smartphone design wins for our low voltage MOSFET family, which grew more than 20% sequentially in the 4th quarter for that product family. While the overall power business results in the Q4 were disappointing, we currently expect a gradual recovery in our Power Business in the first half of the year with increased momentum in the second half. Our major markets such as consumer, computing and communication already underwent a major inventory correction over the last year. We continue to focus on execution in Q4. We developed and launched new power products and saw strong momentum in our design win activities.

Speaker 3

In Q4, we secured a new design win and began mass production for a major U. S. Automotive brand that would contribute to revenue growth in 2024. I am extremely proud of the progress we've made in our automotive business as revenue for the full year 2023 is up over 3 times compared to 2022. I look forward to building on this momentum in coming years.

Speaker 3

We also continue to innovate. In October, we announced 2 new 6 50 volt superjunction MOSFET that reduced the overall footprint by nearly 60% as compared to other products from competitors. These new MOSFETs offer excellent design flexibility, efficient heat dissipation and low resistance characteristics. As a result, they are well suited for various applications that require compact size and high efficiency, such as OLED TVs, servers, lighting products and laptop chargers and adapters. In summary, our power business, our product portfolio is getting stronger as we continue to focus on rolling out our next generation power products to maintain our momentum of design ins and wins.

Speaker 3

These new products will provide a foundation to fill our Gumi fab, achieve better margin and help us get back to profitability. Entire families of our next generation products will be forthcoming in 2024. We will be releasing the next generation 650 volt IGBT in the first half twenty twenty four, followed by 6th generation superjunction MOSFETs and 6th generation IGBTs in Q3 of this year and 8th generation medium voltage MOSFETs and 8th generation low voltage MOSFETs in Q4 of this year. We expect these next generation product families to match or surpass the performance of our Tier 1 competitors. This will position us well to compete for high end industrial and auto 1 markets as well as serve our existing markets such as consumer computing and communications better.

Speaker 3

Additionally, we will be introducing a new line of commodity products by end of the Q4 to improve fab utilization. I'll come back to wrap up the call after Xinyuan gives you more details of our financial performance in the Q4 and provide Q1 and full year 2024 guidance. Xinyuan?

Speaker 4

Thank you, Ajay, and welcome to everyone on the call. Let's start with key financial metrics for Q4. Total revenue in Q4 was $60,800,000 down 17% sequentially and down 16.7% year over year. Revenue from the SendOut Prox business was $41,200,000 and revenue from transitional foundry services was $9,600,000 Within Sendar products, display business revenue was $5,200,000 and power business revenue was $36,000,000 Gross margin in Q4 was 22.7%, down from 23.6% in Q3, mainly driven by lower fab utilization. Compared to the same period last year, gross margin decreased 370 basis points from 26.4 percent, primarily as a result of unfavorable product mix, lower fab utilization and higher fab costs.

Speaker 4

Going forward, please keep in mind that there likely will be more volatility in our gross margin due to the relative sizes of the newly organized businesses on a standalone basis. In addition, among other things, product mix, that utilization and input manufacturing costs will impact our quarterly gross margin by business. As a reminder, our transitional foundry services contract with SK key foundry expired at the end of August 2023, and we are planning to wind down these foundry services starting in Q1 2024 and the revenue is expected to be approximately $2,000,000 to $3,000,000 per quarter in the first half of twenty twenty four. Transition of foundry services accounts for approximately 30% of our Gumi capacity when fully utilized with foundry products. This anticipated decline is significantly impacting our factory utilization rate in Cumi, which is negatively impacting our product gross margin for the power business.

Speaker 4

Turning now to operating expenses, Q4 combined R and D and SG and A was $27,500,000 This compares to R and D and SG and A of $23,700,000 in Q3 2023 and $26,200,000 in Q4 last year. R and D in Q4 was $15,400,000 as compared to $11,600,000 in Q3 and $13,700,000 in Q4 last year due to higher mask set costs. Stock compensation charges including operating expenses were $1,700,000 in Q4 compared to $2,100,000 in Q3 $1,500,000 in Q4 last year. Q4 operating loss was $15,900,000 This compares to an operating loss of $9,200,000 in Q3 and operating loss of $10,100,000 in Q4 2022. On a non GAAP basis, Q4 adjusted operating loss was $14,100,000 compared to adjusted operating loss of $7,100,000 in Q3 $8,600,000 in Q4 last year.

Speaker 4

Net loss in Q4 was $6,000,000 as compared with a net loss of $5,200,000 in Q3 and a net income of $3,000,000 in Q4 last year. Q4 adjusted EBITDA was negative $10,000,000 This compares to a negative $2,700,000 in Q3 and negative $4,800,000 in Q4 last year. Our GAAP diluted loss per share in Q4 was $0.16 as compared with diluted loss per share of $0.13 in Q3 and diluted earnings per share of $0.07 in Q4 last year. Our non GAAP diluted loss per share in Q4 was 0 point 21 dollars This compares with diluted loss per share of $0.04 in Q3 $0.36 in Q4 last year. Our weighted average diluted shares outstanding for the quarter were 38,800,000 shares.

Speaker 4

In Q4, under our new Stop Bybit program authorization of $50,000,000 we repurchased approximately 1,100,000 shares or $8,200,000 We had about $36,400,000 remaining out of the new $50,000,000 program at the end of December 31, 2023. Moving to the balance sheet. We ended the quarter with no debt and cash of $158,100,000 down from $166,600,000 at the end of Q3 2023. The primary cash outflow during the quarter was approximately $8,200,000 of stock buybacks. Net accounts receivable at the end of the quarter totaled $32,600,000 which represents a decrease of 20.6 percent from Q3 2023.

Speaker 4

Our daily days outstanding for Q4 was 59 days and compares to 62 days in Q3. Our average days in inventory for Q4 was 77 days and compares to 61 days in Q3. The absolute dollar value of our inventory was up slightly quarter over quarter, while lower cost of sales primarily drove the calculation for days of inventory higher. Specifically, inventories net at the end of the quarter totaled $32,700,000 This compares to $30,800,000 in Q3 2023. Lastly, Q4 CapEx was $4,700,000 and for the full year 2023, we spent $7,000,000 in line with our previous estimates that reaffirmed last quarter.

Speaker 4

Now moving to our Q1 and full year 2024 guidance. Beginning in Q1, we'll begin reporting results under the newly organized businesses, MSS and PAS. While actual results may vary, for Q1 2024, MagnaChip currently expects consolidated revenue to be in the range of $46,000,000 to $51,000,000 including approximately $3,000,000 in the transition of voluntary services. MSS revenue to be in the range of $8,000,000 to $10,000,000 This compares with MSS equivalent revenue of $8,600,000 in Q4 2023. PAS revenue to be in the range of 35 $1,000,000 to $38,000,000 This compares with PAS equivalent revenue of $32,600,000 in Q4 2023.

Speaker 4

Consolidated gross profit margin to be in the range of 17% to 20%. MSS gross profit margin to be in the range of 40% to 43%, which includes the positive impact of expected one time non recurring engineering revenue. This compares with MSS equivalent gross profit margin of 41.3 percent in Q4 2023, which also included one time non recurring engineering revenue. PAS gross profit margin to be in the range of 15% to 18%, due primarily to the expected decline in transitional boundary services revenue. This compares with PAS equivalent gross profit margin of 18% in Q4 2023.

Speaker 4

For the full year 2024, we currently expect MSS revenue to grow double digits year over year as compared with MSS equivalent revenue of 44 $400,000 in 2023. PAS revenue to grow double digits year over year as compared with PAS equivalent revenue of $151,300,000 in 2023. Consolidated revenue flat to up slightly year over year as recovery in MSS PAS is offset by the base out of transitional foundry services. Consolidated gross profit margin between 17% to 20% due to idle capacity expected from the phase out of transition of funds related services. This compares with the consolidated gross profit margin of 22.4% in 2023.

Speaker 4

Thank you. And now I'll turn the call back over to YJ for his final remarks. YJ?

Speaker 3

I want to emphasize points I made earlier because they are important for investors to understand where we are and where we are headed. One, our display business is building upon our past success in Korea to focus more squarely on China. As a sign of the importance of the China market, we have formed a dedicated China operating entity, enabling us to forge strategic partnerships with key players in the smartphone, TV, automotive and ecosystems. This move strengthens our market presence and fosters valuable relationship within the industry. As we benefit from these strategic initiatives in our China operations, we are optimistic about the trajectory ahead for our display business.

Speaker 3

2, we are dealing ahead on with unexpected drop in fab capacity in our Gumi fab as a result of the expected drop off in transitional foundry services, and we'll provide regular updates on our plan. 3, we've separated the structure of the company into 2 entities to increase shareholder value by maximizing the valuation of each segment, strengthening business performance management and enhancing flexibility to respond to changes in the business environment. The move also will dramatically increase our transparency to the investor community. Thank you to our shareholders for your patience. We appreciate your support as we work to achieve our goals.

Speaker 3

Now, I will turn the call back to Stephen.

Speaker 2

Stephen? Great. Thank you. That concludes the prepared remarks section of our call today. Operator or Jonathan, would you now open up the call for questions?

Speaker 1

Certainly. One moment for our first question. And our first question comes from the line of Suji Desilva from ROTH Capital Markets. Your question please.

Operator

Hi, YJ. Hi, Xinyuan. So, YJ, in the display market in China, you say you have 2 smartphone OEM wins. Are those wins secured directly by you or by the display partner you have? Just trying to understand how those OEM wins are going to be secured going forward?

Speaker 3

Yes. The in China, we sell to the panel customer and the smartphone OEMs, they also dictate on the which DDIC they like to use as well. So as I said, we doubled our resources in last few quarters. We have more than 20 professionals. And also, we have added 3 more direct OEM sales to smartphone and to OEMs.

Speaker 3

And I've also hired 3 advisers to help out from the top 5 gs Semiconductor Companies and Supply Chain and so forth. So we are using both cell to the panel as well as the small OEMs, and that's how we're going to accelerate and win more sockets.

Operator

Okay. Also in the display market, can you tell me how many products you have now targeting the China market in total? And what is the after service market? Is that a special market that needs special products? Yes.

Speaker 3

So let me talk about the after service market. So after service market is like either refurbished phone or when your screen goes off, then you have to replace. According to market research, that market now is anywhere between 10% to 20% of smartphone market. And as you saw, there is an increase in used smartphone. So I think that's what we have seen.

Speaker 3

That's the first question and answer. And then the app, what was the

Speaker 4

How many products

Speaker 3

do you have?

Speaker 5

The number of products.

Speaker 3

The number of products we now have in China, we have 3. And I said we're going to have another chip coming out next quarter. And then we are working on the affordable and the mainstream product. That would be all out this year.

Operator

Okay, great. And then last question, as you convert the foundry services at Gumi to Power, how should we size the revenue opportunity once that's fully converted incrementally for your power business, the opportunity at least capacity wise?

Speaker 3

Yes. So I think there are 2 vectors there. 1 is how we're going to fill the fab. The how we're going to fill the fab is during the transition. First of all, we're going to have a bunch of new products.

Speaker 3

As I said today, we have a slew of new generation coming out all this year. So we have a 6 50 volt IGBT in first half followed by 6th generation superjunction and IGBT in Q3 and 8th generation ND and low voltage in Q4 and then another commodity product line to fill the factory in Q4. So that is a product strategy to fill. And then in the second half, we will be converting the fab to our products and fill it up. So once all that is achieved, we expect to revenue to go beyond what we did in the past.

Speaker 3

But it will take a little time.

Operator

Understood. Maybe one last question for Xinyoung and I'll go I'll come back in the queue. Xinyoung, for the gross margin for MSS, how much of that was NRE benefit? If you could roughly size that, that will be helpful.

Speaker 4

It's probably the normalized basis. It's probably 30% plus.

Operator

30% of the margin?

Speaker 4

No, no, no. So 41% is just because of that one time thing. So without that NRE, kind of normalized display at this stage is 30 plus to 30%, like a couple of percentage more than that, yes.

Operator

Got it. That's helpful. Okay. Thanks, guys.

Speaker 1

Thank you. One moment for our next question. And our next question comes from the line of Quinn Bolton from Needham. Your question please.

Speaker 6

Hey guys, Nick Doyle on for Quinn. Just a quick one, will you provide a historical breakout of MSS and PAS?

Speaker 4

We will, we will,

Speaker 3

yes. Okay, great. And then

Speaker 4

technically like when we report the Q1 quarterly, you're going to see the competitive the historical period recont on the same basis.

Speaker 6

Right. So we'd at least see the Q1, but hopefully we could get some second and third quarter numbers. Great. So for gross margins, you mentioned we should expect volatility. You're winding down the transitional foundry services, I think by the end of the second quarter.

Speaker 6

So how long will that fee fab be at least 30% underutilized? I guess I'd expect margins to maybe bottom in 2Q and remain low, maybe flat 30Q into 4Q perhaps. I mean, after last quarter, I think we are expecting margins to bottom in the 3Q, 4Q timeframe. So are you kind of pulling that in with maybe an accelerated foundry wind down, I guess what's the best way to think about the margin path?

Speaker 4

I mean, we are going to still have some boundary services revenue like $2,000,000 to $3,000,000 per quarter in Q1 and Q2. So technically, we can't really do anything about the 30% capacity in our Gumi fab and we are going to wind down after the Q2. So I mean, we're going to see some the either capacity in the second half as well until we fully convert that fab capacity to power the PAS, the product. So you're going to see that the margin kind of depression throughout the year.

Speaker 3

But I think in the second half, the difference is that we are rolling out by the time all the new generation, which is higher margin and lower cost. So that will be the lever that will try to maximize the margins.

Speaker 6

Okay. I think I understand. I mean, when you kind of finish the idling process, maybe margins bottom in the Q3 and then stay flat until you fill

Speaker 3

up the

Speaker 6

fab. That's what it sounds like. So in the power business, you talked about an auto win that will contribute in 2024. So a couple of questions there. Just how do we think about sizing that win?

Speaker 6

Maybe when will it begin to ramp? What was the main technical driver of that design win? And then how does that ramp play out with your gimme fab utilization? It sounds like that would kind of help in the 3Q, 4Q timeframe.

Speaker 3

So the automotive, as you know, we didn't have any automotive business about 2 calendar years ago. And the 2022 was 1st year, maybe it was 1% or less than 1% of revenue. Last year, we had about 5% of revenue. So and then this year, we'll still grow at high double digits. So that's the about size of the automotive business.

Speaker 3

So but we now have more than 2 dozen of

Speaker 6

Thank you.

Speaker 1

Thank you. One moment for our next question. And our next question comes from the line of Martin Yang from Oppenheimer. Your question please.

Speaker 5

Hi, thank you for taking my question. My first question is about your customer engagement activities in China. Can you talk about how many customers are you actively engaged with? And are the new wearables and aftermarket wings with the same customer?

Speaker 3

Yes. So very good question. So we are discuss so we are discussing with direct panel customer, like the panel guys. So we have 2 panel guys. We're doing business now.

Speaker 3

And we are actively engaged with top 5 out of 6 smartphone OEMs directly. And so that's what we are doing.

Speaker 5

Got it. Thank you. A question on the margins for power discrete products. And how does the current margin compares to historical levels, especially historical peaks? And what needs to happen before we see that discrete product power product margin recover back to where it was?

Speaker 4

I mean, as YJ mentioned that like once we convert that the 30% of the idle capacity for the power discrete, but we are going to rolling out with a new generation power product series of them, which we're going to have a higher margin. So once we kind of replace the foundry product, you've seen the negative margin. The thing is ASP was fixed for those products, but the cost was high. So the power now have to absorb those fixed costs on those foundry, but if we feel that capacity with a higher margin product based on the new generation product series and we have a potential to go back to the our historical kind of high

Speaker 5

levels. Got it. And do you so what else needs to happen fundamentally for you to fully fill that capacity?

Speaker 3

Yes. So I think that's very we've been saying that today. That is our top priority, and it's about having the right product portfolio. And so we already had a 6 50 volt superjunction in the October release. That's like 60% better than before.

Speaker 3

We are introducing the new 650 volt IGBT in first half, followed by 6th generation superjunction and 6th generation IGBT in the 3rd quarter and 8th generation medium volt and low voltage MOSFET in the 4th quarter. And additionally, we'll have a new line of commodity products on the Q4. So those will drive to fill the fab with a better margin and better performance.

Speaker 5

Thank you, Roger. That's it for me.

Speaker 1

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Stephen Pelayo for any further remarks.

Speaker 2

Okay, great. Thank you. This concludes our Q4 earnings conference call. Please look for details of our future events on MagnaChip's Investor Relations website. Thank you and take care.

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