Magnachip Semiconductor NYSE: MX reported second-quarter revenue within its forecast range as the power semiconductor company continued to face pricing pressure in legacy products while investing in newer, higher-margin offerings.
Revenue from continuing operations, including its Power Analog Solutions and Power IC businesses, was $44.7 million for the quarter ended June 30, down 6.1% from $47.6 million a year earlier and 3.3% from $46.2 million in the first quarter. The company said the year-over-year decline reflected weaker demand and intensified pricing competition for legacy products, while the sequential decrease was driven primarily by seasonal softness in communications.
Chief Financial Officer Shinyoung Park said first-quarter sales had benefited from a one-time sales incentive program that reduced channel inventory, making the subsequent quarter's seasonal trends more pronounced.
New CEO Outlines Product Strategy
The call marked the first earnings presentation by Chae Lee, who joined Magnachip as chief executive officer about a month earlier. Chairman Camillo Martino said the board selected Lee following an extensive search, citing his experience in power semiconductors and record of building businesses.
Lee said the company is building on its repositioning as a pure-play power semiconductor company, with a focus on differentiated products rather than competing largely on price in commoditized markets.
“Our goal is to transition from being a follower to becoming a leader,” Lee said, adding that the company intends to develop application-specific solutions addressing customer needs that standard commodity products do not adequately serve.
Lee acknowledged that Magnachip's recent financial performance has not reflected its engineering, process technology, manufacturing and customer-relationship capabilities. He said the company's newer-generation products, which carry higher margins, are beginning to show strength, though he characterized the progress as early.
The company remains on track to introduce 55 new-generation products in 2026, according to Park. Magnachip expects those products to account for at least 10% of full-year revenue, compared with roughly 2% in 2025.
Navitas Partnership Expands Silicon Carbide Plans
Magnachip also discussed its recently announced strategic partnership with Navitas Semiconductor. Under the agreement, Magnachip will license Navitas' Gen 4, Gen 5 and Gen 6 technology for 1,200-volt, 2,300-volt, 3,300-volt and higher-voltage applications, while gaining access to Navitas' silicon carbide supply-chain ecosystem.
Lee said the agreement provides a capital-efficient route into high-voltage and ultra-high-voltage silicon carbide markets. Magnachip plans to support, qualify and eventually manufacture the products at its fab in Korea.
The partnership is intended to expand Magnachip's opportunity in energy and grid infrastructure, industrial electrification, automotive, renewable energy and other high-power applications. Lee said combining Navitas' silicon carbide technology with Magnachip's silicon IGBT, MOSFET and manufacturing capabilities could accelerate the company's technology roadmap.
Margins Improve Sequentially, Losses Widen
Second-quarter gross margin from continuing operations was 19.3%, above the company's 17% to 19% guidance range and up from 15.6% in the first quarter. The margin remained below 20.4% in the second quarter of 2025.
Park attributed the sequential improvement primarily to a one-quarter-lag benefit from higher fab utilization during the first quarter. The year-over-year margin decline was tied to an unfavorable product mix, particularly in Asia-Pacific markets including China.
Operating expenses rose as the company continued development work on new products. Research and development expense totaled $7.9 million, compared with $6.5 million a year earlier and $6.7 million in the prior quarter. Selling, general and administrative expense was $8.67 million, versus $9 million a year ago and $7.7 million in the first quarter.
- Adjusted operating loss was $7 million, compared with a $4.8 million loss a year earlier and a $6.5 million loss in the prior quarter.
- Adjusted EBITDA was negative $4.2 million, compared with negative $1.5 million in the prior-year quarter and negative $3.6 million in the first quarter.
- Non-GAAP diluted loss per share was $0.13, compared with losses of $0.05 a year earlier and $0.11 in the prior quarter.
The company ended the quarter with $83.9 million in cash, down from $94.6 million at the end of the first quarter, primarily due to operating cash outflows and $1.3 million in capital expenditures. Total borrowings were $41.5 million, including $15.6 million in equipment loans.
During the quarter, Magnachip established a $50 million at-the-market offering program, which Park said gives the company additional financial flexibility if it chooses to use it.
Third-Quarter Outlook Calls for Lower Sales and Margin
For the third quarter, Magnachip forecast continuing-operations revenue of $41.5 million to $45.5 million. At the midpoint, the outlook represents a 2.7% sequential decline and a 5.2% decline from the same period last year. The company reported revenue of $45.9 million in the third quarter of 2025.
Magnachip projected third-quarter gross margin of 17% to 19%, compared with 19.3% in the second quarter. Park cited an unfavorable product mix for the expected sequential decline.
Although demand remains healthy for its low-voltage battery FET products used in mobile devices, the company said third-quarter results will be affected by packaging constraints that limit its ability to meet demand, lower-than-expected customer volumes in certain custom applications, and continued pricing pressure on legacy products.
Park also said a planned electrical substation upgrade will reduce fab utilization in the third quarter and is expected to have a one-quarter-lag effect on margins. As a result, Magnachip currently expects fourth-quarter gross margin to decline slightly from the third quarter.
Lee said the company remains focused on disciplined execution, differentiated product development and improving financial performance over time.
About Magnachip Semiconductor (NYSE:MX)
Magnachip Semiconductor Inc is a fabless semiconductor company specializing in high-performance analog and mixed-signal solutions for the display, power management and lighting markets. Its core product portfolio includes display driver ICs for LCD and OLED panels, high-voltage MOSFETs, DC-DC converters, LED driver ICs and power management devices used in consumer electronics, mobile devices, industrial equipment and automotive applications.
Founded in 2004 as a spin-off from MagnaChip, Magnachip is incorporated in the United States with design and sales offices strategically located across North America, Europe and Asia.
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