Magnachip Semiconductor Corp. Q4 FY2025 earnings call

Management took three meaningful actions in 2025: significantly reduced cost structure by exiting display business and resizing organization, reorganizing and focusing sales and marketing teams on specific market segments, and increased R&D investment. Six foundational pillars for go-forward operating strategy: focus market segments (automotive, industrial motor control, solar, server data infrastructure, etc.), product competitiveness with plan to launch over 40 new generation products in 2026, expand power IC business, use module strategy, evaluate silicon carbide product solutions, and develop strategic partnerships.

For Q4, revenue was $40.6 million and gross margin was 9.3%. For the full year, revenue was $178.9 million and gross margins were 17.6%. Revenue from power analog solutions in Q4 was $36.8 million, down 15.3% year-over-year and down 11.4% sequentially. For the full year 2025, revenue from power analog solutions was $160.5 million. Revenue from PowerIC in Q4 was $3.8 million, down 30.4% year-over-year and down 14.5% sequentially. For the full year 2025, revenue from PowerIC was $18.4 million, down 3.4% year-over-year.

For Q1 2026, consolidated revenue from continuing operations expected to be in range of $44 to $48 million, up from $40.6 million in Q4 2025. Consolidated gross margin from continuing operations expected to be in range of 14% to 16%, up from 9.3% in Q4 2025. Expect more than $2 million of annualized SG&A savings starting in Q4 2025 and plan to increase R&D investment in 2026.

Pricing pressure on legacy products remains intense, especially in China. Factory loading and utilization was a headwind. New generation products take time to qualify, ramp, and contribute meaningfully towards revenue. Entry into silicon carbide market involves risks related to investment and market adoption.

Q: Hi, Camilo. Hi, Shin Young. First, a question on the gross margin guidance. I know there was a gross margin inventory reserve hit in 4Q. Are you assuming an impact, Shin Young, in 1Q, or is that 14 to 16 range a pure range without...

A: That did not include the one-time incentive that we did execute it in Q4-25. So, had we excluded Q4's one-time impact, Q4 margin would be like 15%. So, like we are expecting the Q1-2026 to be the similar range and that's mainly driven by the utilization and also the pricing pressure, so that's actually affecting our gross margin at this time. Our revenue, still the best majority of that is older generation product. We're still feeling the pricing pressure, especially in China.

Q: And then on the operating expense savings from the restructuring, it'll flow through, I think you said SG&A, right, the 2 million run rate, and that would be, we'd see that benefit toward the end of 26, or when would that step down? What's the linearity of that step down?

A: Well, that's actually going to be the continuing basis. So it started in Q4 2025. I just quantified the annualized impact is like 2 million plus, and we are going to see the full impact in 2026. And I'm hoping that that's going to minimize the investment that we are going to do in R&D to support the go-forward strategy operating system, the strategy.

Q: The geographic exposure is, As you bring these new products to market and the new focus segments, does that move your business out of China where it's competitive price-wise, or does it stay in China in less-priced competitive markets? What's the shift there as you go to new products and new markets versus the competitive China market you're in now?

A: Look, it's very clear that we have some very, very important, strategically important and very large customers right here in Korea. And so I think it's important that we do an excellent job in servicing their needs for the next many, many years. So to me, They're here, they're in that backyard, let's deliver the value that we can realize together. It's not a strategy of moving away necessarily from any one country. It's more about focusing more on Korea because we're right here. And clearly, at the same time, we are a global company. We have sales offices in every country, every major country around the world, and so we're going to continue to service them as well. But frankly, I would expect to have a higher percentage of our revenue coming from Korea because they're very close to us, very, very close, and we want to really service them extremely well.

Q: On the silicon carbide effort, can you tell us where you are in that? Is that in development effort? Do you have the technologies in-house that you need? Do you have to invest or partner to get there? And what products and markets might you target with silicon carbide?

A: I don't want to disclose what products we're developing. I would say that we're in development. We are in development, absolutely. We're building the team as well as we're speaking. And to some of our key customers, we're sharing some of that information with them under NDA. At the same time, I would say that this is a long-term plan. This is not a 12-month plan. Clearly, your silicon carbide is going to take many years first to develop and then potentially we're going to look for ways to potentially manufacture it either in-house or maybe in the short term we may go to an outside fabric in the short term. So we're looking at everything there, but very clearly, as I stated in my prepared remarks, silicon carbide is a very, very important part of our future roadmap. If you look at the market segments that we are pursuing, if you look at the key customers that we are deepening our relationships with, silicon carbide is very, very important for that