Transcript: MagnaChip Semiconductor Q2 2026 Earnings Conference Call

MagnaChip Semiconductor (NYSE: MX ) released second-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below. This content is powered APIs. 1% year-over-year, primarily due to weaker demand for legacy products and intensified pricing competition.

The company is undergoing a strategic shift to become a pure-play power semiconductor company, with a focus on developing differentiated, high-value products rather than competing solely on price. A new strategic partnership with Navitas Semiconductor aims to expand MagnaChip's presence in the high-voltage silicon carbide market, leveraging Navitas' technology and supply chain. 3%, above guidance, due to higher utilization rates, despite a challenging product mix. 5 million and gross profit margins of 17% to 19%, with challenges including supply chain constraints and continued pricing pressure.

CEO Chae Lee emphasized a focus on transitioning from a follower to a leader in the power semiconductor industry through innovation and strategic partnerships. Full Transcript OPERATOR Good day, and thank you for standing by. Welcome to the MagnaChip Semiconductor second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode.

After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference may be recorded.

I will now hand the conference over to your first speaker today, Mike Bishop of Investor Relations. Please go ahead. Mike Bishop, Investor Relations Thank you. Hello, everyone, and thank you for joining us to discuss MagnaChip's financial results for the second quarter ended June 30, 2026.

The second 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. Joining me today are Camillo Martino, MagnaChip's Chairman, recently appointed CEO Chae Lee, and Shinyoung Park, our Chief Financial Officer. We will discuss the Company's recent operating performance and business overview, followed by a review of the financial results for the quarter and provide guidance for the third quarter of 2026.

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 MagnaChip'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. Such statements are based on information available to the Company as of the date hereof and are subject to change for future developments.

Except as otherwise required by law, the Company does not undertake any obligation to update these statements. During the call, we'll also discuss non-GAAP financial measures. These non-GAAP financial 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. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our second quarter earnings release in the Investor Relations section of our website.

And with that, I'll now turn the call over to Camillo Martino. Camillo, thank you. Camillo Martino, Chairman Thank you, Mike, and good afternoon, everyone. Before discussing the quarter, I'd like to take a moment to welcome Chae Lee to his first earnings call as Chief Executive Officer of MagnaChip.

On behalf of our Board of Directors, I want to say how pleased we are to have Chae leading our company. The Board conducted an extensive search for this new CEO position, and Chae distinguished himself through his deep experience in power semiconductors, his proven track record of building successful businesses, and his vision for where MagnaChip can create value over the longer term. Over the past several months, we've taken important steps to reposition MagnaChip as a pure-play power semiconductor company.

We believe Chae is the right leader to build on that foundation, accelerate our product strategy, and strengthen our competitive position through differentiated solutions. Having known Chae for nearly three years now, and also having worked closely with him over the past month, I have been impressed by the speed with which he has immersed himself in the business and the way he's engaged with our employees and customers and established clear priorities for the future. The Board has great confidence in his leadership, and I look forward to continuing to work closely with Chae as the Chairman of the company.

With that, it is my pleasure to introduce MagnaChip's Chief Executive Officer, Chae Lee. Chae Lee, Chief Executive Officer Thank you, Camillo. Good afternoon, everyone, and thank you for joining us today. It is an honor to speak with you for the first time as Chief Executive Officer of MagnaChip.

Although I officially joined the company just a month ago, it feels as though I've been here much longer. During that time, I spent my days listening and learning, meeting with our engineering teams, speaking with employees across the organization, reviewing our technology roadmap, and engaging with customers. What has impressed me the most is the quality of our people. MagnaChip has talented engineers, deep process technology expertise, an efficiently managed manufacturing operation, and long-standing strategic relationships with many market-leading customers.

These are important strengths that provide a solid foundation for future growth. At the same time, I recognize that our recent financial performance has not reflected the strength of those assets. Our shareholders have been patient, and they rightly expect better execution and improved results, and my focus is to deliver on those results. One of the things that attracted me to MagnaChip was the work already underway to reposition the company as a pure-play power semiconductor company.

I want to thank Camillo, the Board, and the management team for the important progress they have made over the past several months. Rather than changing direction, my objective is to build on that foundation and accelerate our pace of innovation and execution. As I think about the future of MagnaChip, one ideal stands above all others. Our goal is to transition from being a follower to becoming a leader.

I believe we have the capability to drive innovation, launch differentiated technology, and become a stronger player in the power semiconductor industry. That does not necessarily mean becoming the largest company in every market we serve. Rather, it means developing differentiated products that solve meaningful customer problems, creating solutions that customers actively seek out, and competing on innovation instead of price alone. Much of today's power semiconductor market, particularly for legacy products, has become increasingly commoditized.

Competing primarily on price is not a sustainable strategy, especially in today's environment. Instead, we intend to focus our resources on products that offer greater differentiation, deliver higher customer value, and generate stronger long-term profitability. Our marketing and engineering organizations are already moving in that direction. While I cannot discuss specific products today, we are actively developing differentiated application-specific solutions that leverage our strength in power semiconductor technology to solve customer problems that are not adequately addressed by standard commodity products.

There is a renewed sense of purpose throughout the organization, and our teams are energized by the opportunity to develop industry-leading products that create meaningful value for our customers. Of course, this transformation will not happen overnight, but we are well on our way from being a follower to becoming a leader. To accelerate that journey, last week we announced a strategic partnership with Navitas Semiconductor that advances two key pillars of our growth strategy: technology expansion and strategic partnerships.

Under the agreement, we will license Navitas' proven Gen 6, Gen 4, and Gen 5 technology covering 1200-volt, 2300-volt, 3300-volt, and higher-voltage applications while also gaining access to its established silicon carbide supply chain ecosystem. This partnership provides MagnaChip with a capital-efficient path to accelerate our entry into the high-voltage and ultra-high-voltage silicon carbide market. We plan to port, qualify, and ultimately manufacture those products in our fab in Korea, leveraging our manufacturing expertise to accelerate commercialization and support long-term growth.

We believe this partnership will significantly expand our addressable market and strengthen our ability to serve customers in energy grid infrastructure, industrial electrification, automotive, renewable energy, and other high-power applications. It also positions MagnaChip to participate in some of the fastest-growing and highest-value segments of the silicon carbide power semiconductor market. Strategically, this partnership brings together Navitas' proven silicon carbide technology with MagnaChip's expertise in silicon IGBT and MOSFET technologies and advanced manufacturing capabilities.

Together, these complementary strengths create a strong foundation for future innovation across a broad range of power semiconductor solutions, accelerate our technology roadmap, expand our market opportunity, strengthen our competitive position, and create long-term value for our shareholders. Turning now to our quarterly results, our second quarter performance reflects our heavy dependence on legacy products with limited differentiation. While pricing pressure in our legacy product portfolio will continue for some time, we are also starting to see strength from our recently introduced new-generation products that carry higher margins.

While it's still early, we believe this is an encouraging sign that our product strategy is beginning to gain traction. As we look ahead, our priorities are straightforward and remain aligned with the six strategic pillars Camillo described on prior calls. Our highest priority is disciplined R&D execution while continuing to develop innovative, differentiated solutions. While we still have significant work ahead, we believe these early results reinforce that we are moving in the right direction.

I am excited about the opportunities ahead. MagnaChip has talented people, valuable technology, and a clear opportunity to strengthen its competitive position with differentiated products over time. While there is important work ahead, I am confident we are building the right foundation for the company's next chapter and for creating sustainable, long-term value for our shareholders. With that, I'll turn the call over to our Chief Financial Officer, Shinyoung Park, to review our financial results and provide current-quarter outlook.

Shinyoung Park, Chief Financial Officer Thank you, Chae, and welcome, everyone. Let me begin with our key financial results for Q2. 5 million. 2 million in Q1 2026.

Year-over-year revenue decline was primarily driven by weaker demand for our legacy products resulting from intensified pricing competition. Sequentially, revenue declined mainly due to seasonal softness in the communications segment. As we noted last quarter, Q1 revenue was stronger than typical seasonality, benefiting from a one-time sales incentive program that reduced channel inventory levels. 3%, exceeding the high end of our guidance range of 17% to 19%.

6% in Q1 2026. The year-over-year decline in gross profit margin was primarily attributable to an unfavorable product mix driven mainly by ASP erosion, particularly in China. Sequentially, gross profit margin improved primarily due to the one-quarter lag benefit from higher utilization rate in Q1 2026. 7 million in Q1 2026.

6 million in Q1 2026. 7 million in Q1 2026. The year-over-year and sequential increase primarily reflects the timing of continued investment in our new-generation product development activities. As we mentioned on our prior earnings call, we remain on track to deliver our target of 55 new-generation products in 2026.

Before turning to our non-GAAP results, please note that our GAAP financial results are available in our Form 8-K filing with our second quarter earnings release. Our non-GAAP results are as follows. 5 million in Q1 2026. 6 million in Q1 2026.

The quarter-over-quarter decline in our non-GAAP results was primarily driven by higher operating expenses such as SG&A and R&D expenses. 11 in Q1 2026. 4 million in Q1 2026. 6 million at the end of Q1.

3 million of capital expenditures. 5 million, including $50 million of the equipment loan. During the quarter, we established a $15 million at-the-market offering program, which provides us with additional financial flexibility if and when we choose to utilize it in the future. 2% year over year at the midpoint.

9 million in Q3 2025. 6% in Q3 2025. The sequential decline is primarily due to an unfavorable product mix. I'd like to provide some additional context behind our Q3 guidance.

We continue to see healthy demand for our low-voltage battery FET product line for mobile products. Nevertheless, we expect third quarter revenue to decline sequentially due to three near-term factors. Firstly, packaging constraints in our supply chain that are limiting our ability to fully satisfy demand. Secondly, our customers' volumes in certain custom applications are lower than their earlier plans.

And finally, an unfavorable product mix resulting from continued pricing pressure on our legacy products. While these factors will affect our third quarter results, we remain focused on executing our multiyear portfolio transformation and increasing the contribution from differentiated new-generation products, which we believe will strengthen our competitive position and support improved financial performance over time. We continue to expect new-generation products to contribute at least 10% of our revenue in the fourth quarter of 2026 compared with approximately 2% for full year 2025.

Looking ahead, the lower fab utilization in Q3 resulting from the planned electrical substation upgrade is expected to have a one-quarter lag effect on gross margin. As a result, we currently expect Q4 gross margin to decline slightly from Q3. Thank you. I'll now turn the call over to Chae for his final remarks.

Chae Lee, Chief Executive Officer Thank you, Shinyoung. The financial results we reported today reflect a company that is still in the early stages of our transition. While we delivered results within our guidance, there is still significant work ahead to improve our financial performance. We are not satisfied with where we are today, although I am encouraged by what I have seen during my first month at MagnaChip and our recent partnerships with Navitas.

We have a talented team, a focused strategy, and a product roadmap that I believe can ultimately lead the industry. Our priorities are clear: execute with discipline, develop differentiated products that create greater value for our customers, and steadily improve our financial performance. We understand that ultimately we will be judged by our results, and we are committed to earning the confidence of our shareholders through consistent execution.