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MagnaChip vows a comeback

Posted: 04 Jun 2008 ?? ?Print Version ?Bookmark and Share

Keywords:MagnaChip strategy? CMOS image sensor? MOSFET?

MagnaChip Semiconductor Ltd is putting the finishing touches on its turnaround strategy intended to boost its bottom line and regain lost share.

As part of the strategy, MagnaChipthe logic spin-off of Hynix Semiconductor planning a major comeback in the CMOS image sensor business, bolstering its silicon foundry efforts and moving to expand its recent entry in the analog and power MOSFET business.

It is also expanding its distribution channels and list of design wins. Still to be seen, however, is if or when MagnaChip will move forward with its previously announced initial public offering (IPO) in the United States. After filing for an IPO in 2007, the company is still waiting for the economic climate to improve.

'Good recovery'
The South Korean firm's strategy has begun to bear some fruit. Thanks to a new product introduction cycle, MagnaChip witnessed a "good recovery in 2007," said Sang Park, the former CEO of Hynix, who is chairman and CEO of MagnaChip.

"Almost half of our total revenues are now coming from products we introduced over the last 12 months," Park said in a recent interview at its U.S. headquarters.

Going forward, the outlook is mixed for MagnaChip. In 2008, Q1 was "seasonally slow," but the second period "looks healthy," he said. "The second half looks good."

Analysts are taking a wait-and-see mode regarding the company's prospects. "MagnaChip faces a number of challenges in regaining momentum on a number of fronts," such as CMOS image sensors and foundry services, said Robert Lineback, an analyst with IC Insights Inc.

Market descent
MagnaChip's CMOS image sensor sales were about $85 million in 2007, which ranked them as the world's ninth largest supplier in the area, Lineback said. "MagnaChip was well up in the top-5 in the rankings until a few years ago, but they stumbled in the mega-pixel class and above products," he said.

In the foundry sector, MagnaChip ranked 14th in 2007, according to IC Insights. Its foundry sales fell 6 percent to $322 million in 2007 from $342 million in 2006. It was ranked 9th in foundry revenues in 2006, but it was surpassed by X-Fab, Samsung, SSMC, HHNEC and He Jian last year, according to Lineback.

MagnaChip has seen its share of ups and downs in its colorful history. MagnaChip was the former non-memory chip unit of South Korean memory maker Hynix. MagnaChip had been the System IC division within Hynix, which itself was formed in 1999 by the merger of Hyundai Electronics and LG Semiconductor.

In 2004, the non-memory chip unit of Hynix was sold to a newly created South Korean company formed by Citigroup Venture Capital Equity Partners L.P., CVC Asia Pacific Ltd and Francisco Partners. The new company, MagnaChip, inherited three main business lines from Hynix including CMOS image sensors, LCD drivers and foundry services. At the time of the spin-off, Hynix' non-memory business had a profit of $37.4 million on sales of $1.1 billion in 2004.

At the start, the wheels began to come off amid a sudden and surprising slump in the company's CMOS image sensor and application processor businesses. In 2005, it sold its application processor business to a Korean entity called GreenChips Co. Ltd.

In 2005, MagnaChip's sales were $937.7 million, a 13.6 percent decrease over 2004. It also showed a loss of $100.9 million in 2005. Then, in May of 2006, the company named Park as president and CEO in an effort "to reinvigorate the company's growth and profitability." He replaced Youm Huh, MagnaChip's former president and CEO.

Coming to MagnaChip was a reunion for Park, who was in charge of both the memory and non-memory side of Hynix. "When I joined MagnaChip, the company was already sliding," Park recalled, adding that that the company missed the design windows in the market. Rebuilding MagnaChip
To fix the problem, Park jumpstarted the company's product and design-win efforts. "We have really focused on customer relationships and design wins," he said. The company is seeing mixed results from its three main businesses. In 2007, it posted a loss of $192.6 million on sales of $792.4. This compares to a loss of $240.2 million on sales of $744.4 million in 2006.

Net sales from its bread-and-butter LCD driver business in 2007 were $331.7 million, a 21.2 percent increase from $273.7 million in 2006.

Net sales from its foundry business in 2007 were $321.0 million, a 6.2 percent decrease compared to net sales of $342.4 million in 2006. This decrease was primarily due to a 2.9 percent decrease in wafer ASPs.

Recently, MagnaChip has reportedly gained some new customers in Europe and it continues to beef up its process offerings. The company does not compete head-to-head against Chartered Semiconductor, Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp., but rather it offers specialty analog and mixed-signal foundry processes.

MagnaChip has one 6-inch fab and two 8-inch plants in Cheongju. It has another 8-inch fab in Gumi. The sites have a combined capacity of 120,000 8-inch equivalent wafers per month. It makes wafers utilizing geometries ranging from 0.11- to 1.0?.

Like the foundry sector, MagnaChip is looking to regain share in the CMOS image sensor business. One of the problems is that company launched only one product during one period. "That was not acceptable," Park said.

As part of its comeback strategy, MagnaChip recently launched a 2.2?, 1/10-inch VGA CMOS image sensor for use in slim, high- performance mobile phones. The MC501EA CMOS sensor integrates VGA resolution with an advanced image signal processor to enable compact 5mm x 5mm x 3mm camera modules.

There are other products in the works, but some wonder if MagnaChip can regain its past glory in CMOS image sensors. "MagnaChip has seen some improvements from its weakening position in 2006, but it still faces stiff, growing competition from the likes of Sony and Samsung, along with OmniVision, which has regained its foothold and took back the top spot in CMOS image sensors in 2007," IC Insights' Lineback said.

New markets
While MagnaChip continues to shore up its foundry and CMOS image sensor businesses, the company is moving into new markets. Last year, it jumped into the analog business, by fielding a line of power-management products. The company's initial power management products include MOSFETs, DC/DC converters and linear regulators.

In March, the company launched its 30V N channel MOSFET series, its first power solutions products. The MOSFET product series is designed for use in lithium-ion battery packs and battery modules. Last week, it rolled out its 40V N-Channel MOSFET series for use in LCD monitors and TV applications.

MagnaChip entered this business, because many of its customers in the LCD driver business also buy power-management devices. "We know the customers," Park said. "It's a competitive market, but we have a well-established customer base."

The company claims to have other advantages. Its products are produced in its 8-inch fabs, which is more cost effective than its rival 6-inch or smaller plants.

Oddly, MOSFETs and related products are hot. "We are seeing more logic wafer foundries becoming interested in power MOSFETS, in particularly the low-voltage segment (below 200V) for power supplies and regulation/conditioning functions inside portable systems and PCs," IC Insights' Lineback added.

- Mark LaPedus
EE Times

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