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MagnaChip files for insolvency

Posted: 16 Jun 2009 ?? ?Print Version ?Bookmark and Share

Keywords:bankruptcy? MagnaChip Chapter 11? CMOS? processor?

South Korea's MagnaChip Semiconductor Ltd!the logic spin-off of Hynix Semiconductor Inc.!on June 12 filed for Chapter 11 bankruptcy protection in the United States, according to court documents.

At the same time, a fund led by South Korea's KTB Securities Co. Ltd has acquired MagnaChip and its affiliates, according to court documents. The deal is valued at about $80 million.

The bankruptcy filing involves the following entities: MagnaChip Semiconductor LLC, MagnaChip Semiconductor SA Holdings LLC, MagnaChip Semiconductor Inc., MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Co.

The company's sales units in Europe, Taiwan and Japan are not part of the Chapter 11 filing, according to reports. MagnaChip has assets up to $50 million, but it also estimated liabilities of more than $1 billion.

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. 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.

In foundry services, 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.

Poor sales, losses
From the start, the wheels fell off MagnaChip 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.

Then, in May of 2006, the company named Sang Park as president and chief executive in an effort "to reinvigorate the company's growth and profitability." At the time, he replaced Youm Huh, MagnaChip's former president and CEO.

Still, the company struggled amid vast losses and slumping sales. Last year, MagnaChip exited the CMOS image sensor business. In January, the company dropped its bid for an initial public offering in the United States, citing unfavorable market conditions.

More recently, South Korean financial services firm KTB Securities had been in negotiations to invest in MagnaChip. KTB has apparently acquired the chipmaker.

MagnaChip and others have been hit hard by the downturn. Two other chip makers!Qimonda AG and Spansion Inc.!have separately filed for bankruptcy.

- Mark LaPedus
EE Times

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