☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 83-0406195 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Common Stock, parvalue | MX | New York Stock Exchange |
Large Accelerated Filer | Accelerated Filer | |||||||||
Non-Accelerated Filer | ☐ | Smaller Reporting Company | ☐ | |||||||
Emerging growth company | ☐ |
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
FORM
TABLE OF CONTENTS
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Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 111 | ||||||
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Item 16. | 10-K Summary | 117 | ||||||
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PART I
INDUSTRY AND MARKET DATA
We have made statements in this Annual Report on Form
Statements made in this Report, unless the context otherwise requires, include the use of the terms “us,” “we,” “our,” the “Company” and “Magnachip” to refer to Magnachip Semiconductor Corporation and its consolidated subsidiaries. The term “Korea” refers to the Republic of Korea or South Korea. On September 1, 2020, we completed the sale of our Foundry Services Group business and our fabrication facility located in Cheongju, Korea to Key Foundry Co., Ltd. Unless otherwise noted herein, historical operational metrics presented herein do not include those of the Foundry Services Group.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made certain “forward-looking” statements in this Report within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), that involve risks and uncertainties. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All statements other than statements of historical facts included in this Report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.
These forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this Report are not guarantees of future performance, and we cannot assure any reader that those statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” sections and elsewhere in this Report.
All forward-looking statements speak only as of the date of this Report. We do not intend to publicly update or revise any forward-looking statements as a result of new information or future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
“Magnachip” is a registered trademark of us and our subsidiaries and “Magnachip Everywhere” is our registered trademark and service mark. All other product, service and company names mentioned in this Report are the service marks or trademarks of their respective owners.
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Item 1. Business
General
We are a designer and suppliermanufacturer of analog and mixed-signal semiconductor platform solutions for communications, Internet of Things (“IoT”) applications, consumer, computing, industrial and automotive applications. We have a proven record with more than 40 years of operating history, a portfolio of approximately 1,2001,100 registered patents and pending applications and extensive engineering and manufacturing process expertise. On September 1, 2020, we completed the previously announced sale of our Foundry Services Group business and its fabrication facility located in Cheongju known as “Fab 4,” marking a strategic shift in our operational focus to our standard products business. For a further description of the Foundry Services Group business, see “—Legacy Foundry Services Group Business” below. Our standard products business includes our Display Solutions and Power Solutions business lines. Our Display Solutions products provide panel display solutions to major suppliers of large and small rigid and flexible panel displays, and mobile,a wide range of applications including smartphones, TVs, automotive and IT applications and home appliances.such as monitors, notebook PCs, tablet PCs as well as AR/VRs. Our Power Solutions products include discrete and integrated circuit solutions for power management in communications, consumer, computing, servers, automotive, and industrial applications.
Our wide variety of analog and mixed-signal semiconductor products allow us to address multiple high-growth end markets and rapidly develop and introduce new products in response to market demands. Our design center and substantial manufacturing operations in Korea place us at the core of the global electronics device supply chain. We believe this enables us to quickly and efficiently respond to our customers’ needs, and allows us to better serve and capture additional demand from existing and new customers.
We have a long history of supplying and collaborating on product and technology development with leading innovators in the consumer electronics market. As a result, we have been able to strengthen our technology and develop products that are in high demand by our customers and end consumers. We sold approximately 400 distinct products in the year ended December 31, 20202022 with a substantial portion of our revenues derived from a concentrated number of customers.
Our business is largely driven by innovation in the consumer electronics markets and the growing adoption by consumers of worldwide of electronic devices for use in their daily lives. The consumer electronics market is large and growing rapidly, largely due to consumers increasingly accessing a wide variety of rich media content, such as high definition audio and video, mobile devices, televisions and games on advanced consumer electronic devices. Electronics manufacturers are continuously implementing advanced technologies in new generations of electronic devices using analog and mixed-signal semiconductor components, such as display drivers that enable display of high resolution images, encoding and decoding devices that allow playback of high definition audio and video, and power management semiconductors that increase power efficiency, thereby improving heat dissipation and extending battery life.
For the year ended December 31, 2020,2022, we generated total revenues of $507.1$337.7 million, net incomeloss of $345.0$8.0 million, operating loss of $5.2 million, Adjusted EBITDA of $52.9$19.5 million, Adjusted Operating Income of $41.6$4.1 million and Adjusted Net Income of $28.3$8.8 million. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this Report for an explanation of our use of Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income and a reconciliation to net income (loss) from continuing operationsand operating income (loss) prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”).
Our History
Our business was named “MagnaChip Semiconductor” when it was acquired from SK hynix Inc., formerly known as Hynix Semiconductor, Inc. (“SK hynix”), in October 2004. We refer to this acquisition as the “Original Acquisition.”
On March 10, 2011, we completed our initial public offering. In connection with our initial public offering, we converted from a Delaware limited liability company to a Delaware corporation.
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On December 30, 2020, we changed our name from “MagnaChip Semiconductor Corporation” to “Magnachip Semiconductor Corporation.”
Legacy Foundry Services Group Business
On September 1, 2020, we completed the sale of our Foundry Services Group business and our fabrication facility located in Cheongju, Korea (known as “Fab 4”) to Key Foundry Co., Ltd. This sale was part of a strategic shift in our operational focus to our standard products business. The Foundry Services Group business provided specialty analog and mixed signal foundry services mainly for fabless and Integrated Device Manufacturer semiconductor companies.
Our Products
Our Display Solutions line of products provide flat panel display solutions to major suppliers of large and small flat panel displays. These products include source and gate drivers and timing controllers that cover a wide range of flat panel displays used in mobile communications, automotives, entertainment devices, notebook PCs, monitors and liquid crystal display (LCD), organic light emitting diodes (OLED), and Micro light emitting diode (LED)(Micro LED) televisions. Our Display Solutions line of products support the industry’s most advanced display technologies, such as OLEDs, and low temperature polysilicon thin film transistor (LTPS TFT), as well as high-volume display technologies such as amorphous silicon thin film transistors
We expanded our business and market opportunity by establishing our Power Solutions product line in late 2007. We have introduced a number of power management semiconductor products, including discrete and integrated circuit solutions for power management in high-volume consumer applications. These products include metal oxide semiconductor field effect transistors (MOSFETs), insulated-gate bipolar transistors (IGBTs),
Market Opportunity
The semiconductor market is large and is expanding its applications. Growth in this market is being driven by consumers seeking to enjoy a wide variety of rich media content, such as high definition audio and video, mobile devices, televisions and games. Recently, industrial applications such as power suppliers,
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and video, and power management semiconductors that increase power efficiency, thereby improving heat dissipation and extending battery life. These advanced generations of consumer devices are growing faster than the overall electronics device market.
The user experience delivered by a consumer electronic device is substantially driven by the quality of the display, audio and video processing capabilities and power efficiency of the device. Analog and mixed-signal semiconductors enable and enhance these capabilities. Examples of these analog and mixed-signal
Requirements of Leading Electronic Devices Manufacturers
We believe our target customers view the following characteristics and capabilities as key differentiating factors among available analog and mixed-signal semiconductor suppliers:
• | Broad Offering of Differentiated Products with Advanced System-Level Features and Functions. Leading electronic devices manufacturers seek to differentiate their products by incorporating innovative semiconductor products that enable unique system-level functionality and enhance performance. These consumer electronics manufacturers seek to closely collaborate with semiconductor solutions providers that continuously develop new and advanced products, and technologies that enable state of the art features and functions, such as bright and thin displays, small form factor and energy efficiency. |
• | Fast Time-to-Market with New Products. As a result of rapid technological advancements and short product lifecycles, our target customers typically prefer suppliers who have a compelling pipeline of new products and capacity to leverage a substantial intellectual property and technology base to accelerate product design and manufacturing when needed. |
• | Ability to Deliver Cost Competitive Solutions. Electronics manufacturers are under constant pressure to deliver cost-competitive solutions. To accomplish this objective, they need strategic semiconductor suppliers that have the ability to provide system-level solutions, highly integrated products and a broad product offering at a range of price points and have the design and manufacturing infrastructure and logistical support to deliver cost competitive products. |
• | Focus on Delivering Highly Energy-Efficient Products. Consumers increasingly seek longer run-time, environmentally friendly and energy-efficient consumer electronic products. In addition, there is an increasing regulatory focus on reducing energy consumption of consumer electronic products. As a result of a global focus on more environmentally friendly products, our customers are seeking analog and mixed-signal semiconductor suppliers that have the technological expertise to deliver solutions that satisfy these ever increasing regulatory and consumer power efficiency demands. |
Our Competitive Strengths
Designing and manufacturing analog and mixed-signal semiconductors capable of meeting the evolving functionality requirements for electronics devices are challenging. In order to grow and succeed in the industry, we believe semiconductor suppliers must have a broad, advanced intellectual property portfolio, product design expertise, comprehensive product offerings and specialized manufacturing process technologies and capabilities. Our competitive strengths enable us to offer our customers solutions to solve their key challenges. We believe our strengths include:
• | Advanced Analog and Mixed-Signal Semiconductor Technology. Our long operating history, large patent portfolio, extensive engineering and manufacturing process expertise and analog and mixed-signal intellectual property allow us to leverage our technology and develop new products across multiple end markets. Our product development efforts are supported by a team of over 220 engineers as of the date of this Annual Report. Our platform allows us to develop and introduce new products quickly and integrate |
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numerous functions into a single product. For example, we were one of the first companies to introduce a commercial OLED display driver for mobile phones. |
• | Established Relationships and Close Collaboration with Leading Global Electronics Companies. We have a long history of supplying and collaborating on product and technology development with leading innovators in the consumer electronics market. Our close customer relationships have been built based on many years of close collaborative product development, which provides us with deep system-level knowledge and key insights into our customers’ needs. As a result, we are able to continuously strengthen our technology in areas of strategic interest for our customers and focus on those products that our customers and end consumers demand the most. |
• | Longstanding Presence in Asia and Proximity to Global Electronics Devices Supply Chain. Our presence in Asia facilitates close contact with our customers and fast response to their needs, and enhances our visibility into new product opportunities, markets and technology trends. Our design center and substantial manufacturing operations in Korea place us close to many of our largest customers and to the core of the global electronics devices supply chain. We have active applications, engineering, product design and customer support resources, as well as senior management and marketing resources, in geographic locations close to our customers. This allows us to strengthen our relationship with customers through better service, faster turnaround time and improved product design collaboration. We believe this also helps our customers to deliver products faster than their competitors and to solve problems more efficiently than would be possible with other suppliers. |
• | Broad Portfolio of Product Offerings Targeting Large, High-Growth Markets. We continue to develop a wide variety of analog and mixed-signal semiconductor solutions for multiple high-growth electronics device end markets. We believe our expanding product offerings allow us to provide additional products to new and existing customers and to cross-sell our products to our established customers. For example, we have leveraged our technology expertise and customer relationships to develop and grow power management solutions to customers. Our power management solutions enable our customers to increase system stability and improve heat dissipation and energy use, resulting in improved system efficiency and system cost savings for our customers, as well as environmental benefits. We have been able to sell these new products to our existing customers as well as expand our customer base. |
• | Highly Efficient Manufacturing Capabilities. Our manufacturing strategy is focused on optimizing our asset utilization across our display driver and power management products, which enables us to maintain the price competitiveness of our products through our low-cost operating structure and improve our operational efficiency. We believe the location of our primary manufacturing and research and development facilities in Asia and the relatively low need for ongoing capital expenditures provide us with a number of cost advantages. Since 2007, we had designed and manufactured OLED display driver ICs in our internal manufacturing facilities. As we expanded our design capabilities to products that require lower geometries unavailable at our existing manufacturing facilities, we began outsourcing manufacturing of certain OLED display driver ICs to external 12-inch foundries starting in the second half of 2015 and we have started outsourcing 8-inch wafer for OLED TV ICs after the sale of our fabrication facility located in Cheongju, Korea in 2020. This additional source of manufacturing is an increasingly important part of our supply chain management. By outsourcing manufacturing of OLED products to external foundries, we are able to adapt dynamically to changing customer requirements and address growing markets without substantial capital investments by us. |
Our Strategy
Our objective is to grow our business, cash flow and profitability and to continue strengthening our position in the semiconductor industry as a leading provider of analog and mixed-signal semiconductor products for high-volume markets. Our business strategy emphasizes the following key elements:
• | Increase Business with Existing Customers. We have a global customer base consisting of leading consumer electronics OEMs that sell into multiple end markets. We intend to continue to strengthen our |
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relationships with our customers by collaborating on critical design and product development in order to improve our design-win rates. We seek to increase our customer penetration by more closely aligning our product roadmap with those of our key customers and take advantage of our broad product portfolio, our deep knowledge of customer needs and existing relationships to sell more existing and new products. |
• | Broaden Our Customer Base. We expect to continue to expand our global customer base, particularly in China, Hong Kong, and Taiwan, which we collectively refer to as Greater China, and other high-growth geographies, to penetrate new accounts. In addition, we intend to introduce new products and variations of existing products to address a broader customer base. In order to broaden our market penetration, we are complementing our direct customer relationships and sales with an improved base of distributors, with a particular focus on the growth of our power management business. |
• | Drive Execution Excellence. We intend to improve our execution through a number of management initiatives, new processes for product development, customer service and personnel development. We expect these ongoing initiatives will contribute to improvement of our new product development and customer service as well as enhance our commitment to a culture of quick action and execution by our workforce. In addition, we have focused on improving our manufacturing efficiency during the past several years. |
• | Return on Capital Investments and Cash Flow Generation. We manufacture most of our Display Solutions products at external foundries. Through a strategic cooperation with external foundries, we are able to adapt dynamically to changing customer requirements and address growing markets without substantial capital investments. We manufacture our Power Solutions products by utilizing our in-house manufacturing facility and external foundry to address a broad portfolio of power products while we seek to maximize return on capital investments and our cash flow generation. We intend to keep our capital expenditures relatively low by maintaining our focus on specialty process technologies that do not require substantial investment in frequent upgrades to the latest manufacturing equipment. However, from time to time, we make special investments to enhance our manufacturing capabilities by investing in new equipment and expanding our facility, which we expect will have a positive impact on our future new product development and revenue, particularly during the period of global shortage of capacity. |
Our Technology
We continuously strengthen our advanced analog and mixed-signal semiconductor technology platform by developing innovative technologies and integrated circuit building blocks that enhance the functionality of electronics devices through brighter, thinner displays, enhanced image quality, smaller form factor and longer battery life. Our goal is to leverage our experience and development initiatives across multiple end markets and utilize our understanding of system-level issues our customers face to introduce new technologies that enable our customers to develop more advanced, higher performance products.
Our display technology portfolio includes building blocks for display drivers and timing controllers, processor and interface technologies, as well as sophisticated production techniques, such as
Expertise in ultra-high voltage (UHV), high voltage and deep trench BCDMOS process technologies, low power analog and mixed-signal design capabilities and packaging
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and IGBTs. We believe our system-level understanding of applications such as LCD televisions, smartphones, computing, and servers, automotive, and industrial applications will allow us to more quickly develop and customize power management solutions for our customers in these markets.
Products by Business Line
Our broad portfolio of products addresses multiple high-growth, consumer-focused end markets. A key component of our product strategy is to supply multiple related product offerings to each of the end markets that we serve.
Display Solutions
Display Driver Characteristics.
• | Resolution and Number of Channels. Resolution determines the level of detail displayed within an image and is defined by the number of pixels per line multiplied by the number of lines on a display. For large displays, higher resolution typically requires more display drivers for each panel. Display drivers that have a greater number of channels, however, generally require fewer display drivers for each panel and command a higher selling price per unit. Mobile displays, conversely, are typically single chip solutions designed to deliver a specific resolution. We cover resolutions ranging from VGA (640 x 480) to UHD (3840 x 2160). |
• | Color Depth. Color depth is the number of colors that can be displayed on a panel. For example, for TFT-LCD panels, 262 thousand colors are supported by 6-bit source drivers; 16 million colors are supported by 8-bit source drivers; and 1 billion colors are supported by 10-bit source drivers. |
• | Operational Voltage. Display drivers are characterized by input and output voltages. Source drivers typically operate at input voltages from 1.62 to 3.6 volts and output voltages between 9 and 18 volts. Gate drivers typically operate at input voltages from 1.62 to 3.6 volts and output voltages from 30 to 45 volts. Lower input voltage results in lower power consumption and electromagnetic interference (EMI). |
• | Gamma Curve. The relationship between the light passing through a pixel and the voltage applied to the pixel by the source driver is referred to as the gamma curve. The gamma curve of the source driver can correct some imperfections in picture quality in a process generally known as gamma correction. Some advanced display drivers feature up to three independent gamma curves to facilitate this correction. |
• | Driver Interface. Driver interface refers to the connection between the timing controller and the display drivers. Display drivers increasingly require higher bandwidth interface technology to address the larger data transfer rate necessary for higher definition images. The principal types of interface technologies are embedded clock point to point interface (EPI), mini-low voltage differential signaling (m-LVDS), unified standard interface (USI) and mobile industry processor interface (MIPI). |
• | Package Type. The assembly of display drivers typically uses COF, COG and COP package types. |
• | Large Display Solutions. We provide display solutions for a wide range of flat panel display sizes used in LCD TVs, OLED TVs, Micro LED TVs as well as IT applications such as monitors, notebook PCs, tablet PCs, automotives and public information displays. |
Our large display solutions include source and gate drivers and timing controllers with a variety of interfaces, voltages, frequencies and packages to meet customers’ needs. These products include advanced technologies such as high channel count, with products in mass production to provide up to 1,542 channels. Our large display solutions are designed to allow customers to cost-effectively meet the increasing demand for high resolution displays. We focushave focused extensively on reducing the die size of our large display drivers and other solutions products to reduce costs without having to migrate to smaller geometries. For example, we have
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implemented several solutions to reduce die size in large display drivers, such as optimizing design schemes and design rules and applying specific technologies that we have developed internally. We are currently focusing on growing display segments such as OLED TVs and automotive. We have recently introduced a number of new large display drivers with reduced die size.
The table below sets forth the features of our products, both in mass production and in customer qualification, which is the final stage of product development, for
Product | Key Features | Applications | ||
TFT-LCD | • 480 to 1,542 output channels • 6-bit 8-bit 10-bit • Output voltage ranging from 9V to 18V • Low power consumption and low EMI • COF package types • EPI, m-LVDS, | • LCD/LED TVs • Notebooks • LCD/LED monitors • Automotive |
TFT-LCD Gate Drivers | ||||||
• 272 to 960 output channels • Output voltage ranging from 30V to 45V • COF and COG package types | • Tablet PCs • LCD/LED TVs • Notebooks • Automotive | |||||
Timing Controllers | • Wide range of resolutions • EPI, m-LVDS, MIPI,USI-T interface technologies• Input voltage ranging from 1.6V to 3.6V | • Tablet PCs • Public information display | ||||
OLED Source Drivers | • 960 output channels • 10 bit (1 billion colors) • Output voltage: 18V • COF package type • EPI interface technology | • OLED TVs | ||||
Micro LED Drivers* | • • 10 bit (1 billion colors) • Output voltage: max 18V • COF package type • | • Micro LED TVs |
* | In customer qualification stage |
Mobile Display Solutions.
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will also support our power management product development initiatives, as we leverage our system level understanding of power efficiency. Our OLED driver ICs can support various configurations such as high resolution from FHD+(2,240x1,080)(2,880x1,284) to QHD+(3,120x1,440)(3,360x1,440), wide aspect ratio from 16:9 to 21:9 and flexible
The following table summarizes the features of our products, both in mass production and in customer qualification, which is the final stage of product development, for mobile displays:
Product | Key Features | Applications | ||
OLED | • Resolutions of HD720, WXGA, FHD, FHD+, QHD and QHD+ • Aspect ratio from 16:9 to 21:9 • Color depth of 1 billion • MIPI, eRVDS interface • Logic-based OTP • • Display data compression IP | • Smartphones • Game consoles • Digital still cameras • Tablet PCs • Virtual reality headsets • Automotive |
LTPS | ||||||
• Resolutions of VGA, WSVGA, WVGA and DVGA • Color depth of 16 million • MDDI, MIPI interface • Logic-based OTP • Separated gamma control | • Smartphones • Digital still cameras | |||||
a-Si | • Resolutions of WQVGA and HVGA • Color depth of 16 million • RSDS, MDDI, MIPI interface • CABC • Separated gamma control | • Mobile phones • Digital still cameras • Automotive |
Power Solutions
We develop, manufacture and market power management solutions for a wide range of
• | MOSFETs. Our MOSFETs include low-voltage from 12V to 30V, medium-voltage from 40V to 200V, high-voltage planar MOSFETs, 200V through 650V, and super junction MOSFETs, 500V through 900V. |
MOSFETs are used in applications to switch, shape or transfer electricity under varying power requirements. The key application segments are smartphones, mobile phones, wearable devices, LCD, LED, and UHD televisions, desktop PCs, notebooks, tablet PCs, servers, lighting and power supplies for consumer electronics automotive (electric vehicles) and industrial equipment. MOSFETs allow electronics manufacturers to achieve specific design goals of high efficiency and low standby power consumption. For
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example, computing solutions focus on delivering efficient controllers and MOSFETs for power management in VCORE, DDR and chipsets for audio, video and graphics processing systems.
• | IGBTs. Our IGBTs include 650V to 1200V field stop trench IGBTs. IGBTs are used in automotive and high power industrial applications, such as UPSs, power supplies, motor drives, solar inverters, welding machines and consumer appliances. |
• | AC-DC/DC-DC Converters. We offer AC-DC/DC-DC converters targeting mobile applications and high power applications like LCD, LED, and UHD televisions, notebooks, smartphones, mobile phones, set-top boxes and display modules. We expect our AC-DC/DC-DC converters will meet customer’s green power requirements by featuring wide input voltage ranges, high efficiency and small size. |
• | LED Drivers. LED backlighting drivers serve the fast-growing LCD and LED panel backlighting market for LCD and LED televisions, LCD monitors, digital signage, notebooks, smartphones and tablet PCs. Our products are designed to provide high efficiency and wide input voltage range, as well as pulse width modulation (PWM) dimming for accurate white LED dimming control. LED lighting drivers have a wide input voltage range applicable to incandescent bulb and fluorescent lamp replacement. |
• | Regulators. We also provide analog regulators for mobile, computing and consumer applications. Our products are designed for high efficiency and low power consumption in mobile applications. |
• | SSD PMICs. We also provide solid state drive power management integrated circuits (SSD PMICs) for the computing segment. Our product is designed for high frequency switching, high efficiency and pulse frequency modulation (PFM) function to reduce power consumption in low load converters. |
• | Logic PMICs. We also provide logic power management integrated circuits (PMICs) for organic light-emitting diode (OLED) display panel. Our PMICs provide optimized power to source driver, gate driver and timing controller (T-CON) of OLED display panel with multi-channel power block (boost converter, buck converter, Op-Amps and positive/negative LDOs.) |
Our power management solutions enable customers to increase system stability and improve heat dissipation and energy use, resulting in cost savings for our customers and consumers, as well as environmental benefits. Our
The following table summarizes the features of our products, both in mass production and in customer qualification, which is the final stage of product development:
Product | Key Features | Applications | ||
Low Voltage MOSFET | • Voltage options of 12V-30V • Advanced Trench MOSFET Process • High cell density • Advanced packages to enable reduction of PCB mounting area | • Smartphones, mobile phones, and wearable devices • Tablet PCs, Notebooks • Desktop PCs, Servers • LCD/LED TVs • Industrial applications • Automotive* |
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Product | Key Features | Applications | ||
Medium Voltage MOSFET | • Voltage options of 40V-200V • Advanced Trench MOSFET Process • High cell density • High system efficiency • Advanced packages to enable reduction of PCB mounting area | • e-Bikes and Motor controls • Battery Management Systems • Power tools and Servers • Energy Storage System • Other computing applications (Tablet PCs, Notebooks, Desktops) • Consumer applications (TV) • Industrial applications • Automotive | ||
High Voltage MOSFET | • Voltage options of 200V-650V • R2FET (rapid recovery) option to shorten reverse diode recovery time • Zener diode option for MOSFET protection for abnormal input • Advanced Planar MOSFET Process • Advanced packages to enable reduction of PCB mounting area | • Adaptors for tablet PC/mobile phone/smartphone • Power supplies • Lighting (ballast, HID, LED) • Industrial applications • LCD/LEDTVs | ||
Super Junction MOSFET | • Voltage options of 500V-900V • Low R DS(ON) • Epi stack process • Zener diode option for MOSFET protection for abnormal input • Advanced SJ MOSFET process • Advanced packages to enable reduction of PCB mounting area • Low power loss by high speed switching | • LCD/LED/UHD TVs • Lightings applications (ballast, HID, LED) • Smartphones • Power supplies • Servers and Telecom powers • Industrial applications • EV charging station* • On board charger* | ||
IGBTs | • Voltage options of 650V/1200V • Field Stop Trench IGBT • Current options from 15A to 100A | • Automotive • Solar inverters • Industrial applications • Consumer appliances |
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Product | Key Features | Applications | ||
AC-DC/DC-DCConverter | • Wide control range for high power application (>150W) • Advanced BCDMOS process • High Precision Voltage Reference • Very low startup current consumption • Fast load and line regulation • Accurate output voltage • OCP, SCP and thermal protections | • LCD/LED/UHD TVs • Power supplies |
• Smartphones • Mobile phones • Notebooks • Set-top boxes | ||||
LED Backlighting Drivers | • High efficiency, wide input • Advanced BCDMOS process | |||
voltage range • OCP, SCP, OVP and UVLO protections • Accurate LED current control and multi-channel matching • Programmable current limit, boost up frequency | • Tablet PCs • Notebooks • Smartphones • LED/UHD TVs • LED monitors | |||
Digital Controlled LED Driver | • Multi-channel constant current control • 12Bit gray scale with SPI | • Digital signage | ||
LED Lighting Drivers | • High efficiency, wide input • Simple solutions with external components fully integrated • Advanced high voltage BCDMOS process • Accurate LED current control and high power factor and low THB | • AC and DC LED lighting | ||
Regulators | • Single and multi-regulators • Low Noise Output regulators • Wide range of input voltage and various output current • CMOS and BCDMOS processes • LDO (Low Drop Out — Linear Regulator) | • Smartphones and Mobile phones • Notebooks • Computing | ||
SSD PMIC | • High current buck • PFM function • High frequency switching • High efficiency • High integration technology • Small QFN package | • Computing applications |
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Product | Key Features | Applications | ||
Logic PMIC | • High current boost • Integrated pass transistor • LDO • 3channel high current buck • Negative Charge Pump • 2channel buffer Op-Amp. • Tiny Wafer Level CSP | • Notebooks • Tablet PCs |
* | In customer qualification stage |
Sales and Marketing
We focus our sales and marketing strategy on continuing to grow and leverage our existing relationships with leading consumer electronics OEMs, while expanding into industrial and automotive end markets. We believe our close collaboration with customers allows us to align our product and technology development with our customers’ existing and future needs. Because our customers often service multiple end markets, our product sales teams are organized by customers within the major geographies. We believe this facilitates the sale of products that address multiple
We sell our products through a direct sales force and a network of authorized agents and distributors. We have strategically located our sales and technical support offices near our customers. Our direct sales force consists primarily of representatives
distributors in Korea, Japan, Greater China, Taiwanthe U.S., Europe and Europe.the Asia Pacific region. For the years ended December 31, 2020, 20192022, 2021 and 2018,2020, we derived 75%48%, 75%62% and 71%75% of net sales from our standard products business through our direct sales force, respectively, and 25%52%, 25%38% and 29%25% of net sales from our standard products business through our network of authorized agents and distributors, respectively.
Customers
We sell our Display Solutions and Power Solutions products to consumer, computing, communication, automotive and industrial electronics OEMs, original design manufacturers and electronics manufacturing services companies, as well as subsystem designers. For the years ended December 31, 2020, 20192022, 2021 and 2018,2020, our ten largest customers accounted for 87.6%69.4%, 89.5%79.8% and 84.9%87.6% of net sales from our standard products business, respectively. Our arrangements with and reliance on key customers, particularly customers for our display products, may make it less practicable to pursue certain opportunities with other potential new and existing customerscustomers. For the year ended December 31, 2022, sales to Samsung Display represented 19.0% of net sales from our standard products business and 80.2% of net sales from our Display Solutions business line, and SAMT represented 13.8% of net sales from our standard products business and 18.1% of net sales from our Power Solutions business line. For the year ended December 31, 2021, sales to Samsung Display represented 42.5% of net sales from our standard products business and 89.7% of net sales from our Display Solutions business line, and SAMT represented 10.4% of net sales from our standard products business and 19.8% of net sales from our Power Solutions business line. For the year ended December 31, 2020, sales to Samsung Display represented 56.2% of net sales from our standard products business and 87.5% of net sales from our Display Solutions division’s net sales.business line. For the year ended December 31, 2019, sales to Samsung Display represented 53.8%2022, we recorded revenues of net sales$10.4 million from our standard products businesscustomers in the U.S. and 84.5%$291.5 million from all foreign countries, of our Display Solutions division’s net sales.which 42.2% was from Greater China and 36.1% was from Korea. For the year ended December 31, 2018, sales to Samsung Display represented 34.1%2021, we recorded revenues of net sales$6.1 million from our standard products businesscustomers in the U.S. and 56.6%$427.0 million from all foreign countries, of our Display Solutions division’s net sales,which 47.2% was from Greater China, 26.6% from Korea and LG Display represented 23.4% of net sales18.9% from our standard products business and 38.9% of our Display Solutions division’s net sales.Vietnam. For the year ended December 31, 2020, we recorded revenues of $5.1 million from customers in the USU.S. and $460.4 million from all foreign countries, of which 61.9% was from Greater China, 23.1% from Korea and 10.8% from Vietnam. For the year ended December 31, 2019, we recorded revenues of $2.4 million from customers in the US and $482.4 million from all foreign countries, of which 68.2% was from Greater China and 27.5% from Korea. For the year ended December 31, 2018, we recorded revenues of $2.0 million from customers in the US and $423.5 million from all foreign countries, of which 51.2% was from Greater China and 41.6% from Korea. All information pertaining to the geographic source of revenues is with respect to the geographic location to which our products are billed.
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Intellectual Property
As of December 31, 2020,2022, our portfolio of intellectual property assets included approximately 1,044961 registered patents and 158144 pending patent applications. Approximately 548433 and 5452 of our patents and pending applications, respectively, are novel in that they are not a foreign counterpart of an existing patent or patent application. Because we file patents in multiple jurisdictions, we additionally have approximately 496528 registered patents and 10492 pending applications that relate to identical technical claims in our base patent portfolio. Our patents expire at various times approximately over the next 19 years. While these patents are in the aggregate important to our competitive position, we do not believe that any single registered or pending patent is material to us.
See “Item 1A. Risk Factors—Risks Related to Our Business—Our ability to compete successfully and achieve future growth will depend, in part, on our ability to protect our intellectual property, proprietary technology and
National Core Technology
Under the Act on Prevention of Leakage and Protection of Industrial Technology of Korea (the “ITA”), any export (including various means of outflow such as sale or transfer outside Korea) of technology designated as “national core technology” (“National Core Technology” or “NCT”) by the Korean Ministry of Trade, Industry and Energy (the “MOTIE”) requires the filing of a prior-report with, and the acceptance of the same by, the MOTIE. Any such export of NCT without the acceptance of the prior report with the MOTIE may be subject to corrective orders by the relevant authorities, and failure to comply with such corrective orders may potentially result in criminal liabilities.
The Notification Regarding Designation of National Core Technologies issued by the MOTIE was amended on July 14, 2021 to add certain technologies to the list of National Core Technology designated by the MOTIE, and the amended list includes the design technology for OLED Display Driver IC for driving display panels (“OLED DDI”). In the ordinary course of business, our Korean subsidiary may provide certain information relating to its products, including OLED DDI, to customers, suppliers or vendors, and such disclosure of information may be subject to the NCT-related regulations under the ITA, and therefore the MOTIE’s acceptance of prior-reports. Since the amendment of the foregoing NCT list in July 2021, we have filed prior-reports with the MOTIE for the export of our OLED DDI product-related information to certain overseas vendors that manufacture our products, and all such reports have thus far been accepted by the MOTIE.
Competition
We operate in highly competitive markets characterized by rapid technological change and continually advancing customer requirements. Although no one company competes with us in all of our product lines, we face significant competition in each of our market segments. Our competitors include other independent and captive manufacturers and designers of analog and mixed-signal integrated circuits, including display driver and power management semiconductor devices.
We compete based on design experience, manufacturing capabilities, the ability to satisfy customer needs from the design phase through the shipping of a completed product, length of design cycle and quality of technical support and sales personnel. Our ability to compete successfully will depend on internal and external variables, both within and outside of our control. These variables include the timeliness with which we can develop new products and technologies, product performance and quality, manufacturing yields, capacity availability, customer service, pricing, industry trends and general economic trends.
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Human Capital
Our worldwide workforce consisted of 880897 employees (full- and part-time) as of December 31, 2020,2022, of which 194202 were involved in sales, marketing, general and administrative, 222 in research and development (including 9087 with advanced degrees), 4244 in quality, reliability and assurance, and 422429 in manufacturing (comprised of 4446 in engineering and 378383 in operations, maintenance and others). As of December 31, 2020, 395 employees, or approximately 45% of our workforce, were represented by the Magnachip Semiconductor Labor Union. Our employees leverage their extensive expertise in engineering, design and process to accelerate the advancement of technology and be leaders in our industry. We pride our company on being a great workplace where employees from diverse backgrounds can reach their full potential.
Labor Unions
As disclosed in previous reports, we have a labor union at our Korean subsidiary (the “First Union”). On September 16, 2021, the formation of a second labor union at our Korean subsidiary (the “Second Union”) was approved by local authorities (the First Union and the Second Union are collectively referred to as the “Magnachip Semiconductor Labor Unions”). Both the First Union and the Second Union are members of a supervisory association named “Federation of Korean Trade Unions.” The First Union represents member employees who are factory workers and the Second Union represents member employees who are office workers, in both cases at our Korean subsidiary.
As of December 31, 2022, of the 866 employees at our Korean subsidiary, 387 were represented by the First Union, and 98 employees were represented by the Second Union. Approximately 56% of our employees at our Korean subsidiary were represented by the Magnachip Semiconductor Labor Unions.
See “Item 1A. Risk Factors—Risks Related to Our Business—If we encounter future labor problems, we may fail to deliver our products and services in a timely manner, which would adversely affect our revenues and profitability.”
Values and Culture
Our core values represent a commitment to building an environment of trust with our employees, customers, investors and the communities in which we operate. Through our values and culture, we strive to shape a better future not only for ourselves and our customers, but for humanity as a whole. At Magnachip, we strive to foster effective collaboration by respecting different perspectives, giving and receiving constructive feedback, and supporting one another.
Inclusion and Diversity
We support all employees, regardless of gender, gender identity or expression, age, veteran status, race, ethnicity, national origin, religion or disability. We place great importance on inclusion and diversity within the workplace. Anworkplace, and believe that an inclusive and diverse culture creates a happier, more relaxed work environment.
Labor and Ethics
Magnachip strives to provide and maintain a working environment where management and employees are happy and treated with dignity and respect. Magnachip adheres to human rights and labor standards of international labor organizations, such as the United Nations and the International Labor Organization. Magnachip prohibits all forms of discrimination based on gender, race, nationality, religion and age to ensure all employees work in a safe and fair environment.
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Empowering Great Talent
We offer a variety of offline training programs, including courses in the areas of design, engineering and technology, as well as courses at different job levels and leadership education. We also offer a number of online training programs, including in the areas of management/leadership and business skills such as presentation, negotiation, reporting, Information Technology and foreign language, which allow employees to improve their capabilities without time and space constraints. Every year, a majority of our employees are required to complete certain educational programs in the areas of information security, industrial safety and health, and sexual harassment prevention.
We believe the foundation of Magnachip is our research and development (“R&D”) talent. To ensure R&D technical professionals continue to advance their skills and knowledge, we have technology committees that attend regular seminars and conduct periodic research. We have a reward program for exemplary research.
We also offer a Vision Seminar, which is led by our CEO and is designed to share our company’s vision, strategy and the management’s key messages to employees. Additionally, the CEO and management regularly communicate with employees through CEO letters and town hall meetings.
Compensation and Benefits
We strive to reward employees with competitive compensation based on contribution and performance. We periodically evaluate market practices for compensation and benefits, including with respect to job function, role and responsibility, job level and region, and regularly review whether our compensation levels and distribution methods are fair and equitable. Additionally, we have long- and
We offer various employee benefits under the company philosophy that ensuring employees enjoy a happier life with their families is as critical as promoting their own health and well-being. All employees and their family members have access to annual medical checkup programs. Employees also have access to other benefits such as personal pensions, housing assistance, medical reimbursement plans and educational assistance programs.
Safety and Wellness
During and after the
Environmental
We are subject to a variety of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate, governing, among other things, air emissions, wastewater discharges, the generation, use, handling, storage and disposal of, and exposure to, hazardous substances (including asbestos) and waste, soil and groundwater contamination and employee health and safety. These laws and regulations are complex, change frequently and have tended to become more stringent over time. Since 2015, our Korean subsidiary has been subject to a new set of greenhouse gas emissions regulation, the Korean Emissions Trading Scheme, or
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Another example is the newly reinforced regulations on chemicals under Chemicals Control Act and
Raw Materials
We use processes that require specialized raw materials that are generally available from a limited number of suppliers. We continue to attempt to qualify additional suppliers for our raw materials. The Securities and Exchange Commission (the “SEC”), as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, has adopted new disclosure regulations for public companies that manufacture products containing certain minerals that are mined from the Democratic Republic of Congo and adjoining countries. These “conflict minerals” are commonly found in metals used in the manufacture of semiconductors. The implementation of these new requirements could adversely affect the sourcing, availability and pricing of metals used in the manufacture of our products. See “Item 1A. Risk Factors—Risks Related to Our Business—Compliance with new regulations regarding the use of “conflict minerals” could limit the supply and increase the cost of certain raw materials used in manufacturing our products.”
Available Information
Our principal executive office is located at: c/o MagnaChipMagnachip Semiconductor, S.A.Ltd., 1, Allée Scheffer,
Information About Our Executive Officers
The following table sets forth certain information regarding our current executive officers:
Name | Age | Position | ||||
Young-Joon (YJ) Kim | Director and Chief Executive Officer | |||||
Shin Young | Chief Financial Officer | |||||
Theodore Kim | Chief Compliance Officer, General Counsel and Secretary | |||||
Woung Moo Lee | General Manager of Worldwide Sales | |||||
Chan Ho Park | General Manager of Power Solutions |
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Young-Joon (YJ) Kim, Director,Board of Directors, Member of the Risk Committee and Chief Executive Officer.
Shin Young Soo Woo,Park, Chief Financial Officer
Theodore Kim, Chief Compliance Officer, General Counsel and Secretary.
Woung Moo Lee, General Manager of Worldwide Sales.
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Electronics Co., Ltd. until 2009. Mr. Lee received the prestigious “Proud Samsung Employee Award” in 2005 and holds a B.S. degree in Electron.
Chan Ho Park
Item 1A. Risk Factors
You should carefully consider the risk factors set forth below as well as the other information contained in this Report. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. As a result, the price of our common stock could decline and you could lose all or part of your investment in our common stock. Additional risks and uncertainties not currently known to us or those currently viewed by us to be immaterial may also materially and adversely affect our business, financial condition or results of operations.
Risk Factors Summary
The following is a summary of the risk factors included herein.
• | We manufacture our products based on our estimates of customer demand, and if our estimates are incorrect, our financial results could be negatively impacted. |
• | A significant portion of our sales comes from a relatively limited number of customers, the loss of which could adversely affect our financial results. |
• | The average selling prices of our semiconductor products have at times declined rapidly and will likely do so in the future, which could harm our revenue and gross profit. |
• | We are subject to risks associated with currency fluctuations, and changes in the exchange rates of applicable currencies could impact our results of operations. |
• | Global shortages in manufacturing capacities could interrupt or negatively affect our operations, increase cost to manufacture and negatively impact our results of operations. |
• | Expanded trade restrictions may limit our ability to sell to certain customers. |
• | Recent changes in international trade policy and the imposition and threats of international tariffs, including tariffs applied to goods traded between the United States and China, could materially and adversely affect our business and results of operations. |
• | Our Korean subsidiary has been designated as a regulated business under Korean environmental law, and such designation could have an adverse effect on our financial position and results of operations. |
• | Our compliance with the Serious Accidents Punishment Act (the “SAPA”) could require significant expenditures and management time and expose us to liability for violations. |
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• | Our business depends on international customers, suppliers and operations in Asia, and as a result we are subject to regulatory, operational, financial and political risks, which could adversely affect our financial results. |
• | We cannot guarantee that our share repurchase program will be successfully consummated, or that it will enhance shareholder value, and share repurchases could affect the price of our common stock. |
• | Provisions in our charter documents and Delaware Law may make it difficult for a third party to acquire us and could depress the price of our common stock. |
• | We have not historically paid dividends and do not currently have any dividend or distribution policy, and therefore, investors may need to rely on sales of their common stock as the only way to realize any future gains on their investments. |
Risks Related to Our Business
We operate in the highly cyclical semiconductor industry, which is subject to significant downturns that may negatively impact our results of operations.
The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change and price erosion, evolving technical standards, short product life cycles (for semiconductors and for the
We base our planned operating expenses in part on our expectations of future revenue, and a significant portion of our expenses is relatively fixed in the short term. If revenue for a particular quarter is lower than we expect, we likely will be unable to proportionately reduce our operating expenses for that quarter, which would harm our operating results for that quarter.
Our restructuring activities and dispositions of assets and businesses could result in lost business and other costs that could have a material adverse effect on our results of operations.
From time to time, we may choose to sell assets, restructure business operations, shut down manufacturing lines or otherwise dispose of assets and businesses as part of management’s strategies to better align our product offerings with market demands and our customers’ needs. In connection with these activities, we face risks that we will disrupt service to our customers, lose business and incur significant costs related to such activities. These risks include potential damage to our reputation and customer relationships if we are unable to effectively transition such customer relationships to other production lines or products or if we cannot effectively manage our supplier and vendor relationships during such activities. In addition, we may also face claims or costs
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associated with transitioning or eliminating certain employee positions and modifying or terminating vendor relationships in connection with those exit activities.
If we fail to develop new products and technologies or enhance our existing products in order to react to rapid technological change and market demands, our business will suffer.
Our industry is subject to constant and rapid technological change and product obsolescence as customers and competitors create new and innovative products and technologies. Products or technologies developed by other companies may render our products or technologies obsolete or noncompetitive, and we may not be able to access advanced process technologies, including smaller geometries, or to license or otherwise obtain essential intellectual property required by our customers.
We must develop new products and enhance our existing products to meet rapidly evolving customer requirements. We design products for customers that continually require higher performance and functionality at lower costs. We must, therefore, continue to enhance the performance and functionality of our products. The development process for these advancements is lengthy and requires us to accurately anticipate technological changes and market trends. Developing and enhancing these products is uncertain and can be time-consuming, costly and complex.
Customer and market requirements can change during the development of a product. There is a risk that these developments and enhancements will be late, fail to meet customer or market specifications or not be competitive with products from our competitors that offer comparable or superior performance and functionality. Any new products, such as our expanding line of power management solutions, or product enhancements, may not be accepted in new or existing markets. Our business will suffer if we fail to develop and introduce new products or product enhancements on a timely and cost-effective basis.
We manufacture our products based on our estimates of customer demand, and if our estimates are incorrect, our financial results could be negatively impacted.
We make significant decisions, including determining the levels of business that we will seek and accept, production schedules, component procurement commitments, personnel needs and other resource requirements, based on our estimates of customer demand and expected demand for and success of their products. The short-term nature of commitments by many of our customers and the possibility of rapid changes in demand for their products reduces our ability to estimate accurately future customer demand for our products. On occasion, customers may require rapid increases in supply, which can challenge our production resources and reduce margins. We may not have sufficient capacity at any given time to meet our customers’ increased demand for our products. Conversely, downturns in the semiconductor industry have caused and may in the future cause our customers to reduce significantly the amount of products they order from us. Because many of our costs and operating expenses are relatively fixed, a reduction in customer demand would decrease our results of operations, including our gross profit.
Our customers may cancel their orders, reduce quantities or delay production, which would adversely affect our margins and results of operations.
We generally do not obtain firm, long-term purchase commitments from our customers. Customers may cancel their orders, reduce quantities or delay production for a number of reasons. Cancellations, reductions or delays by a significant customer or by a group of customers, which we have experienced as a result of periodic downturns in the semiconductor industry, or failure to achieve design-wins, have affected and may continue to affect our results of operations adversely. These risks are exacerbated because many of our products are customized, which hampers our ability to sell excess inventory to the general market. We may incur charges resulting from the
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Our fab manufacturing depends on high utilization of our manufacturing capacity, a reduction of which could have a material adverse effect on our business, financial condition and the results of our operations.
An important factor in our success is the extent to which we are able to utilize the available capacity in our fabrication facility. As many of our costs are fixed, a reduction in capacity utilization, as well as changes in other factors, such as reduced yield or unfavorable product mix, could reduce our profit margins and adversely affect our operating results. A number of factors and circumstances may reduce utilization rates, including periods of industry overcapacity, the inability to source sufficient materials necessary for manufacturing, low levels of customer orders, operating inefficiencies, strategic evaluations and decisions by our Board related our overall business, divisions and business lines, mechanical failures and disruption of operations due to expansion or relocation of operations, power interruptions and fire, flood or other natural disasters or calamities. The potential delays and costs resulting from these factors and circumstances could have a material adverse effect on our business, financial condition and results of operations.
A significant portion of our sales comes from a relatively limited number of customers, the loss of which could adversely affect our financial results.
Historically, we have relied on a limited number of customers for a substantial portion of our total revenue. If we were to lose key customers or if customers cease to place orders for our high-volume products, particularly our display products, our financial results could be adversely affected. In addition, our arrangements with and reliance on key customers may make it less practicable to pursue certain opportunities with other potential new and existing customers. For the years ended December 31, 2020, 20192022, 2021 and 2018,2020, our ten largest customers accounted for 87.6%69.4%, 89.5%79.8% and 84.9%87.6% of net sales from our standard products business, respectively. For the year ended December 31, 2022, sales to Samsung Display represented 19.0% of net sales from our standard products business and 80.2% of net sales from our Display Solutions business line, and SAMT represented 13.8% of net sales from our standard products business and 18.1% of net sales from our Power Solutions business line. For the year ended December 31, 2021, sales to Samsung Display represented 42.5% of net sales from our standard products business and 89.7% of net sales from our Display Solutions business line, and SAMT represented 10.4% of net sales from our standard products business and 19.8% of net sales from our Power Solutions business line. For the year ended December 31, 2020, sales to Samsung Display represented 56.2% of net sales from our standard products business and 87.5% of our Display Solutions division’s net sales. For the year ended December 31, 2019, sales to Samsung Display represented 53.8% of net sales from our standard products business and 84.5% of our Display Solutions division’s net sales. For the year ended December 31, 2018, sales to Samsung Display represented 34.1% of net sales from our standard products business and 56.6% of our Display Solutions division’s net sales, and LG Display represented 23.4% of net sales from our standard products business and 38.9% of our Display Solutions division’s net sales.line. Significant reductions in sales to any of these customers, especially our few largest customers, the loss of other major customers or a general curtailment in orders for our high-volume products within a short period of time could adversely affect our business.
The average selling prices of our semiconductor products have at times declined rapidly and will likely do so in the future, which could harm our revenue and gross profit.
The semiconductor products we develop and sell are subject to rapid declines in average selling prices. From time to time, we have had to reduce our prices significantly to meet customer requirements, and we may be required to reduce our prices in the future. This would cause our gross profit to decrease. Our financial results will suffer if we are unable to offset any reductions in our average selling prices by increasing our sales volumes, reducing our costs or developing new or enhanced products on a timely basis with higher selling prices or gross profit.
Our industry is highly competitive, and our ability to compete could be negatively impacted by a variety of factors.
The semiconductor industry is highly competitive and includes hundreds of companies, a number of which have achieved substantial market share within both our product categories and end markets. Current and prospective customers for our products and services evaluate our capabilities against the merits of our
competitors. Some of our competitors are well established as independent companies and have substantially
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greater market share and manufacturing, financial, research and development and marketing resources than we do. We also compete with emerging companies that are attempting to sell their products in certain of our end markets and with the internal semiconductor design and manufacturing capabilities of many of our significant customers. We expect to experience continuing competitive pressures in our markets from existing competitors and new entrants.
Any consolidation among our competitors could enhance their product offerings and financial resources, further enhancing their competitive position. Our ability to compete will depend on a number of factors, including the following:
our ability to offer cost-effective and high quality products and services on a timely basis using our technologies;
our ability to accurately identify and respond to emerging technological trends and demand for product features and performance characteristics;
our ability to continue to rapidly introduce new products that are accepted by the market;
our ability to adopt or adapt to emerging industry standards;
the number and nature of our competitors and competitiveness of their products and services in a given market;
entrance of new competitors into our markets; and
our ability to enter the highly competitive power management market.
Many of these factors are outside of our control. In the future, our competitors may replace us as a supplier to our existing or potential customers, and our customers may satisfy more of their requirements internally. As a result, we may experience declining revenues and results of operations.
Changes in demand for consumer electronics in our end markets can impact our results of operations.
Demand for our products will depend in part on the demand for various consumer electronics products, in particular, mobile phones and multimedia devices, digital televisions, flat panel displays, mobile PCs and digital cameras, which in turn depends on general economic conditions and other factors beyond our control. If our customers fail to introduce new products that employ our products or component parts, demand for our products will suffer. To the extent that we cannot offset periods of reduced demand that may occur in these markets through greater penetration of these markets or reduction in our production and costs, our sales and gross profit may decline, which would negatively impact our business, financial condition and results of operations.
If we fail to achieve design-wins for our semiconductor products, we may lose the opportunity for sales to customers for a significant period of time and be unable to recoup our investments in our products.
We expend considerable resources on winning competitive selection processes, known as design-wins, to develop semiconductor products for use in our customers’ products. These selection processes are typically lengthy and can require us to incur significant design and development expenditures. We may not win the competitive selection process and may never generate any revenue despite incurring significant design and development expenditures. Once a customer designs a semiconductor into a product, that customer is likely to continue to use the same semiconductor or enhanced versions of that semiconductor from the same supplier across a number of similar and successor products for a lengthy period of time due to the significant costs associated with qualifying a new supplier and potentially redesigning the product to incorporate a different semiconductor. If we fail to achieve initial design-wins in a customer’s qualification process, we may lose the opportunity for significant sales to that customer for a number of products and for a lengthy period of time. This may cause us to be unable to recoup our investments in our semiconductor products, which would harm our business.
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We have lengthy and expensive
The cycle time from the design stage to mass production for some of our products is long and requires the investment of significant resources with many potential customers without any guarantee of sales. Our
Research and development investments may not yield profitable and commercially viable products, and thus will not necessarily result in increases in revenues for us.
We invest significant resources in our research and development. Our research and development efforts, however, may not yield profitable or commercially viable products. During each stage of research and development, there is a substantial risk that we will have to abandon a potential product that is no longer marketable and in which we have invested significant resources. In the event we are able to develop viable new products, a significant amount of time will have elapsed between our investment in the necessary research and development effort and the receipt of any related revenues.
We face numerous challenges relating to executing our growth strategy, and if we are unable to execute our growth strategy effectively, our business and financial results could be materially and adversely affected.
Our growth strategy is to leverage our advanced analog and mixed-signal technology platform, continue to innovate and deliver new products, increase business with existing customers, broaden our customer base, aggressively grow our power business, and drive execution excellence. If we are unable to execute our growth strategy effectively, we may not be able to take advantage of market opportunities, execute our business plan or respond to competitive pressures. Moreover, if our allocation of resources does not correspond with future demand for particular products, we could miss market opportunities and our business and financial results could be materially and adversely affected.
We are subject to risks associated with currency fluctuations, and changes in the exchange rates of applicable currencies could impact our results of operations.
Historically, a portion of our revenues and greater than the majority of our operating expenses and costs of sales have been denominated in
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U.S. dollar as a substantial portion of
From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. Our Korean subsidiary enters into foreign currency forward and zero cost collar contracts in order to mitigate a portion of the impact of USU.S. dollar-Korean won exchange rate fluctuations on our operating results. These foreign currency forward and zero cost collar contracts typically require us to sell specified notional amounts in USU.S. dollars and provide us the option to sell specified notional amounts in USU.S. dollars during successive months to our counterparty in exchange for Korean won at specified exchange rates. Obligations under these foreign currency forward and zero cost collar contracts must be cash collateralized if our exposure exceeds certain specified thresholds. These forward and zero cost collar contracts may be terminated by the counterparty in a number of circumstances, including if our long-term debt rating falls below
The loss of our key employees would materially adversely affect our business, and we may not be able to attract or retain the technical or management employees necessary to compete in our industry.
Our key executives have substantial experience and have made significant contributions to our business, and our continued success is dependent upon the retention of our key management executives. The loss of such key personnel would have a material adverse effect on our business. In addition, our future success depends on our ability to attract and retain skilled technical and managerial personnel. We do not know whether we will be able to retain all of these employees as we continue to pursue our business strategy. The loss of the services of key employees, especially our key design and technical personnel, or our inability to retain, attract and motivate qualified design and technical personnel, could have a material adverse effect on our business, financial condition and results of operations. This could hinder our research and product development programs or otherwise have a material adverse effect on our business.
If we encounter future labor problems, we may fail to deliver our products and services in a timely manner, which would adversely affect our revenues and profitability.
As of December 31, 2020, 3952022, 485 employees, or approximately 45%56% of our employees, were represented by the Magnachip Semiconductor Labor Union.Unions. We can offer no assurance that any issues with the labor union and other employees will be resolved favorably for us in the future, that we will not experience work stoppages or other labor problems in future years or that we will not incur significant expenses related to such issues.
We may incur costs to engage in future business combinations or strategic investments, and we may not realize the anticipated benefits of those transactions.
As part of our business strategy, we may seek to enter into business combinations, investments, joint ventures and other strategic alliances with other companies in order to maintain and grow revenue and market presence as well as to provide us with access to technology, products and services. Any such transaction would be accompanied by risks that may harm our business, such as difficulties in assimilating the operations, personnel and products of an acquired business or in realizing the projected benefits, disruption of our ongoing business,
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potential increases in our indebtedness and contingent liabilities and charges if the acquired company or assets
The failure to achieve acceptable manufacturing yields could adversely affect our business.
The manufacturing of semiconductors involves highly complex processes that require precision, a highly regulated and sterile environment and specialized equipment. Defects or other difficulties in the manufacturing process can prevent us from achieving acceptable yields in the manufacturing of our products, which could lead to higher costs, a loss of customers or delay in market acceptance of our products. Slight impurities or defects in the photomasks used to print circuits on a wafer or other factors can cause significant difficulties, particularly in connection with the production of a new product, the adoption of a new manufacturing process or any expansion of our manufacturing capacity and related transitions. We may also experience manufacturing problems in achieving acceptable yields as a result of, among other things, transferring production to other facilities, upgrading or expanding existing facilities or changing our process technologies. Yields below our target levels can negatively impact our gross profit and may cause us to eliminate underperforming products.
We rely on a number of independent subcontractors and the failure of any of these independent subcontractors to perform as required could adversely affect our operating results.
A substantial portion of our net sales are derived from semiconductor devices assembled in packages or on film. The packaging and testing of semiconductors require technical skills and specialized equipment. For the portion of packaging and testing that we outsource, we use subcontractors located in Korea China, Taiwan and Thailand.China. We rely on these subcontractors to package and test our devices with acceptable quality and yield levels, and, while we specify quality standards, we are not able to directly oversee their
We cooperate with independent foundries to produce certain advanced technology Display Solutions and Power Solutions products, and the failure of such independent foundries to satisfy our demand could materially disrupt our business.
We use independent foundry services for certain of our OLED Display Solutions products and Power Solutions products. Silicon wafer production at these facilities is allocated solely by our vendors and beyond our direct control. Therefore, any disruption in wafer supply formfrom these vendors could have a material impact on our revenue and results of operations.
Global shortages in manufacturing capacities could interrupt or negatively affect our operations, increase cost to manufacture and negatively impact our results of operations.
Increases in demand for semiconductor products have resulted in a global shortage of manufacturing capacities.capacity over the prior two years. As a result, we may experience increases in the costs to manufacture our products and may not be able to manufacture and deliver all of the orders placed by our customers. We are not able to foresee when the current shortage of manufacturing capacity will subside. If we are unable secure manufacturing capacities from our current subcontractors, our ability to deliver our products to our customers may be negatively impacted. Also, our subcontractors may increase their fees, which would result in an increase in our
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manufacturing costs,
We depend on successful parts and materials procurement for our manufacturing processes, and a shortage or increase in the price of these materials could interrupt our operations and result in a decline of revenues and results of operations.
We procure materials and electronic and mechanical components from international sources and original equipment manufacturers. We use a wide range of parts and materials in the production of our semiconductors, including silicon, processing chemicals, processing gases, precious metals and electronic and mechanical components, some of which, such as silicon wafers, are specialized raw materials that are generally only available from a limited number of suppliers. If demand increases or supply decreases for any reason, the costs of our raw materials could significantly increase. For example, worldwide supplies of silicon wafers, an important raw material for the semiconductors we manufacture, werehave been constrained in recent years due to an increased demand for silicon. We from time to time may enter into multi-year agreements, which specify future quantities and pricing of materials to be supplied by the vendors of these materials; however, this option may not be available to us and we cannot assure that supply increases will match demand increases. If we cannot obtain adequate materials in a timely manner or on favorable terms for the manufacture of our products, revenues and results of operations will decline.
Compliance with regulations regarding the use of “conflict minerals” could limit the supply and increase the cost of certain raw materials used in manufacturing our products.
The SEC, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, adopted disclosure regulations for public companies that manufacture products containing certain minerals that are mined from the Democratic Republic of Congo and adjoining countries and procedures pertaining to a manufacturer’s efforts regarding the source of such minerals. These “conflict minerals” are commonly found in metals used in the manufacture of semiconductors. Manufacturers are also required to disclose their efforts to prevent the sourcing of such minerals and metals produced from them. The implementation of these requirements could adversely affect the sourcing, availability and pricing of metals used in the manufacture of our products. We may also incur additional costs to comply with the disclosure requirements, including costs related to determining the source of any of the relevant minerals used in our products. We may also face difficulties in satisfying customers who may require that our products be certified as free of “conflict materials,” which could harm our relationships with these customers and lead to a loss of revenue.
We face warranty claims, product return, litigation and liability risks and the risk of negative publicity if our products fail.
Our semiconductors are incorporated into a number of end products, and our business is exposed to product return, warranty and product liability risk and the risk of negative publicity if our products fail. Although we maintain insurance for product liability claims, the amount and scope of our insurance may not be adequate to cover a product liability claim that is asserted against us. In addition, product liability insurance could become more expensive and difficult to maintain and, in the future, may not be available on commercially reasonable terms, or at all.
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We could suffer adverse tax and other financial consequences as a result of changes in, or differences in the interpretation of, applicable tax laws, includingor the recently enactedadoption of new U.S. or international tax reform legislation in the United States.
Our company’s organizational structure was created in part based on certain interpretations and conclusions regarding various tax laws, including withholding tax and other tax laws of applicable jurisdictions. Our interpretations and conclusions regarding tax laws, however, are not binding on any taxing authority and, if these interpretations and conclusions are incorrect, if our business were to be operated in a way that rendered us ineligible for tax exemptions or caused us to become subject to incremental tax, or if the authorities were to change, modify or have a different interpretation of the relevant tax laws, we could suffer adverse tax and other financial consequences, and the anticipated benefits of our organizational structure could be materially impaired. Our company’s organizational structure and other tax positions are subject to review by tax authorities in the local and other jurisdictions where we operate our business.
Our provision for income taxes is subject to volatility and could be negatively affected by earnings being (i) lower than anticipated in jurisdictions that have lower statutory tax rates or (ii) higher than anticipated in jurisdictions that have higher statutory tax rates. In December 2017, H.R. 1, originally known as the Tax Cuts and Jobs Act, was enactedaddition, our provision for income taxes could be negatively affected by changes in the US (the “Tax Reform”). The Tax Reform reduces the US federal statutory rate to 21.0% from 35.0% effective January 1, 2018. The Tax Reform contains several key provisions that affectvaluation of our assessment of deferred taxes, which include the remeasurement of deferred taxes, recognition of liabilities for taxes on mandatory deemed repatriation and certain other foreign income, and reassessment of the realizability of deferred tax assets. For further information regarding the impact of the Tax Reform, see “Item 8. Financial Statementsassets and Supplementary Data—Notesliabilities, changes to Consolidated Financial Statements—Note 17. Income Taxes” included elsewhereglobal intangible low-tax income tax laws, transfer pricing adjustments, or changes in this Report.
Additional changes in the U.S. tax regime or in how U.S. multinational corporations are taxed on foreign income, including changes in how existing tax laws are interpreted or enforced, could adversely affect our business, financial condition or results of operations. For example, the Organization for Economic Cooperation and Development (OECD) has recommended changes to numerous long-standing international tax principles through its base erosion and profit shifting (BEPS) project. These changes, to the extent adopted, may increase tax uncertainty, result in higher compliance costs and adversely affect our provision for income taxes, results of operations and/or cash flow.
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (the “IRA”), which, among other things, implements a 15% alternative minimum tax on the adjusted financial statement income of large corporations with average annual financial income exceeding $1 billion, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. The IRA provisions are effective for tax years beginning after December 31, 2022. On December 12, 2022, the European Union member states agreed to implement the OECD’s Pillar 2 global corporate minimum tax rate of 15% on companies with revenues of at least EUR 750 million, which will be effective for fiscal years beginning on January 1, 2024. Additionally, South Korea became one of the first countries to enact minimum tax rules. At this time, we do not anticipate that changes in the tax laws will have a material impact to our consolidated tax provision for the year ending December 31, 2022 or December 31, 2023. We will continue to monitor as new information and guidance becomes available.
We are also subject to regular reviews, examinations and audits by the IRS and other taxing authorities, including the Korean National Tax Service, with respect to income and
Expanded trade restrictions imposed by the United States may limit our ability to sell to certain customers.
On August 17, 2020, the U.S. Department of Commerce expanded the scope of export restrictions as applied to products directed to Huawei and its affiliates listed on the Bureau of Industry and Security’s Entity List (collectively,
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(collectively, “Huawei”). While prior restrictions had minimal effect on our ability to supply to customers, the newly expanded restrictions would limit our ability to supply to a variety of customers who we believe incorporate our products to those customers’ products directly or indirectly sold to Huawei. As of the date of this Annual Report, we are uncertain on the seriousness of the restrictions’ impact or duration and the future trajectory of our business from customers who directly or indirectly supply Huawei with products that incorporate our products. For export of some of our products, we have successfully obtained the necessary export licenses, and if exports of other products require export licenses due to the restrictions, we will consider applying for the necessary export licenses to continue to sell to the affected customers. Although we have thus far
Additionally, the U.S. has published significant changes to U.S. export control regulations with respect to Russia and China, and we anticipate additional changes to export control regulations in the future. For example, the U.S. government has implemented controls on advanced computing ICs, computer commodities that contain such ICs, and certain semiconductor manufacturing items, as well as controls on transactions involving items for supercomputer and semiconductor manufacturing end-users. The new controls expand the scope of foreign-produced items subject to license requirements for certain entities on the U.S. government’s Entity List. Future changes in the U.S. export control regulations, including changes in the enforcement and scope of such regulations, may create delays in the introduction of our products or services in international markets or could prevent our customers with international operations from deploying our products or services globally. In some cases, such changes could prevent the export or import of our products, which could have a material impact on our future results of operations and financial condition.
Expanded trade restrictions imposed by South Korea may limit our ability to sell to certain customers or engage in any potential strategic opportunities.
Under the ITA, any export (including various means of outflow, such as sale or transfer outside Korea) of National Core Technology by MOTIE requires the filing of a prior-report with, and the acceptance of the same by, the MOTIE. Any such export of NCT without the acceptance of the prior-report with the MOTIE may be subject to corrective orders by the relevant authorities, and failure to comply with such corrective orders may potentially result in criminal liabilities.
The Notification Regarding Designation of National Core Technologies issued by the MOTIE was amended on July 14, 2021 to add certain technologies to the list of National Core Technology designated by the MOTIE, and the amended list includes the design technology for OLED DDI. In the ordinary course of business, our Korean subsidiary may provide certain information relating to its products, including OLED DDI, to customers, suppliers or vendors, and such disclosure of information may be subject to the NCT-related regulations under the ITA, and therefore the MOTIE’s acceptance of prior reports. Since the amendment of the foregoing NCT list in July 2021, we have filed prior-reports with the MOTIE for the export of our OLED DDI product-related information to certain overseas vendors that manufacture our products, and all such reports have thus far been accepted by the MOTIE.
There is no assurance, however, that any future prior-reports for the export of our product-related information will be accepted by the MOTIE. In the event that any future prior-report is not accepted, we may be unable to continue our business with the overseas customers, suppliers or vendors, including the manufacturing and delivery of our OLED DDI products.
In addition, in the event that there is any M&A transaction with respect to our Korean subsidiary that results in non-Korean ownership of 50% or more, or exertion of control over the appointment of officers/management
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by a non-Korean person or entity as the largest shareholder, a prior-report with and the acceptance by the MOTIE is required under the ITA. There is no assurance that any report for an M&A transaction involving non-Korean acquirers or investors will be accepted by the MOTIE when such transaction is pursued in the future.
Recent changes in international trade policy and the imposition and threats of international tariffs, including tariffs applied to goods traded between the United States and China, could materially and adversely affect our business and results of operations.
Since the beginning of 2018, there have been increasing public threats and, in some cases, legislative or executive action, from U.S. and foreign leaders regarding instituting tariffs against foreign imports of certain materials. More specifically, since March of 2018, the U.S. and China have applied tariffs to certain of each other’s exports. The institution of trade tariffs globally, and between the U.S. and China specifically, may negatively impact the affected countries’ economic conditions, which could negatively affect demand for our products in those countries and materially and adversely affect our business and results of operations of our customers serving the affected markets. Additionally, it is currently unclear how the recent change in presidential administration in the U.S. may further impact international trade tariffs going forward. Imposition of tariffs could increase costs of the
Our ability to compete successfully and achieve future growth will depend, in part, on our ability to protect our intellectual property, proprietary technology and
We attempt to protect our intellectual property rights, both in the USU.S. and in foreign countries, through a combination of patent, trademark, copyright, mask works and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. Because of the differences in foreign trademark, patent and other laws concerning proprietary rights, our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the US.U.S. In particular, the validity, enforceability and scope of protection of intellectual property in China, where we derive a significant portion of our net sales, and certain other countries where we derive net sales, are uncertain and still evolving and historically have not protected, and may not protect in the future, intellectual property rights to the same extent as do the laws and enforcement procedures in the US.U.S. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition.
We seek to protect our proprietary technologies and
We rely on our trademarks, trade names, and brand names to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks. We cannot assure you that our trademark applications will be approved. Third parties may also oppose our trademark applications, or
Our ability to compete successfully depends on our ability to operate without infringing the proprietary rights of others. We have no means of knowing what patent applications have been filed until they are published.
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In addition, the semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. We may need to file lawsuits to enforce our patents or intellectual property rights, and we may need to defend against claimed infringement of the rights of others. Any litigation could result in substantial costs to us and divert our resources, and we cannot assure you that we will prevail. Any claims of intellectual property infringement or misappropriation against use, even those without merit, could require us to:
pay substantial damages or indemnify customers or licensees for damages they may suffer if the products they purchase from us or the technology they license from us violate the intellectual property rights of others;
stop our manufacture, use, sale or importation of the accused products;
redesign, reengineer or rebrand our products, if feasible;
• | expend significant resources to develop or acquire non-infringing technologies; |
discontinue processes; or
obtain licenses to a third party’s intellectual property.
There can be no assurance that we would be successful in such development or acquisition or that such licenses would be available under reasonable terms, or at all.
We license certain intellectual property from third parties. The termination of key third-party licenses relating to the use of intellectual property in our products and our design processes such as our agreements with Silicon Works Co., Ltd. and ARM Limited, would materially and adversely affect certain areas of our business.
We are subject to many environmental laws and regulations that could affect our operations or result in significant expenses.
We are subject to a variety of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate, governing, among other things, air emissions, wastewater discharges, the generation, use, handling, storage and disposal of, and exposure to, hazardous substances (including asbestos) and wastes, soil and groundwater contamination and employee health and safety. These laws and regulations are complex, change frequently and have tended to become more stringent over time. Among them is the Act on Remediation and Compensation for Damages arising from Environmental Contamination which came into effect in Korea on January 1, 2016 and provides for strict liability of business entities in violation of the act and alleviates the burden of proof for the damaged party. Further, under the amendment to the Act on the Control and Aggravated Punishment of Environmental Offenses that becomes effective on November 27, 2020, certain environmental offenses such as illegally emitting specified hazardous air pollutants or emitting air pollutants without necessary permits will be subject to penalties of up to 5% of the sales amount generated from the relevant business. Moreover, to effectively respond to environmental crimes, on November 14, 2022, a joint investigation team was established, consisting of experts from both national and local governments, including the prosecutor’s office, the Ministry of Environment. As a result, we have increased potential exposure to liability for environmental contaminations that might have existed in the past or would arise in the future. There can be no assurance that we have been, or will be, in compliance with all such laws and regulations or that we will not incur material costs or liabilities in connection with these laws and regulations in the future. The adoption of new environmental, health and safety laws, the failure to comply with new or existing laws, or issues relating to hazardous substances could subject us to material liability (including substantial fines or penalties), impose the need for additional capital equipment or other process requirements upon us, curtail our operations or restrict our ability to expand operations.
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Our Korean subsidiary has been designated as a regulated business under Korean environmental law, and such designation could have an adverse effect on our financial position and results of operations.
Since 2015, our Korean subsidiary has been subject to
Furthermore, the Korean legislature enacted the Framework Act on Carbon Neutrality and Green Growth for Responding to Climate Change (the “Carbon Neutrality Framework Act”) on September 24, 2021. The Carbon Neutrality Framework Act aims to reduce greenhouse gas emissions by more than 35% by 2030 (compared to 2018) and proclaims the achievement of carbon neutrality by 2050 as a national vision. The Carbon Neutrality Framework Act is significant in that it legislates carbon neutrality and greenhouse gasreduction objectives, and enables the central administrative agencies, local governments and public institutions to implement various measures towards such objectives.On March 25, 2022, the Enforcement Decree of the Carbon Neutrality Framework Act (the “Enforcement Decree”) was enacted. The Enforcement Decree aims to provide details required for the execution of items prescribed under the Carbon Neutrality Framework Act. The key provisions of the Enforcement Decree include those setting the mid- to long-term greenhouse gasreduction goal at 40% and implementing the climate change impact assessment scheme. It is anticipated that the Carbon Neutrality Framework Act, which aims to promote the harmonious development of the economy and the environment in conjunction with active greenhouse gasreduction measures, will serve as the foundation for the government’s climate change response policy going forward.
Our compliance with the Serious Accidents Punishment Act (the “SAPA”) could require significant expenditures and management time and expose us to liability for violations.
Enacted on January 26, 2021 the SAPA was enactedand effective as of January 27, 2022 in Korea, whichthe SAPA will impose enhanced liability exposure for workplace accidents. The legislative goal of the SAPA is to prevent serious accidents by prescribing punishments and punitive damages liability for business owners or responsible management personnel who have violated safety and health measures in the event of such serious accidents (serious industrial accidents and serious civil accidents). Since the law applies to businesses in Korea with 50 or more full-time employees starting from January 27, 2022, our Korean subsidiary is expected to bebecomes subject to the law after the effective date. According to the SAPA, if a serious occupational accident occurs that results in at least one deceased person, at least two persons wounded for six months or more, or at least three persons suffering from occupational diseases within a one year period, if the “business owners or responsible management personnel” of the relevant business place is found to have failed to perform its “obligation to secure safety and health,” that person may be subject to imprisonment for up to 7 year or a fine of up to KRW 100 million (in case of death, imprisonment for not less than 1 year or a fine of not less than KRW 1 billion). Additionally, if there was negligence of the company in giving due attention and supervision to prevent such accident, the company will be
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subject to a fine up to KRW 5 billion under joint penalty provisions. Relevant responsible management personnel will also be required to spend more time, effort and cost to comply with the SAPA and perform the necessary additional duties imposed by the law to ensure compliance.
We may need additional capital in the future, and such capital may not be available on acceptable terms or at all, which would have a material adverse effect on our business, financial condition and results of operations.
We may require more capital in the future from equity or debt financings to fund operating expenses, such as research and development costs, finance investments in equipment and infrastructure, acquire complementary businesses and technologies, and respond to competitive pressures and potential strategic opportunities. If we raise additional funds through further issuances of equity or other securities convertible into equity, our existing stockholders could suffer significant dilution, and any new shares we issue could have rights, preferences or privileges senior to those of the holders of our common stock. There can be no assurance that any additional equity or debt financing would be available to us, or if available, that such financing would be on favorable terms to us. Accordingly, if we are unable to obtain additional capital or our business does not generate sufficient cash flows from operating activities to fund our working capital needs and planned capital expenditures, and our cash reserves are depleted, we may need to take various actions, such as
Our business depends on international customers, suppliers and operations in Asia, and as a result we are subject to regulatory, operational, financial and political risks, which could adversely affect our financial results.
We rely on, and expect to continue to rely on, suppliers, subcontractors and operations located primarily in Asia. As a result, we face risks inherent in international operations, such as unexpected changes in regulatory requirements, tariffs and other market barriers, political, social and economic instability, adverse tax consequences, war, civil disturbances and acts of terrorism, public health issues (including viral outbreaks such as
Our business, results of operations and financial condition and prospects may be materially and adversely affected by the recentpandemic.
As a virus causing potentially deadly respiratory tract infections, which has spread rapidly and enveloped mostresult of COVID-19, including the world, is a global public health crisis. On March 11, 2020, the World Health Organization characterized the
These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners. The disruptions to our operations caused by the
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other alternative work arrangements. Also, some suppliers of materials used in the production of our products may have been or will be more severely impacted by
The impactfull extent to which COVID-19, or any future pandemic, epidemic or outbreak of the
Tensions with North Korea could have an adverse effect on us and the market value of our shares.
Relations between South Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future
events. In particular, in recent years, there have been heightened security concerns stemming from North Korea’s nuclear weapon and long-range missile programs and increased uncertainty regarding North Korea’s actions and possible responses from the international community.
North Korea’s economy also faces severe challenges, and any adverse economic developments may further aggravate social and political tensions within North Korea.
Although we do not derive any revenue from, nor sell any products in, North Korea, any future increase in tensions between South Korea and North Korea that may occur, for example, if North Korea experiences a leadership crisis, high-level contacts between South Korea and North Korea break down, or military hostilities occur, could have a material adverse effect on the South Korean economy and on our business, financial condition, results of operations and the market value of our common stock.
We may be subject to disruptions, breaches or cyber-attacks of our secured networks and information technology systems that could damage our reputation, harm our business, expose us to liability and materially adversely affect our results of operations.
In the ordinary course of our business, we collect and store sensitive data, including IP and other proprietary information about our business and that of our customers, suppliers and business partners. Secure maintenance, processing and transmission of this information is critical to our operations and business strategy. We may be subject to disruptions, breaches or cyber-attacks of our secured networks and information technology systems caused by illegal hacking, criminal fraud or impersonation, computer viruses, acts of vandalism or terrorism or employee error, and our security measures or those of any third party service providers we use may not detect or prevent such security breaches. We may incur significant costs to eliminate or alleviate cybersecurity breaches and vulnerabilities, which could be significant, and our efforts to protect against such breaches or vulnerabilities may not be successful and could result in system interruptions that may materially impede our sales, manufacturing, distribution, finance or other critical functions. Any such compromise of our information security could also result in the unauthorized publication of our confidential business or proprietary information or that of other parties with which we do business, an interruption in our operations, the unauthorized transfer of cash or
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other assets, the unauthorized release of customer or employee data or a violation of privacy or other laws in the jurisdictions in which we operate. Any of the foregoing could irreparably damage our reputation and business and/or expose us to material monetary liability, which could have a material adverse effect on our results of operations.
You may not be able to bring an action or enforce any judgment obtained in United States courts, or bring an action in any other jurisdiction, against us or our subsidiaries or our directors, officers or independent auditors that are organized or residing in jurisdictions other than the United States.
Most of our subsidiaries are organized or incorporated outside of the USU.S. and some of our directors and executive officers as well as our independent auditors are organized or reside outside of the US.U.S. Most of our and our subsidiaries’ assets are located outside of the USU.S. and in particular, in Korea. Accordingly, any judgment obtained in the USU.S. against us or our subsidiaries may not be collectible in the US.U.S. As a result, it may not be possible for you to effect service of process within the USU.S. upon these persons or to enforce against them or us court judgments obtained in the USU.S. that are predicated upon the civil liability provisions of the federal securities laws of the USU.S. or of the securities laws of any state of the US.U.S. In particular, there is doubt as to the enforceability in Korea or any other jurisdictions outside the US,U.S., either in original actions or in actions for enforcement of judgments of USU.S. courts, of civil liabilities predicated on the federal securities laws of the USU.S. or the securities laws of any state of the US.
We are a holding company and depend on the business of our subsidiaries to make payments to us.
We are a holding company with no independent operations of our own. Our subsidiaries conduct substantially all of the operations necessary to fund our obligations. Our ability to pay dividends or to make
their earnings;
covenants contained in any debt agreements to which we may then be subject, including any debt agreements of our subsidiaries;
covenants contained in other agreements to which we or our subsidiaries are or may become subject;
business and tax considerations; and
applicable law, including any restrictions under Korean law that may be imposed on Magnachip Koreaour Korean subsidiary that would restrict its ability to make payments on intercompany loans from MagnaChip Semiconductor B.V.our Dutch subsidiary.
We cannot assure that the operating results of our subsidiaries at any given time will be sufficient to make distributions or other payments to us.
We may at times need to incur impairment, restructuring and other restructuring related charges, which could materially affect our results of operations and financial condition.
During industry downturns and for other reasons, we may need to record impairment, restructuring or other restructuring related charges. In the future, we may need to record additional impairment charges or to further restructure our business or incur additional restructuring charges, any of which could have a material adverse effect on our results of operations or financial condition.
We are subject to litigation risks, which may be costly to defend and the outcome of which is uncertain.
All industries, including the semiconductor industry, are subject to legal claims, with and without merit, that may be particularly costly and which may divert the attention of our management and our resources in general.
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We are involved in a variety of legal matters, most of which we consider routine matters that arise in the normal course of business. These routine matters typically fall into broad categories such as those involving customers, employment and labor and intellectual property. Even if the final outcome of these legal claims does not have a material adverse effect on our financial position, results of operations or cash flows, defense and settlement costs can be substantial. Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding could have a material effect on our business, financial condition, results of operations or cash flows.
The price of our common stock may be volatile and you may lose all or a part of your investment.
The trading price of our common stock might be subject to wide fluctuations. Factors, some of which are beyond our control, that could affect the trading price of our common stock may include:
actual or anticipated variations in our results of operations from quarter to quarter or year to year;
announcements by us or our competitors of significant agreements, technological innovations or strategic alliances;
changes in recommendations or estimates by any securities analysts who follow our securities;
addition or loss of significant customers;
recruitment or departure of key personnel;
changes in economic performance or market valuations of competing companies in our industry;
price and volume fluctuations in the overall stock market;
market conditions in our industry, end markets and the economy as a whole;
subsequent sales of stock and other financings; and
litigation, legislation, regulation or technological developments that adversely affect our business.
In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation often has been instituted against the public company. Regardless of its outcome, this type of litigation could result in substantial costs to us and a likely diversion of our management’s attention. You may not receive a positive return on your investment when you sell your shares, and you could lose some or the entire amount of your investment.
We cannot guarantee that our share repurchase program will be successfully consummated, or that it will enhance shareholder value, and share repurchases could affect the price of our common stock.
On December 21, 2021, the Board of Directors authorized us to repurchase up to $75.0 million of our outstanding common stock and we entered into an accelerated stock repurchase agreement (the “ASR Agreement”) with JPMorgan Chase Bank, National Association (“JPM”) to repurchase an aggregate of $37.5 million of our common stock. Pursuant to the terms of the ASR Agreement, we paid JPM $37.5 million in cash and received an initial delivery of 994,695 shares of our common stock. Upon final settlement of the ASR Agreement, we received an additional 1,031,576 shares of common stock from JPM. On August 31, 2022, the Board of Directors authorized an expansion of our previously announced stock repurchase program from $75 million to $87.5 million of our common stock. The remaining $50 million of the expanded $87.5 million program was planned to be repurchased in the open market or through privately negotiated transactions. In connection with the repurchase program, we established a stock trading plan with Oppenheimer & Co. Inc. in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. This share repurchase program could affect the price of our common stock, increase volatility and diminish our cash reserves. The IRA enacted in August 2022 imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The total taxable value of shares repurchased is reduced by the fair market
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value of any newly issued shares during the taxable year. We are assessing the potential impact of the stock repurchase excise tax. Based on our preliminary assessment, we do not expect a material impact on our overall share repurchase program or our consolidated financial statements.
See “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 13. Stockholders’ Equity and Stock-Based Compensation” for more information.
Significant ownership of our common stock by certain stockholders could adversely affect our other stockholders.
The concentration of ownership of our common stock by certain stockholders may limit the ability of other stockholders to influence corporate matters and, as a result, we may take actions that our public stockholders do not view as beneficial. For example, ourany concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could cause the market price of our common stock to decline or prevent our stockholders from realizing a premium over the market price for their shares of our common stock.
Under our certificate of incorporation, our
Provisions in our charter documents and Delaware Law may make it difficult for a third party to acquire us and could depress the price of our common stock.
Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. Among other things, our certificate of incorporation and bylaws:
authorize our Board of Directors to issue, without stockholder approval, preferred stock with such terms as the Board of Directors may determine;
prohibit action by written consent of our stockholders;
prohibit any person other than our Board of Directors, the chairman of our Board of Directors, our Chief Executive Officer or holders of at least 25% of the voting power of all then outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors to call a special meeting of our stockholders; and
specify advance notice requirements for stockholder proposals and director nominations.
In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law (the “DGCL”), regulating corporate takeovers and which has an anti-takeover effect with respect to transactions not approved in advance by our Board of Directors, including discouraging takeover attempts that might result in a premium over the market price for shares of our common stock. In general, those provisions prohibit a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless:
the transaction is approved by the board of directors before the date the interested stockholder attained that status;
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or
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• | on or after such date, the business combination is approved by the board of directors and authorized at a meeting of stockholders, and not by written consent, by at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder. |
In general, DGCL Section 203 defines a business combination to include the following:
any merger or consolidation involving the corporation and the interested stockholder;
any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
In general, DGCL Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by any such entity or person.
A Delaware corporation may opt out of this provision by express provision in its original certificate of incorporation or by amendment to its certificate of incorporation or bylaws approved by its stockholders. However, we have not opted out of, and do not currently intend to opt out of, this provision.
We have not historically paid dividends and do not currently have any dividend or distribution policy, and therefore, investors may need to rely on sales of their common stock as the only way to realize any future gains on their investments.
We have not historically paid cash dividends and do not currently have any dividend or distribution policy..policy. Any determination to pay dividends in the future will be at the discretion of our Board of Directors. Accordingly, unless the Board implements a future dividend or distribution policy, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Our manufacturing operations take place in a single fabrication facility located in Korea in Gumi. Our facility has a capacity of approximately 31,00036,000 eight-inch equivalent wafers per month. We manufacture wafers utilizing geometries ranging from 0.35 to 0.50 microns. The Gumi facility has one main building with 41,022 square meters devoted to manufacturing, testing and packaging.
In addition to our fabrication facility in Gumi, we lease facilities in Cheongju and Seoul, Korea. Each of these facilities includes administration, sales and marketing and research and development functions. We lease sales and marketing offices through our subsidiaries in several other countries.
The ownership of our wafer manufacturing assets is an important component of our business strategy. Maintaining manufacturing control enables us to develop proprietary, differentiated products and results in
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higher production yields, as well as shortened design and production cycles. We believe our facilities are suitable and adequate for the conduct of our business for the foreseeable future and that we have sufficient production capacity to service our business as currently contemplated without significant capital investment.
All of our assembly, test and packaging services for our Display Solutions business and all of such services for our Power Solutions business are outsourced with the balance handled
Item 3. Legal Proceedings
We are involved in a variety of legal matters, most of which we consider routine matters that arise in the normal course of business. These routine matters typically fall into broad categories such as those involving customers, employment and labor and intellectual property. Intellectual property litigation and infringement claims, in particular, could cause us to incur significant expenses or prevent us from selling our products. We are currently not involved in any legal proceedings that we believe would have a material adverse effect on our business, financial condition or results of operations.
See also “Item 1A. Risk Factors” and “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 19” in this Report for additional information.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is listed on the New York Stock Exchange under the symbol “MX.”
Stock Performance Graph
The graph and table below compare the cumulative total stockholder return of our common shares with the cumulative total return of the S&P 500 Index and the Philadelphia Semiconductor Index (PHLX) from December 31, 201529, 2017 (the last trading day before the beginning of our fifth preceding fiscal year) through December 31, 2020.30, 2022. The graph assumes that $100 was invested on December 31, 201529, 2017 in our common shares and in each index and that any dividends were reinvested. No cash dividends have been declared on our common shares during the five-year period ended December 31, 2020.
Comparison of Cumulative Total Return*
Among Magnachip Semiconductor Corporation, the S&P 500 Index and the PHLX
* | The stock performance included in this graph is not necessarily indicative of future stock performance. |
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Total Return to Stockholders (Including Reinvestment of Dividends)
Indexed Returns
Company/Index | Base Period 12/31/2015 | 12/30/2016 | 12/29/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | ||||||||||||||||||
Magnachip Semiconductor Corporation | 100 | 117.20 | 188.09 | 117.39 | 219.47 | 255.58 | ||||||||||||||||||
S&P 500 Index | 100 | 109.54 | 130.81 | 122.65 | 159.39 | 183.77 | ||||||||||||||||||
Philadelphia Semiconductor Index | 100 | 136.62 | 188.86 | 174.11 | 278.78 | 421.34 |
Company/Index | Base Period 12/29/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | 12/30/2022 | ||||||||||||||||||
Magnachip Semiconductor Corporation | 100 | 62.41 | 116.68 | 135.88 | 210.75 | 94.37 | ||||||||||||||||||
S&P 500 Index | 100 | 93.76 | 121.85 | 140.49 | 178.27 | 143.61 | ||||||||||||||||||
Philadelphia Semiconductor Index | 100 | 92.19 | 147.61 | 223.10 | 314.93 | 202.08 |
Holders
The approximate number of record holders of our outstanding common stock as of February 15, 202110, 2023 was 70. This number does not include beneficial owners for whom shares are held by nominees in street name.
Stock-Based Compensation
For information on securities authorized for issuance under our equity compensation plans, see Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Dividends
We have not historically paid any cash dividends on our common stock. Our Board of Directors continuously evaluates our capital allocation strategy and liquidity targets, but has not currently implemented any dividend or distribution policy. Any determination to pay dividends in the future will be at the discretion of our Board of Directors.
Issuer Purchases of Equity Securities
The following table shows the monthly activity related to our repurchases of common stock for the quarter ended December 31, 2022.
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | Approximate dollar value of Shares that may yet be Purchased under the Plans or Programs (in thousands)(1) | ||||||||||||
October 2022 | 403,823 | $ | 10.24 | 403,823 | $ | 42,625 | ||||||||||
November 2022 | 314,041 | $ | 9.65 | 314,041 | $ | 39,195 | ||||||||||
December 2022 | 193,143 | $ | 8.83 | 193,143 | $ | 37,489 | ||||||||||
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Total | 911,007 | $ | 9.74 | 911,007 | $ | 37,489 | ||||||||||
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(1) | On August 31, 2022, the Company’s Board of Directors authorized an expansion of the Company’s previously announced stock repurchase program from $75 million to $87.5 million of the Company’s common stock. The Company has already repurchased shares worth $37.5 million under the program through an accelerated stock repurchase agreement on December 21, 2021 with JPMorgan Chase Bank, National Association. The remaining $50.0 million of the expanded $87.5 million program will be repurchased in the open market or through privately negotiated transactions. In connection with the repurchase program, the Company has established a stock trading plan with Oppenheimer & Co. Inc. in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. |
See “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 13. Stockholders’ Equity and Stock-Based Compensation” in this Report for a description of the Accelerated Stock Repurchase Program.
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Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the audited consolidated financial statements, together in each case with the related notes, included elsewhere in this Report. This discussion and analysis contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under the heading “Risk Factors” and elsewhere in this Report. We have reclassified certain prior
The following section generally discusses our financial condition and results of operations for our fiscal year amountsended December 31, 2022 (“fiscal year 2022”) compared to our fiscal year ended December 31, 2021 (“fiscal year 2021”). A discussion regarding our financial condition and results of operations for fiscal year 2021 compared to our fiscal year ended December 31, 2020 (“fiscal year 2020”) can be found in connection with discontinued operations to conform to the current year’s presentation to reflect the divestiturePart II, Item 7 of our Foundry Services Group businessAnnual Report on Form 10-K for fiscal year 2021, filed with the Securities and Fab 4. Unless otherwise stated, information in this section relates to our continuing operations. The consolidated statements of cash flows have not been adjusted to separately disclose cash flows related to discontinued operations.
Overview
We are a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, IoT applications, consumer, computing, industrial and automotive applications. We provide technology platforms for analog, mixed-signal, power, high voltage,
Our standard products business includes our Display Solutions and Power Solutions business lines.
Our Display Solutions line of products providesprovide flat panel display solutions to major suppliers of large and small flat panel displays. These products include source and gate drivers and timing controllers that cover a wide range of flat panel displays used in mobile communications, automotives, entertainment devices, IT applications such as monitors, notebook PCs, monitorstablet PC and TVs applied with liquid crystal display (LCD), organic light emitting diodes (OLED), and Micro light emitting diode (LED) televisions. Our Display Solutions products support the industry’s most advanced display technologies, such as OLEDs, and low temperature polysilicons thin film transistor (LTPS TFT), as well as high-volume display technologies such as amorphous silicon thin film transistors
Our Power Solutions business line produces power management semiconductor products including discrete and integrated circuit solutions for power management in communications, consumer, communications, computing, industrialservers, automotive, and automotiveindustrial applications. These products include metal oxide semiconductor field effect transistors (MOSFETs), insulated-gate bipolar transistors (IGBTs),
Our wide variety of analog and mixed-signal semiconductor products combined with our mature technology platform allow us to address multiple high-growth end markets and rapidly develop and introduce new products and services in response to market demands. Our design center and substantial manufacturing operationsoperation in
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To maintain and increase our profitability, we must accurately forecast trends in demand for electronics devices that incorporate semiconductor products we produce. We must understand our customers’ needs as well as the likely end market trends and demand in the markets they serve. We must also invest in relevant research and development activities and purchase necessary materials on a timely basis to meet our customers’ demand while maintaining our target margins and cash flow.
The semiconductor markets in which we participate are highly competitive. The prices of our products tend to decrease regularly over their useful lives, and such price decreases can be significant as new generations of products are introduced by us or our competitors. We strive to offset the impact of declining selling prices for existing products through cost reductions and the introduction of new products that command selling prices above the average selling price of our existing products. In addition, we seek to manage our inventories and manufacturing capacity so as to mitigate the risk of losses from product obsolescence.
Demand for our products and services is driven by overall demand for communications, IoT, consumer industrial and automotiveindustrial products and can be adversely affected by periods of weak consumer and enterprise spending or by market share losses by our customers. In order to mitigate the impact of market volatility on our business, we are diversifyingcontinually strive to diversify our portfolio of products, customers, and target applications. We also expect that new competitors will emerge in these markets that may place increased pressure on the pricing for our products and services. While we believe we are well positioned competitively to compete in these markets and against these new competitors as a result of our long operating history, existing manufacturing capacity and our worldwide customer base, if we are not effective in competing in these markets, our operating results may be adversely affected.
Net sales for our standard products business are driven by design wins in which we are selected by an electronics original equipment manufacturer (OEM) or other potential customer to supply its demand for a particular product. A customer will often have more than one supplier designed in tointo multi-source components for a particular product line. Once we have design wins and the products enter into mass production, we often specify the pricing of a particular product for a set period of time, with periodic discussions and renegotiations of pricing with our customers. In any given period, our net sales depend heavily upon the
In contrast to completely fabless semiconductor companies, our internal manufacturing capacity provides us with greater control over certain manufacturing costs and the ability to implement process and production improvements for our internally manufactured products, which can favorably impact gross profit margins. Our internal manufacturing capacity also allows for better control over delivery schedules, improved consistency over product quality and reliability and improved ability to protect intellectual property from misappropriation on these internally manufactured products. However, having internal manufacturing capacity exposes us to the risk of under-utilization of manufacturing capacity that results in lower gross profit margins, particularly during downturns in the semiconductor industry.
Our standard products business requires investments in capital equipment. Analog and mixed-signal manufacturing facilities and processes are typically distinguished by the design and process implementation expertise rather than the use of the most advanced equipment. Many of these processes also tend to migrate more slowly to smaller geometries due to technological barriers and increased costs. For example, some of our products use high-voltage technology that requires larger geometries and that may not migrate to smaller geometries for several years, if at all. As a result, our manufacturing base and strategy do not require substantial investment in leading edge process equipment for those products, allowing us to utilize our facilities and
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technology and
Since 2007, we havehad designed and manufactured OLED display driver ICs in our internal manufacturing facilities. As we expanded our design capabilities to products that require lower geometries unavailable at our existing manufacturing facilities, we began outsourcing manufacturing of certain OLED display driver ICs to an external
Our success going forward will depend upon our ability to adapt to future challenges such as the emergence of new competitors for our products and services or the consolidation of current competitors. Additionally, we must innovate to remain ahead of, or at least rapidly adapt to, technological breakthroughs that may lead to a significant change in the technology necessary to deliver our products and services. We believe that our established relationships and close collaboration with leading customers enhance our awareness of new product opportunities, market and technology trends and improve our ability to adapt and grow successfully.
Recent Developments
Expanded Stock Repurchase Program
On August 31, 2022, our Board of 5.0% Exchangeable Senior Notes due 2021 (the “Exchangeable Notes”)
From September 2022 to exchange for an aggregate of 10,144,131December 2022, we repurchased 1,235,650 shares of our common stock in satisfactionthe open market for an aggregate purchase price of $12.5 million and a price per share of $10.13 under the stock repurchase program.
Global Semiconductor Industry Trends
Increases in fulldemand for semiconductor products resulted in a global shortage of manufacturing capacity over the prior two years. As a result, we may experience increased costs to manufacture our products and may not be able to manufacture and deliver all of the outstanding obligations underorders placed by our customers. Specifically, if we are unable to secure manufacturing capacity from the Exchangeable Notes. On March 1, 2021,external foundries we paid the final interest paymentrely on, our ability to deliver products to our customers may be negatively impacted. Also, shortage of manufacturing capacity may lead to an increase in our manufacturing costs. Our principal pricing strategy is to pass on the Exchangeable Notes of $2.1 million and no longer have any Exchangeable Notes obligations outstanding as of such date.
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12-inch OLED wafers, which impacted design-in projects from our large panel customer in Korea that are typically given 9 to 12 months in advance.
In an effort to minimize the redemption of all of our outstanding 2021 Notes on October 2, 2020. We paid approximately $227.4 million to fully redeem allpotential adverse impact of the outstanding $224.25 million aggregate principal amount ofsupply shortage, we continue to work strategically with certain external foundries to help ensure long-term wafer capacity. If these efforts are unsuccessful, however, such shortage could limit our ability to meet demand for our products in the 2021 Notes at a redemption price equal to the sum of 100% of the principal amount of the 2021 Notes, plus accruedfuture, which would adversely affect our reputation and unpaid interest through but excluding the redemption date. The redemption of the 2021 Notes was funded by our Korean subsidiary’s repayment of intercompany loans using the cash proceeds that it received from the sale of the Foundry Services Group business and Fab 4. On October 12, 2020, we paid a withholding tax of approximately $20.6 million, attributable to the repaid accrued interests on the related intercompany loans.
We are not able to foresee when the amountshortage of $46.5 millionmanufacturing capacity will subside, but we are beginning to see some indicators of improvement of such supply shortage situation. However, the global shortage for semiconductor products over the prior two years has led to overbooking backordered demand and Korean Won in the amount of approximately KRW 360.6 billion. In addition to the purchase price, the Buyer assumed all severance liabilities relating to the transferred employees, which had a value of approximately $100 million.
COVID-19
In December 2019, a strain of coronavirus causing a disease known as
We experienced some minor disruption in our Power Solutions business line from assembly and test subcontractors located in China in the first quarter of 2020 as a result of the
We continue to closely monitor and evaluate the nature and scope of the impact of the
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Developments in Export Control Regulations
On October 7, 2022, the Bureau of Industry and Security of the U.S. Department of Commerce published changes to U.S. export control regulations (U.S. Export Regulations), including new restrictions on Chinese entities’ ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors. Further, on October 12, 2022, a new rule went into effect requiring U.S. persons to obtain a license prior to engaging in certain activities that could “support” certain end-uses and end-users, including those related to weapons of mass destruction. Additionally, on October 21, 2022, the Bureau of Industry and Security brought into effect a series of new Foreign Direct Product (FDP) rules and various new controls on advanced computing items, significantly expanding the scope of items that are subject to export control under the U.S. Export Regulations. Based on our understanding of the current U.S. Export Regulations and related rules, we do not anticipate that they will have a material impact on our business. Additional changes to the U.S. Export Regulations are expected, but the scope or timing of such changes is unknown. We will continue to monitor such developments, including potential additional trade restrictions, and other regulatory or policy changes by the U.S. and foreign governments.
Explanation and Reconciliation of
Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income
We use the terms Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income (including on a per share basis) in this Report. Adjusted EBITDA, as we define it, is a
See the footnotes to the table below for further information regarding these items. We present Adjusted EBITDA as a supplemental measure of our performance because:
• | we believe that Adjusted EBITDA, by eliminating the impact of a number of items that we do not consider to be indicative of our core ongoing operating performance, provides a more comparable measure of our operating performance from period-to-period and may be a better indicator of future performance; |
we believe that Adjusted EBITDA is commonly requested and used by securities analysts, investors and other interested parties in the evaluation of the Companya company as an enterprise level performance measure that eliminates the effects of financing, income taxes and the accounting effects of capital spending, as well as other one time or recurring items described above; and
• | we believe that Adjusted EBITDA is useful for investors, among other reasons, to assess a company’s period-to-period core operating performance and to understand and assess the manner in which management analyzes operating performance. |
We use Adjusted EBITDA in a number of ways, including:
for planning purposes, including the preparation of our annual operating budget;
to evaluate the effectiveness of our enterprise level business strategies;
in communications with our Board of Directors concerning our consolidated financial performance; and
in certain of our compensation plans as a performance measure for determining incentive compensation payments.
We encourage you to evaluate each adjustment and the reasons we consider them appropriate. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in
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this presentation. Adjusted EBITDA is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to net income from continuing operations,or any other performance measure derived in accordance with U.S GAAP, or as an alternative to cash flows from operating activities or net income, as determined in accordance with U.S. GAAP.a measure of liquidity. A reconciliation of net income (loss) from continuing operations to Adjusted EBITDA from continuing operations is as follows:
Year Ended December 31, 2020 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||
(In millions) | ||||||||||||
Income (loss) from continuing operations | $ | 57.1 | $ | (20.4 | ) | $ | (25.8 | ) | ||||
Interest expense, net | 15.4 | 19.5 | 20.1 | |||||||||
Income tax expense (benefit) | (46.2 | ) | 2.2 | (1.1 | ) | |||||||
Depreciation and amortization | 11.1 | 10.3 | 8.8 | |||||||||
EBITDA | $ | 37.4 | $ | 11.6 | $ | 2.1 | ||||||
Adjustments: | ||||||||||||
Equity-based compensation expense(a) | 6.3 | 6.1 | 3.8 | |||||||||
Early termination and other charges(b) | 5.6 | 0.1 | — | |||||||||
Foreign currency loss, net(c) | 0.4 | 22.3 | 26.3 | |||||||||
Derivative valuation loss (gain), net(d) | (0.1 | ) | 0.3 | 2.4 | ||||||||
Loss on early extinguishment of borrowings, net(e) | 0.8 | 0.0 | 0.2 | |||||||||
Inventory reserve related to Huawei impact of downstream trade restrictions (f) | 1.5 | — | — | |||||||||
Expenses related to Fab 3 power outage(g) | 1.2 | — | — | |||||||||
Restatement related expenses (gain)(h) | — | — | (0.8 | ) | ||||||||
Others(i) | — | 0.6 | 0.4 | |||||||||
Adjusted EBITDA | $ | 52.9 | $ | 40.9 | $ | 34.4 | ||||||
Year Ended December 31, 2022 | Year Ended December 31, 2021 | |||||||
(Dollars in millions) | ||||||||
Net income (loss) | $ | (8.0 | ) | $ | 56.7 | |||
Interest income | (6.0 | ) | (2.6 | ) | ||||
Interest expense | 1.2 | 1.4 | ||||||
Income tax expense | 5.2 | 17.3 | ||||||
Depreciation and amortization | 15.0 | 14.2 | ||||||
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EBITDA | $ | 7.3 | $ | 87.0 | ||||
Adjustments: | ||||||||
Equity-based compensation expense(a) | 6.0 | 7.7 | ||||||
Foreign currency loss, net(b) | 3.0 | 11.9 | ||||||
Derivative valuation gain, net(c) | (0.1 | ) | (0.1 | ) | ||||
Inventory reserve related to Huawei impact of downstream trade restrictions(d) | — | (1.5 | ) | |||||
Merger-related income, net(e) | — | (35.5 | ) | |||||
Other charges, net(f) | 3.3 | 1.3 | ||||||
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Adjusted EBITDA | $ | 19.5 | $ | 70.7 | ||||
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(a) | This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incurnon-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of thesenon-cash expenses as supplemental information. |
(b) |
This adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarilynon-cash gains or losses, which we cannot control. Additionally, we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results. |
This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our |
expected cash flows denominated in U.S. dollars, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance. |
For the year ended December 31, |
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For the year ended December 31, 2021, this adjustment eliminates |
For the year ended December 31, |
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; |
Adjusted EBITDA does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;
Adjusted EBITDA does not reflect the costs of holding certain assets and liabilities in foreign currencies; and
other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only supplementally.
We present Adjusted Operating Income as supplemental measures of our performance. We prepare Adjusted Operating Income by adjusting operating income (loss) to eliminate the impact of equity-based compensation expenses
Adjusted Operating Income is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to operating income income from continuing operations, cash flows from operating activities or net income, as determinedany other performance measure derived in accordance with U.S.
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U.S GAAP. We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other companies in our industry may calculate Adjusted Operating Income differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Operating Income, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. We define Adjusted Operating Income for the periods indicated as operating income adjusted to exclude (i) equity-based compensation expense, (ii) early termination and other charges, (iii) inventory reserve related to Huawei impact of downstream trade restrictions, (iii) merger-related income, net and (iv) expenses related to Fab 3 power outage, (v) restatement related expenses (gain) and (vi) others.
The following table summarizes the adjustments to operating income (loss) that we make in order to calculate Adjusted Operating Income from continuing operations for the periods indicated:
Year Ended December 31, 2020 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||
(In millions) | ||||||||||||
Operating income | $ | 27.0 | $ | 23.7 | $ | 21.9 | ||||||
Adjustments: | ||||||||||||
Equity-based compensation expense(a) | 6.3 | 6.1 | 3.8 | |||||||||
Early termination and other charges(b) | 5.6 | 0.1 | — | |||||||||
Inventory reserve related to Huawei impact of downstream trade restrictions(c) | 1.5 | — | — | |||||||||
Expenses related to Fab 3 power outage(d) | 1.2 | — | — | |||||||||
Restatement related expenses (gain)(e) | — | — | (0.8 | ) | ||||||||
Others(f) | — | 0.6 | 0.4 | |||||||||
Adjusted Operating Income | $ | 41.6 | $ | 30.4 | $ | 25.3 | ||||||
Year Ended December 31, 2022 | Year Ended December 31, 2021 | |||||||
(Dollars in millions) | ||||||||
Operating income (loss) | $ | (5.2 | ) | $ | 83.4 | |||
Adjustments: | ||||||||
Equity-based compensation expense(a) | 6.0 | 7.7 | ||||||
Inventory reserve related to Huawei impact of downstream trade restrictions(b) | — | (1.5 | ) | |||||
Merger-related income, net(c) | — | (35.5 | ) | |||||
Other charges, net(d) | 3.3 | 2.0 | ||||||
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Adjusted Operating Income | $ | 4.1 | $ | 56.1 | ||||
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(a) | This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incurnon-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of thesenon-cash expenses as supplemental information. |
(b) | For the year ended December 31, |
For the year ended December 31, 2021, this adjustment eliminates |
For the year ended December 31, |
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We present Adjusted Net Income (including on a per share basis) as a further supplemental measure of our performance. We prepare Adjusted Net Income (including on a per share basis) by adjusting income (loss) from continuing operations to eliminate the impact of a number of
• | we use Adjusted Net Income (including on a per share basis) in communications with our Board of Directors concerning our consolidated financial performance without the impact of non-cash expenses and the other items as we discussed below since we believe that it is a more consistent measure of our core operating results from period to period; and |
• | we believe that reporting Adjusted Net Income (including on a per share basis) is useful to readers in evaluating our core operating results because it eliminates the effects of non-cash expenses as well as the other items we discuss below, such as foreign currency gains and losses, which are out of our control and can vary significantly from period to period. |
Adjusted Net Income (including on a per share basis) is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to net income from continuing operations,or any other performance measure derived in accordance with U.S GAAP, or as an alternative to cash flows from operating activities or net income, as determined in accordance with U.S. GAAP.a measure of liquidity. We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other companies in our industry may calculate Adjusted Net Income (including on a per share basis) differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Net Income (including on a per share basis), you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. We define Adjusted Net Income (including on a per share basis); for the periods indicated as income (loss) from continuing operations,, adjusted to exclude (i) equity-based compensation expense, (ii) early termination and other charges, (iii) foreign currency loss, net, (iv)(iii) derivative valuation loss (gain),gain, net, (v) loss on early extinguishment of borrowings, net, (vi)(iv) inventory reserve related to Huawei impact of downstream trade restrictions, (v) merger-related income, net, (vi) other charges, net and (vii) expenses related to Fab 3 power outage, (viii) restatement related expenses (gain), (ix) valuation allowance release on deferred income tax assets and (x) others.effect on non-GAAP adjustments.
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The following table summarizes the adjustments to income (loss) from continuing operations that we make in order to calculate Adjusted Net Income (including on a per share basis) from continuing operations for the periods indicated:
Year Ended December 31, 2020 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||
(In millions, except per share data) | ||||||||||||
Income (loss) from continuing operations | $ | 57.1 | $ | (20.4 | ) | $ | (25.8 | ) | ||||
Adjustments: | ||||||||||||
Equity-based compensation expense(a) | 6.3 | 6.1 | 3.8 | |||||||||
Early termination and other charges(b) | 5.6 | 0.1 | — | |||||||||
Foreign currency loss, net(c) | 0.4 | 22.3 | 26.3 | |||||||||
Derivative valuation loss (gain), net(d) | (0.1 | ) | 0.3 | 2.4 | ||||||||
Loss on early extinguishment of borrowings, net(e) | 0.8 | 0.0 | 0.2 | |||||||||
Inventory reserve related to Huawei impact of downstream trade restrictions(f) | 1.5 | — | — | |||||||||
Expenses related to Fab 3 power outage(g) | 1.2 | — | — | |||||||||
Restatement related expenses (gain)(h) | — | — | (0.8 | ) | ||||||||
GAAP and cash tax expense difference (i) | (43.9 | ) | — | — | ||||||||
Others(j) | — | 0.6 | 0.4 | |||||||||
Income tax effect on non-GAAP adjustments(k) | 0.5 | — | — | |||||||||
Adjusted Net Income | $ | 28.3 | $ | 9.0 | $ | 6.5 | ||||||
Reported earnings (loss) per share—basic | $ | 1.62 | $ | (0.59 | ) | $ | (0.75 | ) | ||||
Reported earnings (loss) per share—diluted | $ | 1.35 | $ | (0.59 | ) | $ | (0.75 | ) | ||||
Weighted average number of shares—basic | 35,213,525 | 34,321,888 | 34,469,921 | |||||||||
Weighted average number of shares—diluted | 46,503,586 | 34,321,888 | 34,469,921 | |||||||||
Adjusted earnings per share—basic | $ | 0.80 | $ | 0.26 | $ | 0.19 | ||||||
Adjusted earnings per share—diluted | $ | 0.73 | $ | 0.25 | $ | 0.18 | ||||||
Weighted average number of shares—basic | 35,213,525 | 34,321,888 | 34,469,921 | |||||||||
Weighted average number of shares—diluted | 46,503,586 | 35,405,077 | 35,503,667 |
Year Ended December 31, 2022 | Year Ended December 31, 2021(h) | |||||||
(Dollars in millions, except per share data) | ||||||||
Net income (loss) | $ | (8.0 | ) | $ | 56.7 | |||
Adjustments: | ||||||||
Equity-based compensation expense(a) | 6.0 | 7.7 | ||||||
Foreign currency loss, net(b) | 3.0 | 11.9 | ||||||
Derivative valuation gain, net(c) | (0.1 | ) | (0.1 | ) | ||||
Inventory reserve related to Huawei impact of downstream trade restrictions(d) | — | (1.5 | ) | |||||
Merger-related income, net(e) | — | (35.5 | ) | |||||
Other charges, net(f) | 3.3 | 1.3 | ||||||
Income tax effect on non-GAAP adjustments(g) | 4.6 | 9.7 | ||||||
|
|
|
| |||||
Adjusted Net Income(h) | $ | 8.8 | $ | 50.2 | ||||
|
|
|
| |||||
Reported earnings (loss) per share—basic | $ | (0.18 | ) | $ | 1.26 | |||
Reported earnings (loss) per share—diluted | $ | (0.18 | ) | $ | 1.21 | |||
Weighted average number of shares—basic | 44,850,791 | 44,879,412 | ||||||
Weighted average number of shares—diluted | 44,850,791 | 47,709,373 | ||||||
Adjusted earnings per share—basic | $ | 0.20 | $ | 1.12 | ||||
Adjusted earnings per share—diluted | $ | 0.19 | $ | 1.07 | ||||
Weighted average number of shares—basic | 44,850,791 | 44,879,412 | ||||||
Weighted average number of shares—diluted | 45,795,559 | 47,709,373 |
(a) | This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incurnon-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of thesenon-cash expenses as supplemental information. |
(b) |
This adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarilynon-cash gains or losses, which we cannot control. Additionally, we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results. |
This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in U.S. dollars, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance. |
For the year ended December 31, |
51
expense subject to our ability to foresee and control, we believe our operating performance results are more meaningfully compared if this charge |
For the year ended December 31, 2021, this adjustment eliminates |
For the year ended December 31, |
For the years ended December 31, 2022 and 2021, income tax effect on non-GAAP adjustments were calculated by calculating the tax expense of each jurisdiction with or without the non-GAAP adjustments. For the year ended December 31, non-GAAP adjustments |
(h) | The adjustment for GAAP and cash tax expense difference in connection with the release of valuation allowances will no longer be an adjustment included in this non-GAAP financial measure. The reconciliation for the year ended December 31, 2021 presented above has been recast to |
We believe that all adjustments to income (loss) from continuing operations used to calculate Adjusted Net Income was applied consistently to the periods presented.
Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under USU.S. GAAP. Some of these limitations are:
Adjusted Net Income does not reflect changes in, or cash requirements for, our working capital needs;
Adjusted Net Income does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;
Adjusted Net Income does not reflect the costs of holding certain assets and liabilities in foreign currencies; and
other companies in our industry may calculate Adjusted Net Income differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted Net Income should not be considered as a measure of profitability of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted Net Income only as a supplement.
Factors Affecting Our Results of Operations
Net
52
product inventory is primarily located in Korea and is available for drop shipment globally. Outside of Korea, we maintain limited product inventory, and our sales representatives generally relay orders to our factories in Korea for fulfillment. We have strategically located our sales and technical support offices near concentrations of major customers. Our sales offices are located in Korea, Japan, Taiwan and Greater China. Our network of authorized agents and distributors is in the United States,U.S., Europe and the Asia Pacific region.
We recognize revenue when a customer obtains control of the product, which is generally upon product shipment, delivery at the customer’s location or upon customer acceptance, depending on the terms of the arrangement. For the years ended December 31, 2020, 20192022 and 2018,2021, we sold products to 178, 180175 and 192177 customers, respectively, and our net sales to our ten largest customers represented 88%, 90%69% and 85%80% of our net sales—standard products business, respectively.
We will provide the Transitional Fab 3 Foundry Services up to September 1, 2023 at an agreed upon cost plus a
Gross Profit.
Average
Material Costs.
Labor
Depreciation Expense.
Selling
53
direct sales force, a network of sales representatives and other costs of distribution. Personnel costs include base salary, benefits and incentive compensation.
General
Research
Impact of Foreign Currency Exchange Rates on Reported Results of Operations.
From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. Our Korean subsidiary enters into foreign currency forward and zero cost collar contracts in order to mitigate a portion of the impact of U.S. dollar-Korean won exchange rate fluctuations on our
54
Foreign Currency Gain or Loss.
Income Taxes.
We are subject to income- or
Capital
Inventories.
55
Results of Operations
Year Ended December 31, 2020 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
Amount | % of Total revenues | Amount | % of Total revenues | Amount | % of Total revenues | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Consolidated statements of operations data: | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Net sales—standard products business | $ | 465.5 | 91.8 | % | $ | 484.8 | 93.1 | % | $ | 425.5 | 91.4 | % | ||||||||||||
Net sales—transitional Fab 3 foundry services | 41.5 | 8.2 | 35.8 | 6.9 | 39.9 | 8.6 | ||||||||||||||||||
Total revenues | 507.1 | 100.0 | 520.7 | 100.0 | 465.4 | 100.0 | ||||||||||||||||||
Cost of sales | ||||||||||||||||||||||||
Cost of sales—standard products business | 338.4 | 66.7 | 368.5 | 70.8 | 309.8 | 66.6 | ||||||||||||||||||
Cost of sales—transitional Fab 3 foundry services | 40.3 | 8.0 | 35.8 | 6.9 | 39.9 | 8.6 | ||||||||||||||||||
Total cost of sales | 378.7 | 74.7 | 404.3 | 77.6 | 349.8 | 75.2 | ||||||||||||||||||
Gross profit | 128.3 | 25.3 | 116.4 | 22.4 | 115.6 | 24.8 | ||||||||||||||||||
Selling, general and administrative expenses | 50.0 | 9.9 | 47.6 | 9.1 | 47.7 | 10.3 | ||||||||||||||||||
Research and development expenses | 45.7 | 9.0 | 45.0 | 8.6 | 46.0 | 9.9 | ||||||||||||||||||
Early termination and other charges | 5.6 | 1.1 | 0.1 | 0.0 | — | — | ||||||||||||||||||
Operating income | 27.0 | 5.3 | 23.7 | 4.6 | 21.9 | 4.7 | ||||||||||||||||||
Interest expense | (18.1 | ) | (3.6 | ) | (22.2 | ) | (4.3 | ) | (22.0 | ) | (4.7 | ) | ||||||||||||
Foreign currency loss, net | (0.4 | ) | (0.1 | ) | (22.3 | ) | (4.3 | ) | (26.3 | ) | (5.7 | ) | ||||||||||||
Loss on early extinguishment of borrowings, net | (0.8 | ) | (0.2 | ) | (0.0 | ) | (0.0 | ) | (0.2 | ) | (0.0 | ) | ||||||||||||
Others, net | 3.1 | 0.6 | 2.6 | 0.5 | (0.2 | ) | (0.0 | ) | ||||||||||||||||
(16.2 | ) | (3.2 | ) | (41.9 | ) | (8.1 | ) | (48.7 | ) | (10.5 | ) | |||||||||||||
Income (loss) from continuing operations before income tax expense | 10.8 | 2.1 | (18.2 | ) | (3.5 | ) | (26.9 | ) | (5.8 | ) | ||||||||||||||
Income tax expense (benefit) | (46.2 | ) | (9.1 | ) | 2.2 | 0.4 | (1.1 | ) | (0.2 | ) | ||||||||||||||
Income (loss) from continuing operations | 57.1 | 11.3 | (20.4 | ) | (3.9 | ) | (25.8 | ) | (5.5 | ) | ||||||||||||||
Income (loss) from discontinued operations, net of tax | 287.9 | 56.8 | (1.4 | ) | (0.3 | ) | 21.9 | 4.7 | ||||||||||||||||
Net income (loss) | $ | 345.0 | 68.0 | % | $ | (21.8 | ) | (4.2 | )% | $ | (3.9 | ) | (0.8 | )% | ||||||||||
Revenues: | ||||||||||||||||||||||||
Net sales—standard products business | ||||||||||||||||||||||||
Display Solutions | 299.1 | 59.0 | 308.5 | 59.3 | 256.1 | 55.0 | ||||||||||||||||||
Power Solutions | 166.5 | 32.8 | 176.3 | 33.9 | 169.4 | 36.4 | ||||||||||||||||||
Total standard products business | 465.5 | 91.8 | 484.8 | 93.1 | 425.5 | 91.4 | ||||||||||||||||||
Net sales—transitional Fab 3 foundry services | 41.5 | 8.2 | 35.8 | 6.9 | 39.9 | 8.6 | ||||||||||||||||||
Total revenues | $ | 507.1 | 100.0 | % | $ | 520.7 | 100.0 | % | $ | 465.4 | 100.0 | % | ||||||||||||
Comparison of Years Ended December 31, 20202022 and 2019
The following table sets forth consolidated results of operations for the years ended December 31, 20202022 and 2019:
Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||||||||||||||
Amount | % of Total revenues | Amount | % of Total revenues | Change Amount | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
Net sales—standard products business | $ | 465.5 | 91.8 | % | $ | 484.8 | 93.1 | % | $ | (19.3 | ) | |||||||||
Net sales—transitional Fab 3 foundry services | 41.5 | 8.2 | 35.8 | 6.9 | 5.7 | |||||||||||||||
Total revenues | 507.1 | 100.0 | 520.7 | 100.0 | (13.6 | ) | ||||||||||||||
Cost of sales | ||||||||||||||||||||
Cost of sales—standard products business | 338.4 | 66.7 | 368.5 | 70.8 | (30.0 | ) | ||||||||||||||
Cost of sales—transitional Fab 3 foundry services | 40.3 | 8.0 | 35.8 | 6.9 | 4.5 | |||||||||||||||
Total cost of sales | 378.7 | 74.7 | 404.3 | 77.6 | (25.5 | ) | ||||||||||||||
Gross profit | 128.3 | 25.3 | 116.4 | 22.4 | 11.9 | |||||||||||||||
Selling, general and administrative expenses | 50.0 | 9.9 | 47.6 | 9.1 | 2.4 | |||||||||||||||
Research and development expenses | 45.7 | 9.0 | 45.0 | 8.6 | 0.7 | |||||||||||||||
Early termination and other charges | 5.6 | 1.1 | 0.1 | 0.0 | 5.6 | |||||||||||||||
Operating income | 27.0 | 5.3 | 23.7 | 4.6 | 3.3 | |||||||||||||||
Interest expense | (18.1 | ) | (3.6 | ) | (22.2 | ) | (4.3 | ) | 4.0 | |||||||||||
Foreign currency loss, net | (0.4 | ) | (0.1 | ) | (22.3 | ) | (4.3 | ) | 21.9 | |||||||||||
Loss on early extinguishment of borrowings, net | (0.8 | ) | (0.2 | ) | (0.0 | ) | (0.0 | ) | (0.7 | ) | ||||||||||
Others, net | 3.1 | 0.6 | 2.6 | 0.5 | 0.5 | |||||||||||||||
(16.2 | ) | (3.2 | ) | (41.9 | ) | (8.1 | ) | 25.8 | ||||||||||||
Income (loss) from continuing operations before income tax expense | 10.8 | 2.1 | (18.2 | ) | (3.5 | ) | 29.0 | |||||||||||||
Income tax expense (benefit) | (46.2 | ) | (9.1 | ) | 2.2 | 0.4 | (48.4 | ) | ||||||||||||
Income (loss) from continuing operations | 57.1 | 11.3 | (20.4 | ) | (3.9 | ) | 77.5 | |||||||||||||
Income (loss) from discontinued operations, net of tax | 287.9 | 56.8 | (1.4 | ) | (0.3 | ) | 289.3 | |||||||||||||
Net income (loss) | $ | 345.0 | 68.0 | % | $ | (21.8 | ) | (4.2 | )% | $ | 366.8 | |||||||||
Year Ended December 31, 2022 | Year Ended December 31, 2021 | |||||||||||||||||||
Amount | % of Total revenues | Amount | % of Total revenues | Change Amount | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
Net sales—standard products business | $ | 301.9 | 89.4 | % | $ | 433.1 | 91.3 | % | $ | (131.2 | ) | |||||||||
Net sales—transitional Fab 3 foundry services | 35.8 | 10.6 | 41.1 | 8.7 | (5.4 | ) | ||||||||||||||
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Total revenues | 337.7 | 100.0 | 474.2 | 100.0 | (136.6 | ) | ||||||||||||||
Cost of sales | ||||||||||||||||||||
Cost of sales—standard products business | 202.3 | 59.9 | 283.5 | 59.8 | (81.2 | ) | ||||||||||||||
Cost of sales—transitional Fab 3 foundry services | 34.0 | 10.1 | 37.2 | 7.8 | (3.1 | ) | ||||||||||||||
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Total cost of sales | 236.4 | 70.0 | 320.7 | 67.6 | (84.3 | ) | ||||||||||||||
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Gross profit | 101.3 | 30.0 | 153.5 | 32.4 | (52.3 | ) | ||||||||||||||
Selling, general and administrative expenses | 50.9 | 15.1 | 52.4 | 11.1 | (1.6 | ) | ||||||||||||||
Research and development expenses | 52.3 | 15.5 | 51.2 | 10.8 | 1.1 | |||||||||||||||
Merger-related income, net | — | — | (35.5 | ) | (7.5 | ) | 35.5 | |||||||||||||
Other charges, net | 3.3 | 1.0 | 2.0 | 0.4 | 1.3 | |||||||||||||||
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Operating income (loss) | (5.2 | ) | (1.6 | ) | 83.4 | 17.6 | (88.7 | ) | ||||||||||||
Interest income | 6.0 | 1.8 | 2.6 | 0.6 | 3.4 | |||||||||||||||
Interest expense | (1.2 | ) | (0.3 | ) | (1.4 | ) | (0.3 | ) | 0.2 | |||||||||||
Foreign currency loss, net | (3.0 | ) | (0.9 | ) | (11.9 | ) | (2.5 | ) | 8.8 | |||||||||||
Others, net | 0.6 | 0.2 | 1.2 | 0.2 | (0.6 | ) | ||||||||||||||
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2.4 | 0.7 | (9.4 | ) | (2.0 | ) | 11.8 | ||||||||||||||
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Income (loss) before income tax expense | (2.9 | ) | (0.9 | ) | 74.0 | 15.6 | (76.8 | ) | ||||||||||||
Income tax expense | 5.2 | 1.5 | 17.3 | 3.6 | (12.1 | ) | ||||||||||||||
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Net income (loss) | $ | (8.0 | ) | (2.4 | )% | $ | 56.7 | 12.0 | % | $ | (64.7 | ) | ||||||||
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Results by business line
Year Ended December 31, 2022 | Year Ended December 31, 2021 | |||||||||||||||||||
Amount | % of Total revenues | Amount | % of Total revenues | Change Amount | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
Net sales—standard products business | ||||||||||||||||||||
Display Solutions | 71.4 | 21.2 | 205.3 | 43.3 | (133.9 | ) | ||||||||||||||
Power Solutions | 230.5 | 68.3 | 227.8 | 48.0 | 2.7 | |||||||||||||||
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Total standard products business | 301.9 | 89.4 | 433.1 | 91.3 | (131.2 | ) | ||||||||||||||
Net sales—transitional Fab 3 foundry services | 35.8 | 10.6 | 41.1 | 8.7 | (5.4 | ) | ||||||||||||||
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Total revenues | $ | 337.7 | 100.0 | % | $ | 474.2 | 100.0 | % | $ | (136.6 | ) | |||||||||
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56
Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||||||||||||||
Amount | % of Total revenues | Amount | % of Total revenues | Change Amount | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
Net sales—standard products business | ||||||||||||||||||||
Display Solutions | 299.1 | 59.0 | 308.5 | 59.3 | (9.5 | ) | ||||||||||||||
Power Solutions | 166.5 | 32.8 | 176.3 | 33.9 | (9.9 | ) | ||||||||||||||
Total standard products business | 465.5 | 91.8 | 484.8 | 93.1 | (19.3 | ) | ||||||||||||||
Net sales—transitional Fab 3 foundry services | 41.5 | 8.2 | 35.8 | 6.9 | 5.7 | |||||||||||||||
Total revenues | $ | 507.1 | 100.0 | % | $ | 520.7 | 100.0 | % | $ | (13.6 | ) | |||||||||
Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||||||||||||||
Amount | % of Net Sales | Amount | % of Net Sales | Change Amount | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Gross Profit | ||||||||||||||||||||
Gross profit—standard products business | 127.1 | 27.3 | 116.4 | 24.0 | 10.7 | |||||||||||||||
Gross profit—transitional Fab 3 foundry services | 1.2 | 2.9 | — | — | 1.2 | |||||||||||||||
Total gross profit | $ | 128.3 | 25.3 | % | $ | 116.4 | 22.4 | % | $ | 11.9 | ||||||||||
Year Ended December 31, 2022 | Year Ended December 31, 2021 | |||||||||||||||||||
Amount | % of Net Sales | Amount | % of Net Sales | Change Amount | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Gross Profit | ||||||||||||||||||||
Gross profit—standard products business | 99.5 | 33.0 | 149.6 | 34.5 | (50.0 | ) | ||||||||||||||
Gross profit—transitional Fab 3 foundry services | 1.7 | 4.8 | 3.9 | 9.6 | (2.2 | ) | ||||||||||||||
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Total gross profit | $ | 101.3 | 30.0 | % | $ | 153.5 | 32.4 | % | $ | (52.3 | ) | |||||||||
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Revenues
Total revenues were $507.1$337.7 million for the year ended December 31, 2020,2022, a $13.6$136.6 million, or 2.6%28.8%, decrease compared to $520.7$474.2 million for the year ended December 31, 2019.2021. This decrease was primarily due to a decrease in revenue related to our standard products business as described below.
The standard products business.
The transitional Fab 3 power outage, which affected our ability to meet customer demandfoundry services. Net sales from the transitional Fab 3 foundry services were $35.8 million and $41.1 million for some of our Power Solution products during the third quarter of 2020.
Gross Profit
Total gross profit was $128.3$101.3 million for the year ended December 31, 20202022 compared to $116.4$153.5 million for the year ended December 31, 2019,2021, representing an $11.9a $52.3 million, or 10.2%34.0%, increase.decrease. Gross profit as a percentage of total revenues for the year ended December 31, 2020 increased2022 decreased to 25.3%30.0% compared to 22.4%32.4% for the year ended December 31, 2019.2021. The increasedecrease in gross profit and gross profit as a percentage of total revenuesnet sales was primarily due to the increasedecrease in gross profit and gross profit as a percentage of total revenuesnet sales from our standard products business as further described below.
The standard products business.
Net Sales—Standard Products Business by Geographic Region
We report net sales—standard products business by geographic region based on the location to which the products are billed. The following table sets forth our net sales—standard products business by geographic region
57
and the percentage of total net sales—standard products business represented by each geographic region for the years ended December 31, 20202022 and 2019:
Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||||||||||||||
Amount | % of Net Sales – standard products business | Amount | % of Net Sales – standard products business | Change Amount | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Korea | $ | 106.4 | 22.9 | % | $ | 132.6 | 27.4 | % | $ | (26.2 | ) | |||||||||
Asia Pacific (other than Korea) | 347.6 | 74.7 | 343.7 | 70.9 | 3.9 | |||||||||||||||
United States | 5.1 | 1.1 | 2.4 | 0.5 | 2.7 | |||||||||||||||
Europe | 4.3 | 0.9 | 4.8 | 1.0 | (0.5 | ) | ||||||||||||||
Others | 2.0 | 0.4 | 1.4 | 0.3 | 0.7 | |||||||||||||||
$ | 465.5 | 100.0 | % | $ | 484.8 | 100.0 | % | $ | (19.3 | ) | ||||||||||
Year Ended December 31, 2022 | Year Ended December 31, 2021 | |||||||||||||||||||
Amount | % of Net Sales – standard products business | Amount | % of Net Sales – standard products business | Change Amount | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Korea | $ | 105.3 | 34.9 | % | $ | 113.8 | 26.3 | % | $ | (8.5 | ) | |||||||||
Asia Pacific (other than Korea) | 179.6 | 59.5 | 306.3 | 70.7 | (126.8 | ) | ||||||||||||||
United States | 10.4 | 3.4 | 6.1 | 1.4 | 4.3 | |||||||||||||||
Europe | 6.7 | 2.2 | 5.7 | 1.3 | 1.0 | |||||||||||||||
Others | — | — | 1.2 | 0.3 | (1.2 | ) | ||||||||||||||
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$ | 301.9 | 100.0 | % | $ | 433.1 | 100.0 | % | $ | (131.2 | ) | ||||||||||
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|
Net sales—standard products business in Korea for the year ended December 31, 20202022 decreased from $132.6$113.8 million to $106.4$105.3 million compared to the year ended December 31, 2019,2021, or by $26.2$8.5 million, or 19.8%7.5%, primarily due to a strategic reduction of our lower margin
Net sales—standard products business in the Asia Pacific for the year ended December 31, 2020 increased2022 decreased from $343.7$306.3 million to $347.6$179.6 million compared to the year ended December 31, 2019,2021, or by $3.9$126.8 million, or 1.1%41.4%, primarily due to higher demand for certain auto LCD DDIC products. Thea significant decrease in revenue related tofrom our mobile OLED display driver IC remained flatICs stemming from a lower customer demand resulting from a slowdown in the Chinese smartphone market, and a lack of secured manufacturing capacity (in particular for 28nm 12-inch OLED wafers) at external 12-inch foundries, which was offset in part by a higher demand for power products such as high-end MOSFETs, primarily for computing, and IGBTs mainly for solar inverters. The increased demand for our auto-LCD display driver ICs also favorably affected this year.
Net sales—standard products business in the U.S. for the year over year.
Operating Expenses
Selling, General and Administrative Expenses.
Research and Development Expenses.
Merger-related Income, Net. For the year ended December 31, 2021, we recorded a $70.2 million income from the recognition of a reverse termination fee as a result of the termination of the merger transaction, which
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was offset in part by decreased material costs.
Other Charges, Net. For the year ended December 31, 2022, we recorded a $2.8 million of one-time employee incentives and professional service fees and expenses of $1.0 million incurred in connection with certain treasurystrategic evaluations, which was offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi. For the year ended December 31, 2021, we recorded a $3.4 million of non-recurring professional service fees and finance initiatives.
Operating Income
As a result of the foregoing, operating incomeloss of $27.0$5.2 million was recorded for the year ended December 31, 20202022 compared to operating income of $23.7$83.4 million the year ended December 31, 2019.2021. The increasedecrease in operating income of $3.3$88.7 million resulted primarily from an $11.9a $52.3 million increasedecrease in gross profit which was offset in part by a $5.6 million increase in early termination and other charges, a $2.4 million increase in selling, general and administrative expenses, and a $0.7$35.5 million increasenet decrease in research and development expenses.
Other Income (Expense)
Interest Expense.
Interest Expense. Interest expense was $1.2 million of interest expensesand $1.4 million for the yearyears ended December 31, 2019. The $4.0 million decrease in interest expenses was attributable to the full redemption of our outstanding2022 and December 31, 2021, Notes on October 2, 2020. We did not incur interest expense associated with the 2021 Notes from and after October 2, 2020.
Foreign Currency Loss, Net.
A substantial portion of our net foreign currency gain or loss is
Others, Net.
Income Tax Expense (Benefit)
We are subject to income taxes in the United StatesU.S. and many foreign jurisdictions and our effective tax rate is affected by changes in the mix of earnings between countries with differing tax rates.
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We recorded a $46.2$5.2 million income tax benefitexpense for the year ended December 31, 2020,2022, which is primarily as a resultcomposed of releasing valuation allowances established againstincome tax expense from our Korean subsidiary due mainly to its realized foreign currency gains resulting in taxable income for the related deferredyear, and this expense was partially offset by income tax assets relatedbenefit from our Dutch subsidiary. The Dutch subsidiary’s tax benefit was mainly attributable to the reversal of withholding tax with respect to the waiver of the accrued interest on the loans granted to our Korean subsidiary by our Dutch subsidiary.
We recorded a $17.3 million income tax expense for the year ended December 31, 2021, which was primarily composed of the income tax expense of $6.9 million from our Korean subsidiary, primarily due to its taxable income for the year, and the income tax expense of $8.2 million from the parent entity in the U.S. Our Korean subsidiary had generated three yearsThe U.S. parent’s tax expense was mainly attributable to the recognition of cumulative profits adjusted for permanent differencesincome and is anticipatedexpenses related to generate taxable basis for the subsequent years. As a result, $39.4 millionMerger combined with the utilization of valuation allowances, established against the Korean subsidiary’s deferred tax assets, were released as of December 31, 2020. In addition, we believe it is more likely than not that the parent entity in the U.S. would be able to utilize its available net operating loss in future tax years, which would provide incremental tax savings of approximately $4.5 million. Therefore, we released the valuation allowances, established against the U.S. parent’s deferred tax assets, up to these anticipated tax savings as of December 31, 2020.
Net Income (Loss)
As a result of the foregoing, net incomeloss of $345.0$8.0 million was recorded for the year ended December 31, 20202022 compared to net lossincome of $21.8$56.7 million for the year ended December 31, 2019.2021. As discussed above, the increase$64.7 million decrease in net income of $366.8 million primarily resulted from a $289.3 million increase in income from discontinued operations, net of tax, mainly attributable to the completion of the sale of the Foundry Service Group business and Fab 4, and a $77.5 million improvement in loss from continuing operations.
Year Ended December 31, 2019 | Year Ended December 31, 2018 | |||||||||||||||||||
Amount | % of Total revenues | Amount | % of Total revenues | Change Amount | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
Net sales—standard products business | $ | 484.8 | 93.1 | % | $ | 425.5 | 91.4 | % | $ | 59.4 | ||||||||||
Net sales—transitional Fab 3 foundry services | 35.8 | 6.9 | 39.9 | 8.6 | (4.1 | ) | ||||||||||||||
Total revenues | 520.7 | 100.0 | 465.4 | 100.0 | 55.2 | |||||||||||||||
Cost of sales | ||||||||||||||||||||
Cost of sales—standard products business | 368.5 | 70.8 | 309.8 | 66.6 | 58.6 | |||||||||||||||
Cost of sales—transitional Fab 3 foundry services | 35.8 | 6.9 | 39.9 | 8.6 | (4.1 | ) | ||||||||||||||
Total cost of sales | 404.3 | 77.6 | 349.8 | 75.2 | 54.5 | |||||||||||||||
Gross profit | 116.4 | 22.4 | 115.6 | 24.8 | 0.7 | |||||||||||||||
Selling, general and administrative expenses | 47.6 | 9.1 | 47.7 | 10.3 | (0.1 | ) | ||||||||||||||
Research and development expenses | 45.0 | 8.6 | 46.0 | 9.9 | (1.0 | ) | ||||||||||||||
Early termination and other charges | 0.1 | 0.0 | — | — | 0.1 | |||||||||||||||
Operating income | 23.7 | 4.6 | 21.9 | 4.7 | 1.8 | |||||||||||||||
Interest expense | (22.2 | ) | (4.3 | ) | (22.0 | ) | (4.7 | ) | (0.2 | ) | ||||||||||
Foreign currency loss, net | (22.3 | ) | (4.3 | ) | (26.3 | ) | (5.7 | ) | 4.0 | |||||||||||
Loss on early extinguishment of borrowings, net | (0.0 | ) | (0.0 | ) | (0.2 | ) | (0.0 | ) | 0.2 | |||||||||||
Others, net | 2.6 | 0.5 | (0.2 | ) | (0.0 | ) | 2.8 | |||||||||||||
(41.9 | ) | (8.1 | ) | (48.7 | ) | (10.5 | ) | 6.8 | ||||||||||||
Loss from continuing operations before income tax expense | (18.2 | ) | (3.5 | ) | (26.9 | ) | (5.8 | ) | 8.6 | |||||||||||
Income tax expense (benefit) | 2.2 | 0.4 | (1.1 | ) | (0.2 | ) | 3.3 | |||||||||||||
Loss from continuing operations | (20.4 | ) | (3.9 | ) | (25.8 | ) | (5.5 | ) | 5.4 | |||||||||||
Income (loss) from discontinued operations, net of tax | (1.4 | ) | (0.3 | ) | 21.9 | 4.7 | (23.3 | ) | ||||||||||||
Net loss | $ | (21.8 | ) | (4.2 | )% | $ | (3.9 | ) | (0.8 | )% | $ | (17.9 | ) | |||||||
Year Ended December 31, 2019 | Year Ended December 31, 2018 | |||||||||||||||||||
Amount | % of Total revenues | Amount | % of Total revenues | Change Amount | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
Net sales—standard products business | ||||||||||||||||||||
Display Solutions | 308.5 | 59.3 | 256.1 | 55.0 | 52.4 | |||||||||||||||
Power Solutions | 176.3 | 33.9 | 169.4 | 36.4 | 6.9 | |||||||||||||||
Total standard products business | 484.8 | 93.1 | 425.5 | 91.4 | 59.4 | |||||||||||||||
Net sales—transitional Fab 3 foundry services | 35.8 | 6.9 | 39.9 | 8.6 | (4.1 | ) | ||||||||||||||
Total revenues | $ | 520.7 | 100.0 | % | $ | 465.4 | 100.0 | % | $ | 55.2 | ||||||||||
Year Ended December 31, 2019 | Year Ended December 31, 2018 | |||||||||||||||||||
Amount | % of Net Sales | Amount | % of Net Sales | Change Amount | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Gross Profit | ||||||||||||||||||||
Gross profit—standard products business | 116.4 | 24.0 | 115.6 | 27.2 | 0.7 | |||||||||||||||
Gross profit—transitional Fab 3 foundry services | — | — | — | — | — | |||||||||||||||
Total gross profit | $ | 116.4 | 22.4 | % | $ | 115.6 | 24.8 | % | $ | 0.7 | ||||||||||
Year Ended December 31, 2019 | Year Ended December 31, 2018 | |||||||||||||||||||
Amount | % of Net Sales – standard products business | Amount | % of Net Sales – standard products business | Change Amount | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Korea | $ | 132.6 | 27.4 | % | $ | 176.1 | 41.4 | % | $ | (43.5 | ) | |||||||||
Asia Pacific (other than Korea) | 343.7 | 70.9 | 241.5 | 56.7 | 102.2 | |||||||||||||||
United States | 2.4 | 0.5 | 2.0 | 0.5 | 0.4 | |||||||||||||||
Europe | 4.8 | 1.0 | 4.4 | 1.0 | 0.4 | |||||||||||||||
Others | 1.4 | 0.3 | 1.6 | 0.4 | (0.2 | ) | ||||||||||||||
$ | 484.8 | 100.0 | % | $ | 425.5 | 100.0 | % | $ | 59.4 | |||||||||||
Liquidity and Capital Resources
Our principal capital requirements are to fund sales and marketing, invest in research and development and capital equipment, to make debt service payments and to fund working capital needs. We calculate working capital as current assets less current liabilities.
Our principal sources of liquidity are our cash, cash equivalents, our cash flows from operations and our financing activities. Our ability to manage cash and cash equivalents may be limited, as our primary cash flows are dictated by the terms of our sales and supply agreements, contractual obligations, debt instruments and legal and regulatory requirements. From time to time, we may sell accounts receivable to third parties under factoring agreements or engage in accounts receivable discounting to facilitate the collection of cash. For a description of our factoring arrangements and accounts receivable discounting, please see “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 4. Accounts Receivable” included elsewhere in this Report. In addition, from time to time, we may make payments to our vendors on extended terms with their consent. As of December 31, 2020,2022, we did not have any accounts payable on extended terms or payment deferment with our vendors.
As of June 29, 2018, our Korean subsidiary entered into an arrangement whereby it (i) acquired a water treatment facility from SK hynix for $4.2 million to support our fabrication facility in Gumi, Korea, and (ii) subsequently sold the water treatment facility for $4.2 million to a third party management company that we completedengaged to run the sale of our Foundry Services Group business and Fab 4 to the Buyer in exchangefacility for a purchase price equal to approximately $350.6 million in cash. The purchase price was paid in a combination of U.S. Dollars in the amount of $46.5 million and Korean Won in the amount of approximately KRW 360.6 billion.
As of December 31, 2022, cash and cash equivalents held by our Korean subsidiary were $271.8$207.9 million, which represents 97%92% of our total cash and cash equivalents on a consolidated basis. We currently believe that we will have sufficient cash reserves from cash on hand and expected cash from operations to fund our operations as well as capital expenditures for the next twelve months and the foreseeable future.
Year ended December 31, 20202022 compared to year ended December 31, 2019
As of December 31, 2020,2022, our cash and cash equivalents balance was $279.9$225.5 million, a $128.3$54.1 million increasedecrease compared to $151.7$279.5 million as of December 31, 2019. The increase resulted from a $318.5 million cash inflow provided by investing activities and a $7.5 million of cash inflow provided by operating activities, which were partially offset by a $222.3 million cash outflow used in financing activities.
Cash inflow provided by operating activities totaled $7.5$5.2 million for the year ended December 31, 2020,2022, compared to $50.5$87.7 million of cash inflow provided by operating activities for the year ended December 31, 2019. 2021.
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The net operating cash inflow for the year ended December 31, 20202022 reflects our net incomeloss of $57.8$8.0 million, excluding gain on sale of discontinued operations, as adjusted unfavorablyfavorably by $17.4$57.6 million, which mainly consisted of depreciation and amortization, provision for severance benefits, net foreign currency loss and deferred income tax assets,stock-based compensation, and net unfavorable impact of $33.0$44.4 million from changes of operating assets and liabilities.
Our working capital balance as of December 31, 20202022 was $236.0$290.6 million compared to $245.5$323.6 million as of December 31, 2019.2021. The $33.0 million decrease in working capital was primarily attributable to reclassificationa $54.1 million decrease in cash and cash equivalents and a $18.0 million decrease in other receivables mainly resulted from receipt of the outstanding Exchangeable Notes, which were reclassified as a current liability in the first quarter of 2020,reverse termination fee, which was offset in part by increased casha $19.6 million decrease in accounts payable, a $10.4 million decrease in accrued expenses and cash equivalents as a result of the completion of sale of$4.9 million increase in advance payments to certain suppliers, including external foundries to meet our Foundry Services Group business and Fab 4 and redemption of our outstanding 2021 Notes.
Cash inflow provided byoutflow used in investing activities totaled $318.5$24.9 million for the year ended December 31, 2020,2022, compared to $28.9a $31.4 million of cash outflow used in investing activities for the year ended December 31, 2019.2021. The $347.4$6.5 million increasedecrease in cash inflowoutflow was attributable to $350.6an $8.8 million of proceeds received from the sale of the Foundry Services Group business and Fab 4, a $9.2 million net decrease in hedge collateral,purchase of property, plant and equipment, which was offset in part by a $13.1$1.9 million net increase in purchasehedge collateral and a $0.9 million decrease in proceeds from disposal of property, plant property and equipment.
Cash outflow used in financing activities totaled $222.3$12.7 million for the year ended December 31, 2020,2022, compared to $1.8$35.5 million of cash outflow used in financing activities for the year ended December 31, 2019.2021. The financing cash outflow for the year ended December 31, 20202022 was primarily attributable to a payment of $224.3$12.1 million for the full redemptionrepurchases of the outstanding 2021 Notesour common stock in the fourth quarter of 20202022 pursuant to our stock repurchase program and a payment of $1.1$1.8 million for the repurchase of our common stock to satisfy tax withholding obligationobligations in connection with the vesting of restricted stock units, which was offset in part by $3.9$1.8 million of proceeds received from the issuance of common stock in connection with the exercise of stock options. The financing cash outflow for the year ended December 31, 20192021 was primarily attributable to a payment of $1.2$37.5 million for theaccelerated stock repurchase of 2021 Notes and Exchangeable Notes in the first quarter of 2019program and a payment of $2.4$1.7 million for the repurchase of our common stock to satisfy tax withholding obligations in January 2019 pursuant to ourconnection with the vesting of restricted stock repurchase plan,units, which was offset in part by
We routinely make capital expenditures for fabrication facility maintenance, enhancement of our existing facilitiesfacility and reinforcement of our global research and development capabilities.capability. For the year ended
Payments Due by Period | ||||||||||||||||||||||||||||
Total | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Exchangeable Notes(1) | $ | 85.8 | $ | 85.8 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Operating leases(2) | 5.0 | 2.4 | 1.0 | 0.6 | 0.6 | 0.4 | — | |||||||||||||||||||||
Finance leases(2) | 0.2 | 0.1 | 0.1 | 0.1 | — | — | — | |||||||||||||||||||||
Water Treatment Services(2)(3) | 30.4 | 4.3 | 4.2 | 4.2 | 4.0 | 4.0 | 9.7 | |||||||||||||||||||||
Others(2)(4) | 6.0 | 3.3 | 1.8 | 0.7 | 0.1 | 0.1 | — |
Critical Accounting Policies and Estimates
Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in our consolidated financial statements and accompanying notes.
We believe that the accounting policies discussed below are critical due to the fact that they involve a high degree of judgment and estimates about the effects of matters that are inherently uncertain. We base these estimates and judgments on historical experience, knowledge of current conditions and other assumptions and information that we believe to be reasonable. Estimates and assumptions about future events and their effects cannot be determined with certainty. Accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the business environment in which we operate changes.
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Inventories
Inventories are stated at the lower of cost or net realizable value, using the first in, first out method (“FIFO”). If net realizable value is less than cost at the balance sheet date, the carrying amount is reduced to the realizable value, and the difference is recognized as a loss on valuation of inventories within cost of sales. Inventory reserves are established when conditions indicate that the net realizable value is less than costs due to physical deterioration, obsolescence, changes in price levels, or other causes based on individual facts and circumstances. We evaluate the sufficiency of inventory reserves and take into consideration historical usage, expected demand, anticipated sales price, new product development schedules, the effect new products might have on the sale of existing products, product age and other factors. Reserves are also established for excess inventory based on our current inventory levels and projected demand and our ability to sell those specific products. Situations that could cause these inventory reserves include a decline in business and economic conditions, decline in consumer confidence caused by changes in market conditions, sudden and significant decline in demand for our products, inventory obsolescence because of rapidly changing technology and consumer requirements, or failure to estimate end customer demand properly. A reduction of these inventory reserves may be recorded if previously reserved items are subsequently sold as a result of unexpected changes to certain aforementioned situations.
The gross amount of inventory reserves charged to cost of sales totaled $7.3 million, $12.9$13.3 million and $6.7$7.6 million in the fiscal years ended December 31, 2020, 20192022 and 2018,2021, respectively. The new cost base related to the sale of inventory that was previously written down totaled $4.3 million, $2.9$3.6 million and $3.7$5.3 million in the fiscal years ended December 31, 2020, 20192022 and 2018,2021, respectively.
As prescribed in ASC 330, “Inventory,” once a reserve is established for a particular item based on our assessment as described above, it is maintained until the related item is sold or scrapped as a new cost basis has been established that cannot subsequently be marked up. In addition, the cost of inventories is determined based on the normal capacity of each fabrication facility. In case the capacity utilization is lower than a certain level that management believes to be normal, the fixed overhead costs per production unit which exceed those under normal capacity are charged to cost of sales rather than capitalized as inventories.
Income Taxes
We account forare subject to income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires recognition of deferredthe U.S. and foreign jurisdictions. Significant judgments and estimates are required in evaluating our uncertain tax assetspositions and liabilitiesdetermining our provision for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based upon the difference between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
We make an ongoing assessment of our deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences, expiration of tax credits and net operating loss carry-forwards and tax planning strategies. As of December 31, 2020,Then, if necessary, we released therecord valuation allowances atagainst our operating subsidiarydeferred tax assets in Korea andorder for the parent entity innet amount of deferred tax assets to be recorded only to the U.S. since it was determinedextent that we conclude that it is more likely than not that theour net deferred tax assets at these subsidiaries will be realizable based on the current prospects of their future taxable income.realized. We will continue to evaluate the ability to realize our net deferred tax assets on an ongoing basis to identify whether any significant changes in circumstances or assumptions have occurred that could materially affect the ability to realize deferred tax assets.
We recognize and measuresmeasure uncertain tax positions taken or expected to be taken in a tax return utilizing a
Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and
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accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provisions for income taxes in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest and penalties.
Recent Accounting Pronouncements
See Note 1 “Business, Basis of Presentation and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Item 8 of Part II of this Report, for a full description of recent accounting pronouncements, including the expected dates of adoption, which is incorporated herein by reference.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to the market risk that the value of a financial instrument will fluctuate due to changes in market conditions, primarily from changes in foreign currency exchange rates. In the normal course of our business, we are subject to market risks associated with currency movements on our assets and liabilities.
Foreign Currency Exposures
We have exposure to foreign currency exchange rate fluctuations on net income from our subsidiaries denominated in currencies other than U.S. dollars, as our foreign subsidiaries in Korea, Taiwan, China, Japan and Hong Kong use local currency as their functional currency. From time to time these subsidiaries have cash and financial instruments in local currency. The amounts held in Japan, Taiwan, Hong Kong and China are not material in regards to foreign currency movements. However, based on the cash and financial instruments balance at December 31, 20202022 for our Korean subsidiary, a 10% devaluation of the Korean won against the U.S. dollar would have resulted in a decrease of $4.7$0.7 million in our U.S. dollar financial instruments and cash balances.
See “Note 10. Derivative Financial Instruments” to our consolidated financial statements under “Item 8. Financial Statements and Supplementary Data” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations—Impact of Foreign Currency Exchange Rates on Reported Results of Operations” for additional information regarding our foreign exchange hedging activities.
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/s/ Samil PricewaterhouseCoopers |
Seoul, Korea February 22, 2023 |
December 31, | ||||||||
2020 | 2019 | |||||||
(In thousands of U.S. dollars, except share data) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 279,940 | $ | 151,657 | ||||
Accounts receivable, net | 64,390 | 47,447 | ||||||
Inventories, net | 39,039 | 41,404 | ||||||
Other receivables | 4,338 | 10,200 | ||||||
Prepaid expenses | 7,332 | 9,003 | ||||||
Hedge collateral (Note 10) | 5,250 | 9,820 | ||||||
Other current assets | 9,321 | 10,013 | ||||||
Current assets held for sale (Note 2) | — | 99,821 | ||||||
Total current assets | 409,610 | 379,365 | ||||||
Property, plant and equipment, net | 96,383 | 73,068 | ||||||
Operating lease right-of-use | 4,632 | 1,876 | ||||||
Intangible assets, net | 2,727 | 2,769 | ||||||
Long-term prepaid expenses | 4,058 | 5,757 | ||||||
Deferred income taxes (Note 17) | 44,541 | 154 | ||||||
Other non-current assets | 9,739 | 8,905 | ||||||
Non-current assets held for sale (Note 2) | — | 123,434 | ||||||
Total assets | $ | 571,690 | $ | 595,328 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 52,164 | $ | 40,376 | ||||
Other accounts payable | 2,531 | 6,410 | ||||||
Accrued expenses (Note 9) | 16,241 | 44,799 | ||||||
Accrued income taxes | 12,398 | 1,569 | ||||||
Operating lease liabilities | 2,210 | 1,625 | ||||||
Current portion of long-term borrowings, net | 83,479 | — | ||||||
Other current liabilities | 4,595 | 2,014 | ||||||
Current liabilities held for sale (Note 2) | — | 37,040 | ||||||
Total current liabilities | 173,618 | 133,833 | ||||||
Long-term borrowings, net | 0— | 304,743 | ||||||
Accrued severance benefits, net | 40,462 | 51,181 | ||||||
Non-current operating lease liabilities | 2,422 | 251 | ||||||
Other non-current liabilities | 9,588 | 9,420 | ||||||
Non-current liabilities held for sale (Note 2) | — | 110,881 | ||||||
Total liabilities | 226,090 | 610,309 | ||||||
Commitments and contingencies (Note 19) | 0 | 0 | ||||||
Stockholders’ equity | ||||||||
Common stock, $0.01 par value, 150,000,000 shares authorized, 44,943,854 shares issued and 35,783,347 outstanding at December 31, 2020 and 43,851,991 shares issued and 34,800,312 outstanding at December 31, 2019 | 450 | 439 | ||||||
Additional paid-in capital | 163,010 | 152,404 | ||||||
Retained earnings (deficit) | 286,834 | (58,131 | ) | |||||
Treasury stock, 9,160,507 shares at December 31, 2020 and 9,051,679 shares at December 31, 2019, respectively | (108,397 | ) | (107,033 | ) | ||||
Accumulated other comprehensive income (loss) | 3,703 | (2,660 | ) | |||||
Total stockholders’ equity (deficit) | 345,600 | (14,981 | ) | |||||
Total liabilities and stockholders’ equity | $ | 571,690 | $ | 595,328 | ||||
December 31, | ||||||||
2022 | 2021 | |||||||
(In thousands of U.S. dollars, except share data) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 225,477 | $ | 279,547 | ||||
Accounts receivable, net | 35,380 | 50,954 | ||||||
Inventories, net | 39,883 | 39,370 | ||||||
Other receivables (Note 18) | 7,847 | 25,895 | ||||||
Prepaid expenses | 10,560 | 7,675 | ||||||
Hedge collateral (Note 10) | 2,940 | 3,060 | ||||||
Other current assets (Note 1) | 15,766 | 2,619 | ||||||
Total current assets | 337,853 | 409,120 | ||||||
Property, plant and equipment, net | 110,747 | 107,882 | ||||||
Operating lease right-of-use | 5,265 | 4,275 | ||||||
Intangible assets, net | 1,930 | 2,377 | ||||||
Long-term prepaid expenses | 10,939 | 8,243 | ||||||
Deferred income taxes (Note 16) | 38,324 | 41,095 | ||||||
Other non-current assets | 11,587 | 10,662 | ||||||
Total assets | $ | 516,645 | $ | 583,654 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 17,998 | $ | 37,593 | ||||
Other accounts payable | 9,702 | 6,289 | ||||||
Accrued expenses (Note 9) | 9,688 | 20,071 | ||||||
Accrued income taxes | 3,154 | 11,823 | ||||||
Operating lease liabilities | 1,397 | 2,323 | ||||||
Other current liabilities | 5,306 | 7,382 | ||||||
Total current liabilities | 47,245 | 85,481 | ||||||
Accrued severance benefits, net | 23,121 | 33,064 | ||||||
Non-current operating lease liabilities | 4,091 | 1,952 | ||||||
Other non-current liabilities | 14,035 | 10,395 | ||||||
Total liabilities | 88,492 | 130,892 | ||||||
Commitments and contingencies (Note 19) | ||||||||
Stockholders’ equity | ||||||||
Common stock, $0.01 par value, 150,000,000 shares authorized, 56,432,449 shares issued and 43,824,575 outstanding at December 31, 2022 and 55,905,320 shares issued and 45,659,304 outstanding at December 31, 2021 | 564 | 559 | ||||||
Additional paid-in capital | 266,058 | 241,197 | ||||||
Retained earnings | 335,506 | 343,542 | ||||||
Treasury stock, 12,607,874 shares at December 31, 2022 and 10,246,016 shares at December 31, 2021, respectively | (161,422 | ) | (130,306 | ) | ||||
Accumulated other comprehensive loss | (12,553 | ) | (2,230 | ) | ||||
Total stockholders’ equity | 428,153 | 452,762 | ||||||
Total liabilities and stockholders’ equity | $ | 516,645 | $ | 583,654 | ||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(In thousands of U.S. dollars, except share data) | ||||||||||||
Revenues: | ||||||||||||
Net sales—standard products business | $ | 465,519 | $ | 484,847 | $ | 425,490 | ||||||
Net sales—transitional Fab 3 foundry services | 41,540 | 35,824 | 39,935 | |||||||||
Total revenues | 507,059 | 520,671 | 465,425 | |||||||||
Cost of sales: | ||||||||||||
Cost of sales—standard products business | 338,420 | 368,450 | 309,842 | |||||||||
Cost of sales—transitional Fab 3 foundry services | 40,322 | 35,824 | 39,935 | |||||||||
Total cost of sales | 378,742 | 404,274 | 349,777 | |||||||||
Gross profit | 128,317 | 116,397 | 115,648 | |||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative expenses | 49,974 | 47,595 | 47,712 | |||||||||
Research and development expenses | 45,698 | 45,024 | 46,044 | |||||||||
Early termination and other charges | 5,629 | 53 | — | |||||||||
Total operating expenses | 101,301 | 92,672 | 93,756 | |||||||||
Operating income: | 27,016 | 23,725 | 21,892 | |||||||||
Interest expense | (18,147 | ) | (22,157 | ) | (22,006 | ) | ||||||
Foreign currency loss, net | (382 | ) | (22,316 | ) | (26,307 | ) | ||||||
Loss on early extinguishment of borrowings, net | (766 | ) | (42 | ) | (206 | ) | ||||||
Other income (expense), net | 3,110 | 2,577 | (229 | ) | ||||||||
Income (loss) from continuing operations before income tax expense | 10,831 | (18,213 | ) | (26,856 | ) | |||||||
Income tax expense (benefit) | (46,228 | ) | 2,200 | (1,079 | ) | |||||||
Income (loss) from continuing operations | 57,059 | (20,413 | ) | (25,777 | ) | |||||||
Income (loss) from discontinued operations, net of tax | 287,906 | (1,413 | ) | 21,877 | ||||||||
Net income (loss) | $ | 344,965 | $ | (21,826 | ) | $ | (3,900 | ) | ||||
Basic earnings (loss) per common share— | ||||||||||||
Continuing operations | $ | 1.62 | $ | (0.59 | ) | $ | (0.75 | ) | ||||
Discontinued operations | 8.18 | (0.05 | ) | 0.64 | ||||||||
Total | $ | 9.80 | $ | (0.64 | ) | $ | (0.11 | ) | ||||
Diluted earnings (loss) per common share— | ||||||||||||
Continuing operations | $ | 1.35 | $ | (0.59 | ) | $ | (0.75 | ) | ||||
Discontinued operations | 6.19 | (0.05 | ) | 0.64 | ||||||||
Total | $ | 7.54 | $ | (0.64 | ) | $ | (0.11 | ) | ||||
Weighted average number of shares— | ||||||||||||
Basic | 35,213,525 | 34,321,888 | 34,469,921 | |||||||||
Diluted | 46,503,586 | 34,321,888 | 34,469,921 |
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
(In thousands of U.S. dollars, except share data) | ||||||||||||
Revenues: | ||||||||||||
Net sales—standard products business | $ | 301,896 | $ | 433,099 | $ | 465,519 | ||||||
Net sales—transitional Fab 3 foundry services | 35,762 | 41,131 | 41,540 | |||||||||
Total revenues | 337,658 | 474,230 | 507,059 | |||||||||
Cost of sales: | ||||||||||||
Cost of sales—standard products business | 202,347 | 283,503 | 338,420 | |||||||||
Cost of sales—transitional Fab 3 foundry services | 34,047 | 37,184 | 40,322 | |||||||||
Total cost of sales | 236,394 | 320,687 | 378,742 | |||||||||
Gross profit | 101,264 | 153,543 | 128,317 | |||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative expenses | 50,872 | 52,440 | 49,974 | |||||||||
Research and development expenses | 52,338 | 51,212 | 45,698 | |||||||||
Merger-related costs (income), net | — | (35,527 | ) | 653 | ||||||||
Early termination and other charges, net | 3,298 | 2,011 | 4,976 | |||||||||
Total operating expenses | 106,508 | 70,136 | 101,301 | |||||||||
Operating income (loss): | (5,244 | ) | 83,407 | 27,016 | ||||||||
Interest income | 5,980 | 2,609 | 2,740 | |||||||||
Interest expense | (1,157 | ) | (1,371 | ) | (18,147 | ) | ||||||
Foreign currency loss, net | (3,019 | ) | (11,853 | ) | (382 | ) | ||||||
Loss on early extinguishment of borrowings | — | — | (766 | ) | ||||||||
Other income, net | 561 | 1,177 | 370 | |||||||||
Income (loss) from continuing operations before income tax expense (benefit) | (2,879 | ) | 73,969 | 10,831 | ||||||||
Income tax expense (benefit) | 5,157 | 17,261 | (46,228 | ) | ||||||||
Income (loss) from continuing operations | (8,036 | ) | 56,708 | 57,059 | ||||||||
Income from discontinued operations, net of tax | — | — | 287,906 | |||||||||
Net income (loss) | $ | (8,036 | ) | $ | 56,708 | $ | 344,965 | |||||
Basic earnings (loss) per common share— | ||||||||||||
Continuing operations | $ | (0.18 | ) | $ | 1.26 | $ | 1.62 | |||||
Discontinued operations | — | — | 8.18 | |||||||||
Total | $ | (0.18 | ) | $ | 1.26 | $ | 9.80 | |||||
Diluted earnings (loss) per common share— | ||||||||||||
Continuing operations | $ | (0.18 | ) | $ | 1.21 | $ | 1.35 | |||||
Discontinued operations | — | — | 6.19 | |||||||||
Total | $ | (0.18 | ) | $ | 1.21 | $ | 7.54 | |||||
Weighted average number of shares— | ||||||||||||
Basic | 44,850,791 | 44,879,412 | 35,213,525 | |||||||||
Diluted | 44,850,791 | 47,709,373 | 46,503,586 |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(In thousands of U.S. dollars) | ||||||||||||
Net income (loss) | $ | 344,965 | $ | (21,826 | ) | $ | (3,900 | ) | ||||
Other comprehensive income (loss) | ||||||||||||
Foreign currency translation adjustments | 6,274 | 15,856 | 18,352 | |||||||||
Derivative adjustments | ||||||||||||
Fair valuation of derivatives | 1,452 | (2,894 | ) | (1,589 | ) | |||||||
Reclassification adjustment for loss (gain) on derivatives included in net income (loss) | (1,363 | ) | 4,488 | (3,759 | ) | |||||||
Total other comprehensive income | 6,363 | 17,450 | 13,004 | |||||||||
Total comprehensive income (loss) | $ | 351,328 | $ | (4,376 | ) | $ | 9,104 | |||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
(In thousands of U.S. dollars) | ||||||||||||
Net income (loss) | $ | (8,036 | ) | $ | 56,708 | $ | 344,965 | |||||
Other comprehensive income (loss) | ||||||||||||
Foreign currency translation adjustments | (10,558 | ) | (2,839 | ) | 6,274 | |||||||
Derivative adjustments | ||||||||||||
Fair valuation of derivatives | (8,279 | ) | (3,913 | ) | 1,452 | |||||||
Reclassification adjustment for loss (gain) on derivatives included in net income (loss) | 8,514 | 819 | (1,363 | ) | ||||||||
Total other comprehensive income (loss) | (10,323 | ) | (5,933 | ) | 6,363 | |||||||
Total comprehensive income (loss) | $ | (18,359 | ) | $ | 50,775 | $ | 351,328 | |||||
Common Stock | Additional Paid-In Capital | Retained Earnings (Deficit) | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||||||||||
(In thousands of U.S. dollars, except share data) | Shares | Amount | ||||||||||||||||||||||||||
Balance at December 31, 2017, as previously reported | 34,189,599 | $ | 426 | $ | 136,259 | $ | (40,889 | ) | $ | (102,319 | ) | $ | (33,114 | ) | $ | (39,637 | ) | |||||||||||
Impact of adopting the new revenue standard | — | — | — | 8,484 | — | — | 8,484 | |||||||||||||||||||||
Balance at January 1, 2018, as adjusted | 34,189,599 | $ | 426 | $ | 136,259 | $ | (32,405 | ) | $ | (102,319 | ) | $ | (33,114 | ) | $ | (31,153 | ) | |||||||||||
Stock-based compensation | — | — | 5,213 | — | — | — | 5,213 | |||||||||||||||||||||
Exercise of stock options | 162,341 | 2 | 1,131 | — | — | — | 1,133 | |||||||||||||||||||||
Settlement of restricted stock units | 328,309 | 3 | (3 | ) | — | — | — | — | ||||||||||||||||||||
Acquisition of treasury stock | (239,017 | ) | — | — | — | (1,607 | ) | — | (1,607 | ) | ||||||||||||||||||
Other comprehensive income, net | — | — | — | — | — | 13,004 | 13,004 | |||||||||||||||||||||
Net loss | — | — | — | (3,900 | ) | — | — | (3,900 | ) | |||||||||||||||||||
Balance at December 31, 2018 | 34,441,232 | $ | 431 | $ | 142,600 | $ | (36,305 | ) | $ | (103,926 | ) | $ | (20,110 | ) | $ | (17,310 | ) | |||||||||||
Stock-based compensation | — | — | 6,952 | — | — | — | 6,952 | |||||||||||||||||||||
Exercise of stock options | 452,819 | 4 | 2,856 | — | — | — | 2,860 | |||||||||||||||||||||
Settlement of restricted stock units | 344,714 | 4 | (4 | ) | — | — | — | — | ||||||||||||||||||||
Acquisition of treasury stock | (438,453 | ) | — | — | — | (3,107 | ) | — | (3,107 | ) | ||||||||||||||||||
Other comprehensive income, net | — | — | — | — | — | 17,450 | 17,450 | |||||||||||||||||||||
Net loss | — | — | — | (21,826 | ) | — | — | (21,826 | ) | |||||||||||||||||||
Balance at December 31, 2019 | 34,800,312 | $ | 439 | $ | 152,404 | $ | (58,131 | ) | $ | (107,033 | ) | $ | (2,660 | ) | $ | (14,981 | ) | |||||||||||
Stock-based compensation | — | — | 6,699 | — | — | — | 6,699 | |||||||||||||||||||||
Exercise of stock options | 510,648 | 5 | 3,913 | — | — | — | 3,918 | |||||||||||||||||||||
Settlement of restricted stock units | 581,215 | 6 | (6 | ) | — | — | — | — | ||||||||||||||||||||
Acquisition of treasury stock | (108,828 | ) | — | — | — | (1,364 | ) | — | (1,364 | ) | ||||||||||||||||||
Other comprehensive income, net | — | — | — | — | — | 6,363 | 6,363 | |||||||||||||||||||||
Net income | — | — | — | 344,965 | — | — | 344,965 | |||||||||||||||||||||
Balance at December 31, 2020 | 35,783,347 | $ | 450 | $ | 163,010 | $ | 286,834 | $ | (108,397 | ) | $ | 3,703 | $ | 345,600 | ||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings (Deficit) | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||||||||||
(In thousands of U.S. dollars, except share data) | Shares | Amount | ||||||||||||||||||||||||||
Balance at December 31, 2019 | 34,800,312 | $ | 439 | $ | 152,404 | $ | (58,131 | ) | $ | (107,033 | ) | $ | (2,660 | ) | $ | (14,981 | ) | |||||||||||
Stock-based compensation | — | — | 6,699 | — | — | — | 6,699 | |||||||||||||||||||||
Exercise of stock options | 510,648 | 5 | 3,913 | — | — | — | 3,918 | |||||||||||||||||||||
Settlement of restricted stock units | 581,215 | 6 | (6 | ) | — | — | — | — | ||||||||||||||||||||
Acquisition of treasury stock | (108,828 | ) | — | — | — | (1,364 | ) | — | (1,364 | ) | ||||||||||||||||||
Other comprehensive income, net | — | — | — | — | — | 6,363 | 6,363 | |||||||||||||||||||||
Net income | — | — | — | 344,965 | — | — | 344,965 | |||||||||||||||||||||
Balance at December 31, 2020 | 35,783,347 | $ | 450 | $ | 163,010 | $ | 286,834 | $ | (108,397 | ) | $ | 3,703 | $ | 345,600 | ||||||||||||||
Stock-based compensation | — | — | 7,704 | — | — | — | 7,704 | |||||||||||||||||||||
Exchange of exchangeable senior note | 10,144,131 | 101 | 83,639 | — | — | — | 83,740 | |||||||||||||||||||||
Exercise of stock options | 336,870 | 3 | 4,276 | — | — | — | 4,279 | |||||||||||||||||||||
Settlement of restricted stock units | 480,465 | 5 | (5 | ) | — | — | — | — | ||||||||||||||||||||
Accelerated stock repurchase | (994,695 | ) | — | (17,427 | ) | — | (20,073 | ) | — | (37,500 | ) | |||||||||||||||||
Acquisition of treasury stock | (90,814 | ) | — | — | — | (1,836 | ) | — | (1,836 | ) | ||||||||||||||||||
Other comprehensive loss, net | — | — | — | — | — | (5,933 | ) | (5,933 | ) | |||||||||||||||||||
Net income | — | — | — | 56,708 | — | — | 56,708 | |||||||||||||||||||||
Balance at December 31, 2021 | 45,659,304 | $ | 559 | $ | 241,197 | $ | 343,542 | $ | (130,306 | ) | $ | (2,230 | ) | $ | 452,762 | |||||||||||||
Stock-based compensation | — | — | 6,037 | — | — | — | 6,037 | |||||||||||||||||||||
Exercise of stock options | 152,326 | 1 | 1,785 | — | — | — | 1,786 | |||||||||||||||||||||
Settlement of restricted stock units | 374,803 | 4 | (178 | ) | — | — | — | (174 | ) | |||||||||||||||||||
Accelerated stock repurchase | (1,031,576 | ) | — | 17,217 | — | (17,217 | ) | — | — | |||||||||||||||||||
Acquisition of treasury stock | (1,330,282 | ) | — | — | — | (13,899 | ) | — | (13,899 | ) | ||||||||||||||||||
Other comprehensive loss, net | — | — | — | — | — | (10,323 | ) | (10,323 | ) | |||||||||||||||||||
Net loss | — | — | — | (8,036 | ) | — | — | (8,036 | ) | |||||||||||||||||||
Balance at December 31, 2022 | 43,824,575 | $ | 564 | $ | 266,058 | $ | 335,506 | $ | (161,422 | ) | $ | (12,553 | ) | $ | 428,153 | |||||||||||||
Year | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(In | ||||||||||||
Cash | ||||||||||||
Net income (loss) | $ | 344,965 | $ | (21,826 | ) | $ | (3,900 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||||||||||||
Depreciation and amortization | 16,481 | 32,729 | 32,048 | |||||||||
Provision for severance benefits | 16,743 | 17,139 | 17,644 | |||||||||
Amortization of debt issuance costs and original issue discount | 2,220 | 2,299 | 2,183 | |||||||||
Loss (gain) on foreign currency, net | (23,233 | ) | 24,692 | 30,215 | ||||||||
Restructuring and other charges | 3,502 | 3,598 | — | |||||||||
Provision for inventory reserves | 3,695 | 10,468 | 4,290 | |||||||||
Stock-based compensation | 6,699 | 6,952 | 4,409 | |||||||||
Loss on early extinguishment of borrowings, net | 766 | 42 | 206 | |||||||||
Gain on sale of discontinued operations | (287,117 | ) | — | — | ||||||||
Deferred income tax assets | (44,441 | ) | 35 | 54 | ||||||||
Others, net | 217 | 247 | (1,235 | ) | ||||||||
Changes in operating assets and liabilities | ||||||||||||
Accounts receivable, net | (19,268 | ) | (19,824 | ) | 8,294 | |||||||
Unbilled accounts receivable, net | 14,260 | 19,274 | (1,284 | ) | ||||||||
Inventories | (816 | ) | (14,678 | ) | (34,965 | ) | ||||||
Other receivables | 6,954 | (6,200 | ) | 1,260 | ||||||||
Other current assets | 13,561 | 11,984 | 9,942 | |||||||||
Accounts payable | 3,960 | 7,375 | (8,389 | ) | ||||||||
Other accounts payable | (12,000 | ) | (8,518 | ) | (11,183 | ) | ||||||
Accrued expenses | (28,756 | ) | 5,279 | (3,926 | ) | |||||||
Accrued income taxes | 10,825 | 267 | 1,103 | |||||||||
Deferred revenue | 2,174 | (4,768 | ) | 2,891 | ||||||||
Other current liabilities | 279 | (4,727 | ) | 1,020 | ||||||||
Other non-current liabilities | 3,521 | (306 | ) | 2,346 | ||||||||
Contributions to severance insurance deposit accounts | (11,921 | ) | (2,262 | ) | (2,532 | ) | ||||||
Payment of severance benefits | (12,076 | ) | (9,288 | ) | (11,688 | ) | ||||||
Others, net | (3,724 | ) | 514 | 433 | ||||||||
Net cash provided by operating activities | 7,470 | 50,497 | 39,236 | |||||||||
Cash flows from investing activities | ||||||||||||
Proceeds from settlement of hedge collateral | 13,762 | 13,583 | 14,342 | |||||||||
Payment of hedge collateral | (8,839 | ) | (17,833 | ) | (12,907 | ) | ||||||
Proceeds from disposal of plant, property and equipment | 65 | 202 | 1,685 | |||||||||
Purchase of property, plant and equipment | (36,100 | ) | (22,955 | ) | (28,948 | ) | ||||||
Payment for property related to water treatment facility arrangement | — | — | (4,283 | ) | ||||||||
Payment for intellectual property registration | (741 | ) | (1,103 | ) | (961 | ) | ||||||
Collection of guarantee deposits | 1,024 | 549 | 801 | |||||||||
Payment of guarantee deposits | (1,236 | ) | (1,349 | ) | (3,016 | ) | ||||||
Proceeds from sale of discontinued operations | 350,553 | — | — | |||||||||
Other, net | (6 | ) | 9 | (19 | ) | |||||||
Net cash provided by (used in) investing activities | 318,482 | (28,897 | ) | (33,306 | ) | |||||||
Cash flows from financing activities | ||||||||||||
Repayment of borrowings | (224,250 | ) | (1,175 | ) | (2,228 | ) | ||||||
Proceeds from exercise of stock options | 3,918 | 2,860 | 1,132 | |||||||||
Acquisition of treasury stock | (1,125 | ) | (2,702 | ) | (1,607 | ) | ||||||
Proceeds from property related to water treatment facility arrangement | 0— | — | 4,283 | |||||||||
Repayment of financing related to water treatment facility arrangement | (546 | ) | (552 | ) | (286 | ) | ||||||
Others | (278 | ) | (233 | ) | — | |||||||
Net cash provided by (used in) financing activities | (222,281 | ) | (1,802 | ) | 1,294 | |||||||
Effect of exchange rates on cash and cash equivalents | 24,612 | (579 | ) | (3,361 | ) | |||||||
Net increase in cash and cash equivalents | 128,283 | 19,219 | 3,863 | |||||||||
Cash and cash equivalents | ||||||||||||
Beginning of the period | 151,657 | 132,438 | 128,575 | |||||||||
End of the period | $ | 279,940 | $ | 151,657 | $ | 132,438 | ||||||
Supplemental cash flow information | ||||||||||||
Cash paid for interest | $ | 22,221 | $ | 19,071 | $ | 19,255 | ||||||
Cash paid for income taxes | $ | 23,056 | $ | 2,081 | $ | 920 | ||||||
Non-cash investing and financing activities | ||||||||||||
Property, plant and equipment additions in other accounts payable | $ | — | $ | 2,542 | $ | 5,249 | ||||||
Acquisition of treasury stock to satisfy the tax withholding obligations in connection with equity-based compensation | $ | (643 | ) | $ | (405 | ) | $ | — | ||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
(In thousands of U.S. dollars) | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net income (loss) | $ | (8,036 | ) | $ | 56,708 | $ | 344,965 | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||||||||||||
Depreciation and amortization | 15,000 | 14,239 | 16,481 | |||||||||
Provision for severance benefits | 6,289 | 8,282 | 16,743 | |||||||||
Amortization of debt issuance costs and original issue discount | — | 261 | 2,220 | |||||||||
Loss (gain) on foreign currency, net | 19,729 | 32,432 | (23,233 | ) | ||||||||
Provision for inventory reserves | 9,574 | 2,244 | 3,695 | |||||||||
Stock-based compensation | 6,037 | 7,704 | 6,699 | |||||||||
Loss on early extinguishment of borrowings | — | — | 766 | |||||||||
Gain on sale of discontinued operations | — | — | (287,117 | ) | ||||||||
Deferred income tax assets | 278 | 918 | (44,441 | ) | ||||||||
Other, net | 664 | (613 | ) | 217 | ||||||||
Changes in operating assets and liabilities | ||||||||||||
Accounts receivable, net | 10,276 | 7,505 | (19,268 | ) | ||||||||
Unbilled accounts receivable, net | — | — | 14,260 | |||||||||
Inventories | (12,626 | ) | (5,939 | ) | (816 | ) | ||||||
Other receivables | 18,146 | (21,538 | ) | 6,954 | ||||||||
Other current assets | (4,150 | ) | 12,397 | 13,561 | ||||||||
Accounts payable | (16,325 | ) | (11,437 | ) | 4,907 | |||||||
Other accounts payable | (9,410 | ) | (7,798 | ) | (12,000 | ) | ||||||
Accrued expenses | (7,228 | ) | 4,637 | (26,201 | ) | |||||||
Accrued income taxes | (8,400 | ) | (1 | ) | 10,825 | |||||||
Deferred revenue | (1,261 | ) | (131 | ) | 2,174 | |||||||
Other current liabilities | (645 | ) | 1,445 | 279 | ||||||||
Other non-current liabilities | 749 | (1,398 | ) | 3,521 | ||||||||
Contributions to severance insurance deposit accounts | (7,899 | ) | (5,688 | ) | (11,921 | ) | ||||||
Payment of severance benefits | (6,012 | ) | (6,679 | ) | (12,076 | ) | ||||||
Other, net | 415 | 193 | (3,724 | ) | ||||||||
Net cash provided by operating activities | 5,165 | 87,743 | 7,470 | |||||||||
Cash flows from investing activities | ||||||||||||
Proceeds from settlement of hedge collateral | 15,232 | 5,214 | 13,762 | |||||||||
Payment of hedge collateral | (15,282 | ) | (3,349 | ) | (8,839 | ) | ||||||
Proceeds from disposal of property, plant and equipment | 550 | 1,446 | 65 | |||||||||
Purchase of property, plant and equipment | (23,394 | ) | (32,212 | ) | (36,100 | ) | ||||||
Payment for intellectual property registration | (390 | ) | (614 | ) | (741 | ) | ||||||
Collection of guarantee deposits | — | 3,192 | 1,024 | |||||||||
Payment of guarantee deposits | (2,381 | ) | (5,001 | ) | (1,236 | ) | ||||||
Proceeds from sale of discontinued operations | — | — | 350,553 | |||||||||
Other, net | 737 | (114 | ) | (6 | ) | |||||||
Net cash provided by (used in) investing activities | (24,928 | ) | (31,438 | ) | 318,482 | |||||||
Cash flows from financing activities | ||||||||||||
Repayment of borrowings | — | — | (224,250 | ) | ||||||||
Proceeds from exercise of stock options | 1,786 | 4,279 | 3,918 | |||||||||
Acquisition of treasury stock | (13,960 | ) | (1,653 | ) | (1,125 | ) | ||||||
Acquisition of stock under accelerated stock repurchase agreement | — | (20,073 | ) | — | ||||||||
Payment under accelerated stock repurchase agreement | — | (17,427 | ) | — | ||||||||
Repayment of financing related to water treatment facility arrangement | (500 | ) | (563 | ) | (546 | ) | ||||||
Others | (70 | ) | (107 | ) | (278 | ) | ||||||
Net cash used in financing activities | (12,744 | ) | (35,544 | ) | (222,281 | ) | ||||||
Effect of exchange rates on cash and cash equivalents | (21,563 | ) | (21,154 | ) | 24,612 | |||||||
Net increase (decrease) in cash and cash equivalents | (54,070 | ) | (393 | ) | 128,283 | |||||||
Cash and cash equivalents at beginning of period | 279,547 | 279,940 | 151,657 | |||||||||
Cash and cash equivalents at end of period | $ | 225,477 | $ | 279,547 | $ | 279,940 | ||||||
Supplemental cash flow information | ||||||||||||
Cash paid for interest | $ | — | $ | 2,094 | $ | 22,221 | ||||||
Cash paid for income taxes | $ | 18,988 | $ | 12,672 | $ | 23,056 | ||||||
Non-cash investing and financing activities | ||||||||||||
Property, plant and equipment additions in other accounts payable | $ | 190 | $ | 747 | $ | — | ||||||
Acquisition of treasury stock to satisfy the tax withholding obligations in connection with equity-based compensation | $ | 387 | $ | 826 | $ | 643 | ||||||
Unsettled common stock repurchases | $ | 378 | $ | — | $ | — | ||||||
Exchange of exchangeable senior notes into common stock | $ | — | $ | 83,740 | $ | — |
Buildings | 30 - 40 years | |||
Building related structures | 10 - 20 years | |||
Machinery and equipment | 10 - 12 years | |||
Others | 3 - 10 years |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(In thousands of U.S. dollars, except share data) | ||||||||||||
Revenues: | ||||||||||||
Net sales—Foundry Services Group | $ | 254,732 | $ | 307,348 | $ | 325,408 | ||||||
Net sales—transitional Fab 3 foundry services | (25,887 | ) | (35,824 | ) | (39,935 | ) | ||||||
Total revenues | 228,845 | 271,524 | 285,473 | |||||||||
Cost of sales: | ||||||||||||
Cost of sales—Foundry Services Group | 182,872 | 243,134 | 242,960 | |||||||||
Cost of sales—transitional Fab 3 foundry services | (25,887 | ) | (35,824 | ) | (39,935 | ) | ||||||
Total cost of sales | 156,985 | 207,310 | 203,025 | |||||||||
Gross profit | 71,860 | 64,214 | 82,448 | |||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative expenses | 14,797 | 24,042 | 24,927 | |||||||||
Research and development expenses | 19,484 | 30,332 | 31,995 | |||||||||
Restructuring and other charges | 15,873 | 9,142 | — | |||||||||
Total operating expenses | 50,154 | 63,516 | 56,922 | |||||||||
Operating income from discontinued operations | 21,706 | 698 | 25,526 | |||||||||
Foreign currency gain, net | 1,277 | 503 | 1,862 | |||||||||
Others, net | 72 | (67 | ) | 217 | ||||||||
Income from discontinued operations before income tax expense | 23,055 | 1,134 | 27,605 | |||||||||
Income tax expense | 11,452 | 2,547 | 5,728 | |||||||||
Gain on sale of discontinued operations | 287,117 | — | — | |||||||||
Transaction costs | (10,814 | ) | — | — | ||||||||
Income (loss) from discontinued operations, net of tax | 287,906 | (1,413 | ) | 21,877 | ||||||||
Year Ended December 31, | ||||
(In thousands of U.S. dollars) | ||||
Revenues: | ||||
Net sales—Foundry Services Group | $ | 254,732 | ||
Net sales—transitional Fab 3 foundry services | (25,887 | ) | ||
Total revenues | 228,845 | |||
Cost of sales: | ||||
Cost of sales—Foundry Services Group | 182,872 | |||
Cost of sales—transitional Fab 3 foundry services | (25,887 | ) | ||
Total cost of sales | 156,985 | |||
Gross profit | 71,860 | |||
Operating expenses: | ||||
Selling, general and administrative expenses | 14,797 | |||
Research and development expenses | 19,484 | |||
Restructuring and other charges | 15,873 | |||
Total operating expenses | 50,154 | |||
Operating income from discontinued operations | 21,706 | |||
Foreign currency gain, net | 1,277 | |||
Others, net | 72 | |||
Income from discontinued operations before income tax expense | 23,055 | |||
Income tax expense | 11,452 | |||
Gain on sale of discontinued operations | 287,117 | |||
Transaction costs | (10,814 | ) | ||
Income from discontinued operations, net of tax | 287,906 | |||
December 31, 2019 | ||||
(In thousands of U.S. dollars) | ||||
Assets | ||||
Current assets | ||||
Accounts receivable, net | $ | 48,194 | ||
Unbilled accounts receivable | 16,463 | |||
Inventories, net | 31,863 | |||
Other current assets | 3,301 | |||
Total current assets held for sale | $ | 99,821 | ||
Property, plant and equipment, net | 109,506 | |||
Intangible assets, net | 1,245 | |||
Other non-current assets | 12,683 | |||
Total assets held for sale | $ | 223,255 | ||
Liabilities | ||||
Current liabilities | ||||
Accounts payable | $ | 20,503 | ||
Other current liabilities | 16,537 | |||
Total current liabilities held for sale | $ | 37,040 | ||
Accrued severance benefits, net | 95,547 | |||
Other non-current liabilities | 15,334 | |||
Total liabilities held for sale | $ | 147,921 | ||
Year Ended December 31, | ||||
(In thousands of U.S. dollars) | ||||
Significant non-cash operating activities: | ||||
Depreciation and amortization | $ | 5,365 | ||
Provision for severance benefits | 8,209 | |||
Stock-based compensation | 388 | |||
Investing activities: | ||||
Capital expenditures | $ | (5,838 | ) |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(In thousands of U.S. dollars) | ||||||||||||
Significant non-cash operating activities: | ||||||||||||
Depreciation and amortization | $ | 5,365 | $ | 22,411 | $ | 23,220 | ||||||
Provision for severance benefits | 8,209 | 10,879 | 10,230 | |||||||||
Stock-based compensation | 388 | 899 | 627 | |||||||||
Investing activities: | ||||||||||||
Capital expenditures | $ | (5,838 | ) | $ | (11,653 | ) | $ | (14,170 | ) |
Carrying Value December 31, 2020 | Fair Value Measurement December 31, 2020 | Quoted Prices in Active Markets for Identical Asset / Liability (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||
Assets: | ||||||||||||||||||||
Derivative assets (other current assets) | $ | 2,036 | $ | 2,036 | — | $ | 2,036 | — | ||||||||||||
Liabilities: | ||||||||||||||||||||
Derivative liabilities (other current liabilities) | $ | 195 | $ | 195 | — | $ | 195 | — |
Carrying Value December 31, 2022 | Fair Value Measurement December 31, 2022 | Quoted Prices in Active Markets for Identical Liability (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||
Liabilities: | ||||||||||||||||||||
Derivative liabilities (other current liabilities) | $ | 2,015 | $ | 2,015 | — | $ | 2,015 | — |
Carrying Value December 31, 2021 | Fair Value Measurement December 31, 2021 | Quoted Prices in Active Markets for Identical Liability (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||
Liabilities: | ||||||||||||||||||||
Derivative liabilities (other current liabilities) | $ | 2,020 | $ | 2,020 | — | $ | 2,020 | — |
Carrying Value December 31, 2019 | Fair Value Measurement December 31, 2019 | Quoted Prices in Active Markets for Identical Asset (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||
Assets: | ||||||||||||||||||||
Derivative assets (other current assets) | $ | 1,456 | $ | 1,456 | — | $ | 1,456 | — |
December 31, 2020 | December 31, 2019 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
(In thousands of U.S. dollars) | ||||||||||||||||
Borrowings: | ||||||||||||||||
5.0% Exchangeable Senior Notes due March 2021 (Level 2) | $ | 83,479 | $ | 145,466 | $ | 81,959 | $ | 116,078 | ||||||||
6.625% Senior Notes due July 2021 (Level 2) | $ | — | $ | — | $ | 222,784 | $ | 224,250 |
December 31, | ||||||||
2020 | 2019 | |||||||
Accounts receivable | $ | 63,145 | $ | 44,176 | ||||
Notes receivable | 1,606 | 3,707 | ||||||
Less: | ||||||||
Allowance for credit losses | (188 | ) | (49 | ) | ||||
Sales return reserves | (173 | ) | (387 | ) | ||||
Accounts receivable, net | $ | 64,390 | $ | 47,447 | ||||
December 31, | ||||||||
2022 | 2021 | |||||||
Accounts receivable | $ | 35,610 | $ | 50,363 | ||||
Notes receivable | 32 | 1,242 | ||||||
Less: | ||||||||
Allowance for credit losses | (79 | ) | (466 | ) | ||||
Sales return reserves | (183 | ) | (185 | ) | ||||
Accounts receivable, net | $ | 35,380 | $ | 50,954 | ||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Beginning balance | $ | (49 | ) | $ | (51 | ) | $ | (53 | ) | |||
Provision | (131 | ) | — | — | ||||||||
Translation adjustments | (8 | ) | 2 | 2 | ||||||||
Ending balance | $ | (188 | ) | $ | (49 | ) | $ | (51 | ) | |||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Beginning balance | $ | (466 | ) | $ | (188 | ) | $ | (49 | ) | |||
Provision | — | (302 | ) | (131 | ) | |||||||
Write off | 378 | — | — | |||||||||
Translation adjustments | 9 | 24 | (8 | ) | ||||||||
Ending balance | $ | (79 | ) | $ | (466 | ) | $ | (188 | ) | |||
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2022 | 2021 | 2020 | |||||||||||||||||||
Beginning balance | $ | (387 | ) | $ | (439 | ) | $ | (628 | ) | $ | (185 | ) | $ | (173 | ) | $ | (387 | ) | ||||||
Reversal (provision) | 22 | (136 | ) | (245 | ) | (11 | ) | (27 | ) | 22 | ||||||||||||||
Usage | 196 | 170 | 414 | — | — | 196 | ||||||||||||||||||
Translation adjustments | (4 | ) | 18 | 20 | 13 | 15 | (4 | ) | ||||||||||||||||
Ending balance | $ | (173 | ) | $ | (387 | ) | $ | (439 | ) | $ | (183 | ) | $ | (185 | ) | $ | (173 | ) | ||||||
December 31, | ||||||||
2020 | 2019 | |||||||
Finished goods | $ | 6,425 | $ | 10,087 | ||||
Semi-finished goods and work-in-process | 30,968 | 28,815 | ||||||
Raw materials | 6,526 | 8,449 | ||||||
Materials in-transit | 1,021 | — | ||||||
Less: inventory reserve | (5,901 | ) | (5,947 | ) | ||||
Inventories, net | $ | 39,039 | $ | 41,404 | ||||
December 31, | ||||||||
2022 | 2021 | |||||||
Finished goods | $ | 6,799 | $ | 9,594 | ||||
Semi-finished goods and work-in-process | 40,265 | 25,968 | ||||||
Raw materials | 7,460 | 9,443 | ||||||
Materials in-transit | 36 | 95 | ||||||
Less: inventory reserve | (14,677 | ) | (5,730 | ) | ||||
Inventories, net | $ | 39,883 | $ | 39,370 | ||||
Year | Year Ended December 31, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2022 | 2021 | 2020 | |||||||||||||||||||
Beginning balance | $ | (5,947 | ) | $ | (4,845 | ) | $ | (6,094 | ) | $ | (5,730 | ) | $ | (5,901 | ) | $ | (5,947 | ) | ||||||
Change in reserve | ||||||||||||||||||||||||
Inventory reserve charged to costs of sales | (7,268 | ) | (12,941 | ) | (6,721 | ) | (13,310 | ) | (7,626 | ) | (7,268 | ) | ||||||||||||
Sale of previously reserved inventory | 4,349 | 2,938 | 3,709 | 3,631 | 5,349 | 4,349 | ||||||||||||||||||
(2,919 | ) | (10,003 | ) | (3,012 | ) | (9,679 | ) | (2,277 | ) | (2,919 | ) | |||||||||||||
Write off | 2,679 | 8,451 | 4,065 | 582 | 1,875 | 2,679 | ||||||||||||||||||
Translation adjustments | (408 | ) | 450 | 196 | 150 | 573 | (408 | ) | ||||||||||||||||
Reclassified to assets held for sale | 694 | — | — | — | — | 694 | ||||||||||||||||||
Ending balance | $ | (5,901 | ) | $ | (5,947 | ) | $ | (4,845 | ) | $ | (14,677 | ) | $ | (5,730 | ) | $ | (5,901 | ) | ||||||
December 31, | ||||||||
2020 | 2019 | |||||||
Buildings and related structures | $ | 24,882 | $ | 22,502 | ||||
Machinery and equipment | 106,244 | 89,453 | ||||||
Finance lease right-of-use | 344 | 323 | ||||||
Others | 40,116 | 22,242 | ||||||
171,586 | 134,520 | |||||||
Less: accumulated depreciation | (90,370 | ) | (75,704 | ) | ||||
Land | 15,167 | 14,252 | ||||||
Property, plant and equipment, net | $ | 96,383 | $ | 73,068 | ||||
December 31, | ||||||||
2022 | 2021 | |||||||
Buildings and related structures | $ | 24,780 | $ | 24,273 | ||||
Machinery and equipment | 137,666 | 105,300 | ||||||
Finance lease right-of-use | 389 | 316 | ||||||
Others | 33,890 | 32,396 | ||||||
196,725 | 162,285 | |||||||
Less: accumulated depreciation | (101,502 | ) | (94,119 | ) | ||||
Land | 13,034 | 13,898 | ||||||
Construction in progress | 2,490 | 25,818 | ||||||
Property, plant and equipment, net | $ | 110,747 | $ | 107,882 | ||||
December 31, 2020 | ||||||||||||
Gross amount | Accumulated amortization | Net amount | ||||||||||
Intellectual property assets | $ | 9,486 | $ | (6,759 | ) | $ | 2,727 | |||||
Intangible assets, net | $ | 9,486 | $ | (6,759 | ) | $ | 2,727 | |||||
December 31, 2022 | ||||||||||||
Gross amount | Accumulated amortization | Net amount | ||||||||||
Intellectual property assets | $ | 9,111 | $ | (7,181 | ) | $ | 1,930 | |||||
Intangible assets | $ | 9,111 | $ | (7,181 | ) | $ | 1,930 | |||||
December 31, 2019 | ||||||||||||
Gross amount | Accumulated amortization | Net amount | ||||||||||
Technology | $ | 6,575 | $ | (6,575 | ) | $ | — | |||||
Customer relationships | 10,180 | (10,180 | ) | — | ||||||||
Intellectual property assets | 8,637 | (5,868 | ) | 2,769 | ||||||||
Intangible assets, net | $ | 25,392 | $ | (22,623 | ) | $ | 2,769 | |||||
December 31, 2021 | ||||||||||||
Gross amount | Accumulated amortization | Net amount | ||||||||||
Intellectual property assets | $ | 9,312 | $ | (6,935 | ) | $ | 2,377 | |||||
Intangible assets | $ | 9,312 | $ | (6,935 | ) | $ | 2,377 | |||||
December 31, | ||||||||||
Leases | Classification | 2020 | 2019 | |||||||
Assets | ||||||||||
Operating lease | Operating lease right-of-use assets | $ | 4,632 | $ | 1,876 | |||||
Finance lease | Property, plant and equipment, net | 206 | 258 | |||||||
Total lease assets | $ | 4,838 | $ | 2,134 | ||||||
Liabilities | ||||||||||
Current | ||||||||||
Operating | Operating lease liabilities | $ | 2,210 | $ | 1,625 | |||||
Finance | Other current liabilities | 68 | 60 | |||||||
Non-current | ||||||||||
Operating | Non-current operating lease liabilities | 2,422 | 251 | |||||||
Finance | Other non-current liabilities | 153 | 208 | |||||||
Total lease liabilities | $ | 4,853 | $ | 2,144 | ||||||
December 31, | ||||||||||
Leases | Classification | 2022 | 2021 | |||||||
Assets | ||||||||||
Operating lease | Operating lease right-of-use | $ | 5,265 | $ | 4,275 | |||||
Finance lease | Property, plant and equipment, net | 143 | 126 | |||||||
Total lease assets | $ | 5,408 | $ | 4,401 | ||||||
Liabilities | ||||||||||
Current | ||||||||||
Operating | Operating lease liabilities | $ | 1,397 | $ | 2,323 | |||||
Finance | Other current liabilities | 90 | 68 | |||||||
Non-current | ||||||||||
Operating | Non-current operating lease liabilities | 4,091 | 1,952 | |||||||
Finance | Other non-current liabilities | 63 | 73 | |||||||
Total lease liabilities | $ | 5,641 | $ | 4,416 | ||||||
December 31, | December 31, | |||||||||||||||
2020 | 2019 | 2022 | 2021 | |||||||||||||
Weighted average remaining lease term | ||||||||||||||||
Operating leases | 3.0 years | 1.1 years | 3.7 years | 2.4 years | ||||||||||||
Finance leases | 3.0 years | 4.0 years | 2.4 years | 2.0 years | ||||||||||||
Weighted average discount rate | ||||||||||||||||
Operating leases | 5.55 | % | 7.19 | % | 6.6 | % | 4.2 | % | ||||||||
Finance leases | 7.75 | % | 7.75 | % | 7.6 | % | 7.8 | % |
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||
2020 | 2019 | 2022 | 2021 | 2020 | ||||||||||||||||
Operating lease cost | $ | 1,885 | $ | 1,990 | $ | 2,261 | $ | 2,777 | $ | 1,885 | ||||||||||
Finance lease cost | ||||||||||||||||||||
Amortization of right-of-use | 63 | 64 | 68 | 65 | 63 | |||||||||||||||
Interest on lease liabilities | 18 | 22 | 10 | 14 | 18 | |||||||||||||||
Total lease cost | $ | 1,966 | $ | 2,076 | $ | 2,339 | $ | 2,856 | $ | 1,966 | ||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||
2020 | 2019 | 2022 | 2021 | 2020 | ||||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||||||||
Operating cash flows from operating leases | $ | 1,885 | $ | 1,990 | $ | 2,276 | $ | 2,777 | $ | 1,885 | ||||||||||
Operating cash flows from finance leases | 18 | 22 | 10 | 14 | 18 | |||||||||||||||
Financing cash flows from finance leases | 76 | 55 | 70 | 65 | 76 |
Operating Leases | Finance Leases | Operating Leases | Finance Leases | |||||||||||||
2021 | $ | 2,424 | $ | 83 | ||||||||||||
2022 | 999 | 83 | ||||||||||||||
2023 | 623 | 83 | $ | 1,707 | $ | 99 | ||||||||||
2024 | 561 | 0 | 1,594 | 28 | ||||||||||||
2025 | 423 | 0 | 1,386 | 27 | ||||||||||||
2026 | 958 | 14 | ||||||||||||||
2027 | 663 | — | ||||||||||||||
Total future lease payments | 5,030 | 249 | 6,308 | 168 | ||||||||||||
Less: Imputed interest | (398 | ) | (28 | ) | (820 | ) | (15 | ) | ||||||||
Present value of future payments | $ | 4,632 | $ | 221 | $ | 5,488 | $ | 153 | ||||||||
December 31, | December 31, | |||||||||||||||
2020 | 2019 | 2022 | 2021 | |||||||||||||
Payroll, benefits and related taxes, excluding severance benefits | $ | 10,296 | $ | 8,493 | $ | 7,620 | $ | 9,548 | ||||||||
Withholding tax attributable to intercompany interest income | 28 | 23,371 | 43 | 1,950 | ||||||||||||
Interest on senior notes | 1,396 | 8,205 | ||||||||||||||
Outside service fees | 755 | 898 | 1,642 | 1,088 | ||||||||||||
Restructuring and others | 2,658 | 2,018 | ||||||||||||||
Merger-related costs | — | 7,035 | ||||||||||||||
Others | 1,108 | 1,814 | 383 | 450 | ||||||||||||
Accrued expenses | $ | 16,241 | $ | 44,799 | $ | 9,688 | $ | 20,071 | ||||||||
Date of transaction | Type of derivative | Total notional amount | Month of settlement | |||||
July 13, 2020 | Zero cost collar | $ | 30,000 | January 2021 to June 2021 | ||||
December 15, 2020 | Zero cost collar | $ | 30,000 | July 2021 to December 2021 | ||||
December 18, 2020 | Zero cost collar | $ | 18,000 | March 2021 to June 2021 |
Date of transaction | Type of derivative | Total notional amount | Month of settlement | |||||||
January 04, 2022 | Zero cost collar | $ | 30,000 | January 2023 to June 2023 | ||||||
March 07, 2022 | Zero cost collar | $ | 24,000 | July 2023 to December 2023 | ||||||
April 27, 2022 | Zero cost collar | $ | 42,000 | January 2023 to December 2023 |
Date of transaction | Type of derivative | Total notional amount | Month of settlement | |||||
August 13, 2019 | Zero cost collar | $ | 60,000 | January 2020 to June 2020 | ||||
September 27, 2019 | Zero cost collar | $ | 42,000 | January 2020 to June 2020 | ||||
December 4, 2019 | Zero cost collar | $ | 30,000 | July 2020 to December 2020 |
Date of transaction | Type of derivative | Total notional amount | Month of settlement | |||||||
May 13, 2021 | Zero cost collar | $ | 39,000 | January 2022 to September 2022 | ||||||
August 13, 2021 | Zero cost collar | $ | 48,000 | January 2022 to December 2022 |
Derivatives designated as hedging instruments: | Derivatives designated as hedging instruments: | December 31, | Derivatives designated as hedging instruments: | December 31, | ||||||||||||||||||||
2020 | 2019 | 2022 | 2021 | |||||||||||||||||||||
Asset Derivatives: | ||||||||||||||||||||||||
Zero cost collars | Other current assets | $ | 2,036 | $ | 1,456 | |||||||||||||||||||
Liability Derivatives: | ||||||||||||||||||||||||
Zero cost collars | Other current liabilities | $ | 195 | $ | — | Other current liabilities | $ | 2,015 | $ | 2,020 |
As of December 31, 2020 | Gross amounts of recognized assets/liabilities | Gross amounts offset in the balance sheets | Net amounts of assets/liabilities presented in the balance sheets | Gross amounts not offset in the balance sheets | Net amount | |||||||||||||||||||||||||||||||||||||||||||
Financial instruments | Cash collateral pledged | |||||||||||||||||||||||||||||||||||||||||||||||
Asset Derivatives: | ||||||||||||||||||||||||||||||||||||||||||||||||
Zero cost collars | $ | 2,036 | $ | — | $ | 2,036 | $ | — | $ | — | $ | 2,036 | ||||||||||||||||||||||||||||||||||||
As of December 31, 2022 | Gross amounts of recognized liabilities | Gross amounts offset in the balance sheets | Net amounts of liabilities presented in the balance sheets | Gross amounts not offset in the balance sheets | Net amount | |||||||||||||||||||||||||||||||||||||||||||
Financial instruments | Cash collateral pledged | |||||||||||||||||||||||||||||||||||||||||||||||
Liability Derivatives: | ||||||||||||||||||||||||||||||||||||||||||||||||
Zero cost collars | $ | 195 | $ | — | $ | 195 | $ | — | $ | — | $ | 195 | $ | 2,015 | $ | — | $ | 2,015 | $ | — | $ | (1,940 | ) | $ | 75 |
As of December 31, 2019 | Gross amounts of recognized assets | Gross amounts offset in the balance sheets | Net amounts of assets presented in the balance sheets | Gross amounts not offset in the balance sheets | Net amount | |||||||||||||||||||
Financial instruments | Cash collateral pledged | |||||||||||||||||||||||
Asset Derivatives: | ||||||||||||||||||||||||
Zero cost collars | $ | 1,456 | $ | — | $ | 1,456 | $ | — | $ | 1,070 | $ | 2,526 |
As of December 31, 2021 | Gross amounts of recognized liabilities | Gross amounts offset in the balance sheets | Net amounts of liabilities presented in the balance sheets | Gross amounts not offset in the balance sheets | Net amount | |||||||||||||||||||
Financial instruments | Cash collateral pledged | |||||||||||||||||||||||
Liability Derivatives: | ||||||||||||||||||||||||
Zero cost collars | $ | 2,020 | $ | — | $ | 2,020 | $ | — | $ | (2,060 | ) | $ | (40 | ) |
Derivatives in ASC 815 Cash Flow Hedging Relationships | Amount of Gain (Loss) Recognized in AOCI on Derivatives | Location/Amount of Gain (Loss) Reclassified from AOCI Into Statement of Operations | Location/Amount of Gain (Loss) Recognized in Statement of Operations on Derivatives | Amount of Loss Recognized in AOCI on Derivatives | Location/Amount of Loss Reclassified from AOCI Into Statement of Operations | Location/Amount of Gain Recognized in Statement of Operations on Derivatives | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Zero cost collars | $ | 1,769 | $ | (1,096 | ) | Net sales | $ | 1,363 | $ | (2,738 | ) | Other income (expense), net | $ | 148 | $ | (193 | ) | $ | (8,273 | ) | $ | (4,665 | ) | Net sales | $ | (8,514 | ) | $ | (819 | ) | Other income, net | $ | 135 | $ | 123 | |||||||||||||||||||||||||||||
Forwards | $ | — | $ | (1,798 | ) | Net sales | $ | — | $ | (1,750 | ) | Other income (expense), net | $ | — | $ | (125 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
$ | 1,769 | $ | (2,894 | ) | $ | 1,363 | $ | (4,488 | ) | $ | 148 | $ | (318 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, | ||||||||
Counterparties | 2020 | 2019 | ||||||
NFIK | $ | 3,250 | $ | 7,750 | ||||
DB | 1,000 | 1,000 | ||||||
SC | 1,000 | — | ||||||
Total | $ | 5,250 | $ | 8,750 | ||||
December 31, | ||||||||
Counterparty | 2022 | 2021 | ||||||
SC | $ | 1,000 | $ | 1,000 | ||||
Total | $ | 1,000 | $ | 1,000 | ||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Beginning balance | $ | 735 | $ | 115 | $ | 51 | ||||||
Provision (reversal) | (606 | ) | 932 | 220 | ||||||||
Usage | (61 | ) | (314 | ) | (154 | ) | ||||||
Translation adjustments | (20 | ) | 2 | (2 | ) | |||||||
Ending balance | $ | 48 | $ | 735 | $ | 115 | ||||||
December 31, | ||||||||
2020 | 2019 | |||||||
5.0% Exchangeable Senior Notes due March 2021 | $ | 83,740 | $ | 83,740 | ||||
6.625% Senior Notes due July 2021 | — | 224,250 | ||||||
Less: unamortized discount and debt issuance costs | (261 | ) | (3,247 | ) | ||||
Total borrowings, net | 83,479 | 304,743 | ||||||
Less: current portion of long-term borrowings, net | 83,479 | — | ||||||
Long-term borrowings, net | $ | — | $ | 304,743 | ||||
Year Ended December 31, | Year Ended December 31, | |||||||||||||||
2020 | 2019 | 2022 | 2021 | |||||||||||||
Beginning balance | $ | 53,344 | $ | 55,691 | $ | 51,567 | $ | 54,452 | ||||||||
Provisions | 8,534 | 6,260 | 6,289 | 8,282 | ||||||||||||
Severance payments | (10,937 | ) | (6,733 | ) | (6,012 | ) | (6,679 | ) | ||||||||
Translation adjustments | 3,511 | (1,874 | ) | (3,348 | ) | (4,488 | ) | |||||||||
54,452 | 53,344 | 48,496 | 51,567 | |||||||||||||
Less: Cumulative contributions to severance insurance deposit accounts | (13,704 | ) | (1,856 | ) | (25,149 | ) | (18,250 | ) | ||||||||
The National Pension Fund | (66 | ) | (80 | ) | (41 | ) | (53 | ) | ||||||||
Group severance insurance plan | (220 | ) | (227 | ) | (185 | ) | (200 | ) | ||||||||
Accrued severance benefits, net | $ | 40,462 | $ | 51,181 | $ | 23,121 | $ | 33,064 | ||||||||
Severance Benefit | Severance Benefit | |||||||
2021 | $ | 218 | ||||||
2022 | 271 | |||||||
2023 | 663 | $ | 618 | |||||
2024 | 947 | 862 | ||||||
2025 | 2,245 | 1,431 | ||||||
2026 – 2030 | 19,292 | |||||||
2026 | 1,782 | |||||||
2027 | 1,622 | |||||||
2028 – 2032 | 19,305 |
Number of Restricted Stock Units | Weighted Average Grant-Date Fair Value of Restricted Stock Units | Number of Restricted Stock Units | Weighted Average Grant-Date Fair Value of Restricted Stock Units | |||||||||||||
Outstanding at January 1, 2018 | 340,753 | $ | 8.80 | |||||||||||||
Outstanding at December 31, 2021 | 833,961 | $ | 14.33 | |||||||||||||
Granted | 739,231 | 9.64 | 726,000 | 17.41 | ||||||||||||
Vested | (373,620 | ) | 9.24 | (374,803 | ) | 16.99 | ||||||||||
Unsettled | 45,311 | 9.22 | ||||||||||||||
Forfeited | (33,462 | ) | 10.31 | (369,751 | ) | 17.61 | ||||||||||
Outstanding at December 31, 2018 | 718,213 | $ | 9.39 | |||||||||||||
Outstanding at December 31, 2022 | 815,407 | $ | 14.36 | |||||||||||||
Granted | 711,719 | 11.85 | ||||||||||||||
Vested | (528,740 | ) | 11.00 | |||||||||||||
Unsettled | 226,215 | 12.16 | ||||||||||||||
Settled of previous year vesting | (42,189 | ) | 9.22 | |||||||||||||
Forfeited | (41,915 | ) | 10.00 | |||||||||||||
Outstanding at December 31, 2019 | 1,043,303 | $ | 10.83 | |||||||||||||
Granted | 642,372 | 11.11 | ||||||||||||||
Vested | (354,657 | ) | 10.82 | |||||||||||||
Settled of previous year vesting | (226,558 | ) | 12.16 | |||||||||||||
Forfeited | (104,704 | ) | 11.16 | |||||||||||||
Outstanding at December 31, 2020 | 999,756 | $ | 10.68 | |||||||||||||
Number of Options | Weighted Average Exercise Price of Stock Options | Aggregate Intrinsic Value of Stock Options | Weighted Average Remaining Contractual Life of Stock Options | |||||||||||||
Outstanding at January 1, 2018 | 2,871,904 | $ | 9.59 | $ | 6,073 | 6.2 years | ||||||||||
Forfeited | (34,807 | ) | 10.97 | — | — | |||||||||||
Exercised | (162,341 | ) | 6.97 | 737 | — | |||||||||||
Outstanding at December 31, 2018 | 2,674,756 | $ | 9.73 | $ | 395 | 5.2 years | ||||||||||
Vested and expected to vest at December 31, 2018 | 2,674,266 | 9.73 | 394 | 5.2 years | ||||||||||||
Exercisable at December 31, 2018 | 2,544,565 | 9.94 | 306 | 5.1 years | ||||||||||||
Outstanding at January 1, 2019 | 2,674,756 | $ | 9.73 | $ | 395 | 5.2 years | ||||||||||
Forfeited | (44,892 | ) | 10.29 | — | — | |||||||||||
Exercised | (452,819 | ) | 6.31 | 2,404 | — | |||||||||||
Outstanding at December 31, 2019 | 2,177,045 | $ | 10.42 | $ | 6,259 | 4.7 years | ||||||||||
Vested and Exercisable at December 31, 2019 | 2,177,045 | $ | 10.42 | $ | 6,259 | 4.7 years | ||||||||||
Outstanding at January 1, 2020 | 2,177,045 | $ | 10.42 | $ | 6,259 | 4.7 years | ||||||||||
Forfeited | (19,216 | ) | 13.57 | — | — | |||||||||||
Exercised | (510,648 | ) | 7.67 | 2,689 | — | |||||||||||
Outstanding at December 31, 2020 | 1,647,181 | $ | 11.24 | $ | 6,112 | 3.8 years | ||||||||||
Vested and Exercisable at December 31, 2020 | 1,647,181 | $ | 11.24 | $ | 6,112 | 3.8 years | ||||||||||
Number of Options | Weighted Average Exercise Price of Stock Options | Aggregate Intrinsic Value of Stock Options | Weighted Average Remaining Contractual Life of Stock Options | |||||||||||||
Outstanding at January 1, 2022 | 1,297,877 | $ | 10.78 | $ | 13,262 | 3.1 years | ||||||||||
Expired | (7,993 | ) | 12.81 | — | — | |||||||||||
Exercised | (152,326 | ) | 11.73 | $ | 1,187 | — | ||||||||||
Outstanding at December 31, 2022 | 1,137,558 | $ | 10.64 | $ | 1,702 | 2.3 years | ||||||||||
Vested and Exercisable at December 31, 2022 | 1,137,558 | $ | 10.64 | $ | 1,702 | 2.3 years | ||||||||||
�� |
Year Ended December 31, | ||||||||||||||||||||||||
2020 | 2019 | 2018 | ||||||||||||||||||||||
Number | Weighted Average Grant- Date Fair Value | Number | Weighted Average Grant- Date Fair Value | Number | Weighted Average Grant- Date Fair Value | |||||||||||||||||||
Unvested options at the beginning of the period | — | $ | — | 130,191 | $ | 1.54 | 475,925 | $ | 2.19 | |||||||||||||||
Vested options during the period | — | — | (107,100 | ) | 1.54 | (313,160 | ) | 2.51 | ||||||||||||||||
Forfeited options during the period | — | — | (345 | ) | 1.54 | (14,738 | ) | 1.73 | ||||||||||||||||
Exercised options during the period | — | — | (22,746 | ) | 1.54 | (17,836 | ) | 1.66 | ||||||||||||||||
Unvested options at the end of the period | — | — | 0 | $ | — | 130,191 | $ | 1.54 | ||||||||||||||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Income (loss) from continuing operations before income tax expense (benefit) | ||||||||||||
Domestic | $ | (1,955 | ) | $ | 41,566 | $ | (12,305 | ) | ||||
Foreign | (924 | ) | 32,403 | 23,136 | ||||||||
(2,879 | ) | 73,969 | 10,831 | |||||||||
Current income tax expense (benefit) | ||||||||||||
Domestic | 639 | 6,876 | 1 | |||||||||
Foreign | 4,297 | 9,415 | (2,264 | ) | ||||||||
Uncertain tax position liability (foreign) | (33 | ) | (35 | ) | (20 | ) | ||||||
4,903 | 16,256 | (2,283 | ) | |||||||||
Deferred income tax expense (benefit) | ||||||||||||
Domestic | (1,264 | ) | 1,314 | (4,461 | ) | |||||||
Foreign | 1,518 | (309 | ) | (39,484 | ) | |||||||
254 | 1,005 | (43,945 | ) | |||||||||
Total income tax expense (benefit) | $ | 5,157 | $ | 17,261 | $ | (46,228 | ) | |||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Income (loss) from continuing operations before income tax expense | ||||||||||||
Domestic | $ | (12,305 | ) | $ | (24,752 | ) | $ | 3,006 | ||||
Foreign | 23,136 | 6,539 | (29,862 | ) | ||||||||
$ | 10,831 | $ | (18,213 | ) | $ | (26,856 | ) | |||||
Current income tax expense (benefit) | ||||||||||||
Domestic | $ | 1 | $ | 20 | $ | (383 | ) | |||||
Foreign | (2,264 | ) | 3,771 | 3,959 | ||||||||
Uncertain tax position liability (domestic) | — | (1 | ) | (2 | ) | |||||||
Uncertain tax position liability (foreign) | (20 | ) | 2 | (54 | ) | |||||||
(2,283 | ) | 3,792 | 3,520 | |||||||||
Deferred income tax benefit | ||||||||||||
Domestic | (4,461 | ) | — | — | ||||||||
Foreign | (39,484 | ) | 63 | 32 | ||||||||
(43,945 | ) | 63 | 32 | |||||||||
Benefits from intra-period allocation | — | (1,655 | ) | (4,631 | ) | |||||||
Total income tax expense (benefit) | $ | (46,228 | ) | $ | 2,200 | $ | (1,079 | ) | ||||
Effective tax rate | — | — | 4.0 | % | ||||||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Provision computed at statutory rates | $ | (605 | ) | $ | 15,533 | $ | 2,274 | |||||
State income taxes, net of federal effect | — | — | 730 | |||||||||
Change in statutory tax rates | 2,006 | (259 | ) | 5,735 | ||||||||
Difference in foreign tax rates | 302 | 2,820 | 1,077 | |||||||||
Permanent differences | ||||||||||||
Derivative assets adjustment | (62 | ) | (23 | ) | 56 | |||||||
TPECs, hybrid and other interest | (2,096 | ) | (3,400 | ) | (2,722 | ) | ||||||
Thin capitalization | — | — | 339 | |||||||||
Equity-based compensation | (241 | ) | (802 | ) | (73 | ) | ||||||
Permanent foreign currency gain (loss) | 1,676 | 1,888 | (1,813 | ) | ||||||||
Penalty | 75 | 427 | 176 | |||||||||
GILTI | 8,187 | 6,156 | 24,224 | |||||||||
Intercompany debt restructuring | 8,061 | 971 | 11,137 | |||||||||
Other permanent differences | 72 | (767 | ) | 1,335 | ||||||||
Withholding tax | (2,031 | ) | 2,060 | 2,291 | ||||||||
State net operating loss write off | — | 9,844 | — | |||||||||
Change in valuation allowance | (4,582 | ) | (13,803 | ) | (75,452 | ) | ||||||
Tax credits claimed | (5,658 | ) | (5,508 | ) | (12,397 | ) | ||||||
Uncertain tax positions liability | (33 | ) | (35 | ) | (20 | ) | ||||||
Change in net operating loss carry-forwards | (145 | ) | 621 | (3,314 | ) | |||||||
Foreign local taxes | 919 | 723 | 43 | |||||||||
Others | (688 | ) | 815 | 146 | ||||||||
Income tax expense (benefit) | $ | 5,157 | $ | 17,261 | $ | (46,228 | ) | |||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Provision computed at statutory rates | $ | 2,274 | $ | (3,825 | ) | $ | (5,640 | ) | ||||
State income taxes, net of federal effect | 730 | (1,139 | ) | (1,651 | ) | |||||||
Change in statutory tax rates | 5,735 | 2,329 | 1 | |||||||||
Difference in foreign tax rates | 1,077 | 3,002 | 737 | |||||||||
Permanent differences | ||||||||||||
Derivative assets adjustment | 56 | 315 | (1,111 | ) | ||||||||
TPECs, hybrid and other interest | (2,722 | ) | 7,812 | (5,555 | ) | |||||||
Thin capitalization | 339 | 988 | 1,262 | |||||||||
Permanent foreign currency loss | (1,813 | ) | (1,734 | ) | (2,490 | ) | ||||||
Penalty | 176 | 151 | 434 | |||||||||
GILTI | 24,224 | 5,112 | — | |||||||||
Intercompany debt restructuring | 11,137 | (18,435 | ) | — | ||||||||
Other permanent differences | 1,262 | 394 | 417 | |||||||||
Withholding tax | 2,291 | 3,043 | 3,270 | |||||||||
Change in valuation allowance | (75,452 | ) | 7,817 | 14,647 | ||||||||
Benefits from intra-period allocation | — | (1,655 | ) | (4,631 | ) | |||||||
Tax credits claimed | (12,397 | ) | (651 | ) | (421 | ) | ||||||
Tax credits expired | — | 170 | 267 | |||||||||
Uncertain tax positions liability | (20 | ) | 1 | (56 | ) | |||||||
Change in net operating loss carry-forwards | (3,314 | ) | — | — | ||||||||
Others | 189 | (1,495 | ) | (559 | ) | |||||||
Income tax expense (benefit) | $ | (46,228 | ) | $ | 2,200 | $ | (1,079 | ) | ||||
Year Ended December 31, | ||||||||
2022 | 2021 | |||||||
Deferred tax assets | ||||||||
Inventory reserves | $ | 3,108 | $ | 1,313 | ||||
Accrued expenses | 1,668 | 3,084 | ||||||
Property, plant and equipment | 2,685 | 3,119 | ||||||
Accumulated severance benefits | 10,269 | 11,842 | ||||||
Operating lease right-of-use | 1,098 | 899 | ||||||
Foreign currency translation loss | 22,272 | 17,280 | ||||||
NOL carry-forwards | 78,698 | 87,636 | ||||||
Tax credit carry-forwards | 13,337 | 14,164 | ||||||
Other long-term payable | 4,005 | 2,457 | ||||||
Interest expense deduction limitation | 91 | 4,731 | ||||||
Derivative liabilities | 427 | 463 | ||||||
Others | 1,394 | 1,610 | ||||||
Total deferred tax assets | 139,052 | 148,598 | ||||||
Less: Valuation allowance | (84,563 | ) | (94,212 | ) | ||||
54,489 | 54,386 | |||||||
Deferred tax liabilities | ||||||||
Prepaid expense | 3,065 | 2,300 | ||||||
Severance benefit deposits | 5,364 | 4,227 | ||||||
Operating lease right-of-use | 1,051 | 899 | ||||||
Foreign currency translation gain | 5,621 | 5,139 | ||||||
Others | 1,064 | 726 | ||||||
Total deferred tax liabilities | 16,165 | 13,291 | ||||||
Net deferred tax assets | $ | 38,324 | $ | 41,095 | ||||
Year Ended December 31, | ||||||||
2020 | 2019 | |||||||
Deferred tax assets | ||||||||
Inventory reserves | $ | 1,338 | $ | 4,869 | ||||
Accrued expenses | 2,493 | 3,388 | ||||||
Property, plant and equipment | 3,391 | 7,979 | ||||||
Accumulated severance benefits | 12,343 | 36,841 | ||||||
Operating lease right-of-use liabilities | 1,025 | 2,741 | ||||||
Foreign currency translation loss | 9,129 | 20,544 | ||||||
NOL carry-forwards | 121,389 | 150,954 | ||||||
Tax credit carry-forwards | 15,395 | 17,054 | ||||||
Other long-term payable | 944 | 3,023 | ||||||
Interest expense deduction limitation | — | 5,244 | ||||||
Others | 1,629 | 4,734 | ||||||
Total deferred tax assets | 169,076 | 257,371 | ||||||
Less: Valuation allowance | (115,636 | ) | (246,224 | ) | ||||
53,440 | 11,147 | |||||||
Deferred tax liabilities | ||||||||
Derivative assets | 417 | 352 | ||||||
Prepaid expense | 1,071 | 3,090 | ||||||
Severance benefit deposits | 3,156 | 1,294 | ||||||
Operating lease right-of-use assets | 1,025 | 2,741 | ||||||
Foreign currency translation gain | 2,431 | — | ||||||
Others | 799 | 3,516 | ||||||
Total deferred tax liabilities | 8,899 | 10,993 | ||||||
Net deferred tax assets | $ | 44,541 | $ | 154 | ||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Beginning balance | $ | 246,224 | $ | 248,633 | $ | 251,132 | ||||||
Additions | 0 | 7,912 | 7,653 | |||||||||
Reductions | (75,452 | ) | — | — | ||||||||
Changes relating to the discontinued operations | (67,484 | ) | — | — | ||||||||
NOL/tax credit claimed/expired | 3,686 | (3,529 | ) | (1,393 | ) | |||||||
Translation adjustments | 8,662 | (6,792 | ) | (8,759 | ) | |||||||
Ending balance | $ | 115,636 | $ | 246,224 | $ | 248,633 | ||||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Beginning balance | $ | 94,212 | $ | 115,636 | $ | 246,224 | ||||||
Reductions | (4,582 | ) | (13,803 | ) | (75,452 | ) | ||||||
Changes relating to the discontinued operations | — | — | (67,484 | ) | ||||||||
NOL/tax credit claimed/expired | — | — | 3,686 | |||||||||
Translation adjustments | (5,067 | ) | (7,621 | ) | 8,662 | |||||||
Ending balance | $ | 84,563 | $ | 94,212 | $ | 115,636 | ||||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
NOL carry-forwards | $ | 604,977 | $ | 708,885 | $ | 730,472 |
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
NOL carry-forwards | $ | 324,134 | $ | 502,511 | $ | 604,977 |
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2022 | 2021 | 2020 | |||||||||||||||||||
Unrecognized tax benefits, balance at the beginning | $ | 445 | $ | 426 | $ | 475 | $ | 386 | $ | 414 | $ | 445 | ||||||||||||
Additions based on tax positions related to the current year | 48 | 13 | 10 | 40 | 44 | 48 | ||||||||||||||||||
Reductions for tax positions of prior years | (34 | ) | (1 | ) | — | — | — | (34 | ) | |||||||||||||||
Lapse of statute of limitations | (76 | ) | — | (51 | ) | (73 | ) | (79 | ) | (76 | ) | |||||||||||||
Translation adjustments | 31 | 7 | (8 | ) | (37 | ) | 7 | 31 | ||||||||||||||||
Unrecognized tax benefits, balance at the ending | $ | 414 | $ | 445 | $ | 426 | $ | 316 | $ | 386 | $ | 414 | ||||||||||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Revenues | ||||||||||||
Standard products business | ||||||||||||
Display Solutions | $ | 299,057 | $ | 308,531 | $ | 256,113 | ||||||
Power Solutions | 166,462 | 176,316 | 169,377 | |||||||||
Total standard products business | 465,519 | 484,847 | 425,490 | |||||||||
Transitional Fab 3 foundry services | 41,540 | 35,824 | 39,935 | |||||||||
Total revenues | $ | 507,059 | $ | 520,671 | $ | 465,425 | ||||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Revenues | ||||||||||||
Standard products business | ||||||||||||
Display Solutions | $ | 71,432 | $ | 205,322 | $ | 299,057 | ||||||
Power Solutions | 230,464 | 227,777 | 166,462 | |||||||||
Total standard products business | 301,896 | 433,099 | 465,519 | |||||||||
Transitional Fab 3 foundry services | 35,762 | 41,131 | 41,540 | |||||||||
Total revenues | $ | 337,658 | $ | 474,230 | $ | 507,059 | ||||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Gross Profit | ||||||||||||
Standard products business | $ | 127,099 | $ | 116,397 | $ | 115,648 | ||||||
Transitional Fab 3 foundry services | 1,218 | — | — | |||||||||
Total gross profit | $ | 128,317 | $ | 116,397 | $ | 115,648 | ||||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Gross Profit | ||||||||||||
Standard products business | $ | 99,549 | $ | 149,596 | $ | 127,099 | ||||||
Transitional Fab 3 foundry services | 1,715 | 3,947 | 1,218 | |||||||||
Total gross profit | $ | 101,264 | $ | 153,543 | $ | 128,317 | ||||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Korea | $ | 106,415 | $ | 132,622 | $ | 176,097 | ||||||
Asia Pacific (other than Korea) | 347,597 | 343,652 | 241,461 | |||||||||
United States | 5,147 | 2,399 | 1,983 | |||||||||
Europe | 4,317 | 4,801 | 4,360 | |||||||||
Others | 2,043 | 1,373 | 1,589 | |||||||||
Total | $ | 465,519 | $ | 484,847 | $ | 425,490 | ||||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Korea | $ | 105,285 | $ | 113,776 | $ | 106,415 | ||||||
Asia Pacific (other than Korea) | 179,555 | 306,333 | 347,597 | |||||||||
United States | 10,369 | 6,052 | 5,147 | |||||||||
Europe | 6,687 | 5,698 | 4,317 | |||||||||
Others | — | 1,240 | 2,043 | |||||||||
Total | $ | 301,896 | $ | 433,099 | $ | 465,519 | ||||||
Year Ended December 31, | ||||||||
2022 | 2021 | |||||||
Foreign currency translation adjustments | $ | (11,328 | ) | $ | (770 | ) | ||
Derivative adjustments | (1,225 | ) | (1,460 | ) | ||||
Total | $ | (12,553 | ) | $ | (2,230 | ) | ||
Year Ended December 31, | ||||||||
2020 | 2019 | |||||||
Foreign currency translation adjustments | $ | 2,069 | $ | (4,205 | ) | |||
Derivative adjustments | 1,634 | 1,545 | ||||||
Total | $ | 3,703 | $ | (2,660 | ) | |||
Year Ended December 31, 2020 | Foreign currency translation adjustments | Derivative adjustments | Total | |||||||||
Beginning balance | $ | (4,205 | ) | $ | 1,545 | $ | (2,660 | ) | ||||
Other comprehensive income before reclassifications | 6,274 | 1,452 | 7,726 | |||||||||
Amounts reclassified from accumulated other comprehensive income | — | (1,363 | ) | (1,363 | ) | |||||||
Net current-period other comprehensive income | 6,274 | 89 | 6,363 | |||||||||
Ending balance | $ | 2,069 | $ | 1,634 | $ | 3,703 | ||||||
Year Ended December 31, 2022 | Foreign currency translation adjustments | Derivative adjustments | Total | |||||||||
Beginning balance | $ | (770 | ) | $ | (1,460 | ) | $ | (2,230 | ) | |||
Other comprehensive loss before reclassifications | (10,558 | ) | (8,279 | ) | (18,837 | ) | ||||||
Amounts reclassified from accumulated other comprehensive loss | — | 8,514 | 8,514 | |||||||||
Net current-period other comprehensive income (loss) | (10,558 | ) | 235 | (10,323 | ) | |||||||
Ending balance | $ | (11,328 | ) | $ | (1,225 | ) | $ | (12,553 | ) | |||
Year Ended December 31, 2019 | Foreign currency translation adjustments | Derivative adjustments | Total | |||||||||
Beginning balance | $ | (20,061 | ) | $ | (49 | ) | $ | (20,110 | ) | |||
Other comprehensive income (loss) before reclassifications | 15,856 | (2,894 | ) | 12,962 | ||||||||
Amounts reclassified from accumulated other comprehensive loss | — | 4,488 | 4,488 | |||||||||
Net current-period other comprehensive income | 15,856 | 1,594 | 17,450 | |||||||||
Ending balance | $ | (4,205 | ) | $ | 1,545 | $ | (2,660 | ) | ||||
Year Ended December 31, 2018 | Foreign currency translation adjustments | Derivative adjustments | Total | |||||||||
Beginning balance | $ | (38,413 | ) | $ | 5,299 | $ | (33,114 | ) | ||||
Other comprehensive income (loss) before reclassifications | 18,352 | (1,589 | ) | 16,763 | ||||||||
Amounts reclassified from accumulated other comprehensive income | — | (3,759 | ) | (3,759 | ) | |||||||
Net current-period other comprehensive income (loss) | 18,352 | (5,348 | ) | 13,004 | ||||||||
Ending balance | $ | (20,061 | ) | $ | (49 | ) | $ | (20,110 | ) | |||
Year Ended December 31, 2021 | Foreign currency translation adjustments | Derivative adjustments | Total | |||||||||
Beginning balance | $ | 2,069 | $ | 1,634 | $ | 3,703 | ||||||
Other comprehensive loss before reclassifications | (2,839 | ) | (3,913 | ) | (6,752 | ) | ||||||
Amounts reclassified from accumulated other comprehensive loss | — | 819 | 819 | |||||||||
Net current-period other comprehensive loss | (2,839 | ) | (3,094 | ) | (5,933 | ) | ||||||
Ending balance | $ | (770 | ) | $ | (1,460 | ) | $ | (2,230 | ) | |||
Year Ended December 31, 2020 | Foreign currency translation adjustments | Derivative adjustments | Total | |||||||||
Beginning balance | $ | (4,205 | ) | $ | 1,545 | $ | (2,660 | ) | ||||
Other comprehensive income before reclassifications | 6,274 | 1,452 | 7,726 | |||||||||
Amounts reclassified from accumulated other comprehensive income | — | (1,363 | ) | (1,363 | ) | |||||||
Net current-period other comprehensive income | 6,274 | 89 | 6,363 | |||||||||
Ending balance | $ | 2,069 | $ | 1,634 | $ | 3,703 | ||||||
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
(In thousands of U.S. dollars, except share data) | ||||||||||||
Basic earnings (loss) per share | ||||||||||||
Income (loss) from continuing operations | $ | (8,036 | ) | $ | 56,708 | $ | 57,059 | |||||
Income from discontinued operations, net of tax | — | — | 287,906 | |||||||||
Net income (loss) | $ | (8,036 | ) | $ | 56,708 | $ | 344,965 | |||||
Basic weighted average common stock outstanding | 44,850,791 | 44,879,412 | 35,213,525 | |||||||||
Basic earnings (loss) per common share | ||||||||||||
Continuing operations | $ | (0.18 | ) | $ | 1.26 | $ | 1.62 | |||||
Discontinued operations | — | — | 8.18 | |||||||||
Total | $ | (0.18 | ) | $ | 1.26 | $ | 9.80 | |||||
Diluted earnings (loss) per share | ||||||||||||
Income (loss) from continuing operations | $ | (8,036 | ) | $ | 56,708 | $ | 57,059 | |||||
Add back: Interest expense on Exchangeable Notes | — | 959 | 5,708 | |||||||||
Income (loss) from continuing operations allocated to common stockholders | $ | (8,036 | ) | $ | 57,667 | $ | 62,767 | |||||
Income from discontinued operations, net of tax | — | — | 287,906 | |||||||||
Net income (loss) allocated to common stockholders | $ | (8,036 | ) | $ | 57,667 | $ | 350,673 | |||||
Basic weighted average common stock outstanding | 44,850,791 | 44,879,412 | 35,213,525 | |||||||||
Net effect of dilutive equity awards | — | 1,403,789 | 1,145,906 | |||||||||
Net effect of assumed conversion of 5.0% Exchangeable Notes to common stock | — | 1,426,172 | 10,144,155 | |||||||||
Diluted weighted average common stock outstanding | 44,850,791 | 47,709,373 | 46,503,586 | |||||||||
Diluted earnings (loss) per common share | ||||||||||||
Continuing operations | $ | (0.18 | ) | $ | 1.21 | $ | 1.35 | |||||
Discontinued operations | — | — | 6.19 | |||||||||
Total | $ | (0.18 | ) | $ | 1.21 | $ | 7.54 | |||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(In thousands of U.S. dollars, except share data) | ||||||||||||
Basic earnings (loss) per share | ||||||||||||
Income (loss) from continuing operations | $ | 57,059 | $ | (20,413 | ) | $ | (25,777 | ) | ||||
Income (loss) from discontinued operations, net of tax | 287,906 | (1,413 | ) | 21,877 | ||||||||
Net income (loss) | $ | 344,965 | $ | (21,826 | ) | $ | (3,900 | ) | ||||
Basic weighted average common stock outstanding | 35,213,525 | 34,321,888 | 34,469,921 | |||||||||
Basic earnings (loss) per common share | ||||||||||||
Continuing operations | $ | 1.62 | $ | (0.59 | ) | $ | (0.75 | ) | ||||
Discontinued operations | 8.18 | (0.05 | ) | 0.64 | ||||||||
Total | $ | 9.80 | $ | (0.64 | ) | $ | (0.11 | ) | ||||
Diluted earnings (loss) per share | ||||||||||||
Income (loss) from continuing operations | $ | 57,059 | $ | (20,413 | ) | $ | (25,777 | ) | ||||
Add back: Interest expense on Exchangeable Notes | 5,708 | — | — | |||||||||
Income (loss) from continuing operations allocated to common stockholders | $ | 62,767 | $ | (20,413 | ) | $ | (25,777 | ) | ||||
Income (loss) from discontinued operations, net of tax | 287,906 | (1,413 | ) | 21,877 | ||||||||
Net income (loss) allocated to common stockholders | $ | 350,673 | $ | (21,826 | ) | $ | (3,900 | ) | ||||
Basic weighted average common stock outstanding | 35,213,525 | 34,321,888 | 34,469,921 | |||||||||
Net effect of dilutive equity awards | 1,145,906 | — | — | |||||||||
Net effect of assumed conversion of 5.0% Exchangeable Notes to common stock | 10,144,155 | — | — | |||||||||
Diluted weighted average common stock outstanding | 46,503,586 | 34,321,888 | 34,469,921 | |||||||||
Diluted earnings (loss) per common share | ||||||||||||
Continuing operations | $ | 1.35 | $ | (0.59 | ) | $ | (0.75 | ) | ||||
Discontinued operations | 6.19 | (0.05 | ) | 0.64 | ||||||||
Total | $ | 7.54 | $ | (0.64 | ) | $ | (0.11 | ) | ||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Options | 651,417 | 2,177,045 | 2,674,756 | |||||||||
Restricted Stock Units | — | 1,043,303 | 718,213 |
Year Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Options | 1,137,558 | 50,000 | 651,417 | |||||||||
Restricted Stock Units | 815,407 | — | — |
Fiscal Year 2020 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
(In thousands of U.S. dollars, except share data) | ||||||||||||||||
Revenues | $ | 120,473 | $ | 118,828 | $ | 124,813 | $ | 142,945 | ||||||||
Gross profit | 29,130 | 32,138 | 28,588 | 38,461 | ||||||||||||
Operating income | 5,965 | 8,622 | 3,223 | 9,206 | ||||||||||||
Income (loss) from continuing operations | (31,078 | ) | 11,774 | 8,461 | 67,902 | |||||||||||
Income (loss) from discontinued operations, net of tax | 7,329 | 17,397 | 264,501 | (1,321 | ) | |||||||||||
Net income (loss) | $ | (23,749 | ) | $ | 29,171 | $ | 272,962 | $ | 66,581 | |||||||
Basic earnings (loss) per common share— | ||||||||||||||||
Continuing operations | $ | (0.89 | ) | $ | 0.34 | $ | 0.24 | $ | 1.91 | |||||||
Discontinued operations | 0.21 | 0.50 | 7.50 | (0.04 | ) | |||||||||||
Total | $ | (0.68 | ) | $ | 0.84 | $ | 7.74 | $ | 1.87 | |||||||
Diluted earnings (loss) per common share— | ||||||||||||||||
Continuing operations | $ | (0.89 | ) | $ | 0.28 | $ | 0.21 | $ | 1.47 | |||||||
Discontinued operations | 0.21 | 0.37 | 5.68 | (0.02 | ) | |||||||||||
Total | $ | (0.68 | ) | $ | 0.65 | $ | 5.89 | $ | 1.45 | |||||||
Weighted average number of shares— | ||||||||||||||||
Basic | 34,893,157 | 35,092,312 | 35,280,864 | 35,582,966 | ||||||||||||
Diluted | 34,893,157 | 46,474,237 | 46,581,788 | 47,062,903 | ||||||||||||
Fiscal Year 2019 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
(In thousands of U.S. dollars, except share data) | ||||||||||||||||
Revenues | $ | 107,267 | $ | 140,885 | $ | 149,167 | $ | 123,352 | ||||||||
Gross profit | 19,023 | 31,622 | 35,255 | 30,497 | ||||||||||||
Operating income (loss) | (5,057 | ) | 8,755 | 14,336 | 5,691 | |||||||||||
Income (loss) from continuing operations | (21,555 | ) | (8,490 | ) | (14,244 | ) | 23,876 | |||||||||
Income (loss) from discontinued operations, net of tax | (12,570 | ) | (1,030 | ) | 12,637 | (450 | ) | |||||||||
Net income (loss) | $ | (34,125 | ) | $ | (9,520 | ) | $ | (1,607 | ) | $ | 23,426 | |||||
Basic earnings (loss) per common share— | ||||||||||||||||
Continuing operations | $ | (0.63 | ) | $ | (0.25 | ) | $ | (0.41 | ) | $ | 0.69 | |||||
Discontinued operations | (0.37 | ) | (0.03 | ) | 0.36 | (0.01 | ) | |||||||||
Total | $ | (1.00 | ) | $ | (0.28 | ) | $ | (0.05 | ) | $ | 0.68 | |||||
Diluted earnings (loss) per common share— | ||||||||||||||||
Continuing operations | $ | (0.63 | ) | $ | (0.25 | ) | $ | (0.41 | ) | $ | 0.55 | |||||
Discontinued operations | (0.37 | ) | (0.03 | ) | 0.36 | (0.01 | ) | |||||||||
Total | $ | (1.00 | ) | $ | (0.28 | ) | $ | (0.05 | ) | $ | 0.54 | |||||
Weighted average number of shares— | ||||||||||||||||
Basic | 34,194,878 | 34,245,127 | 34,357,745 | 34,542,415 | ||||||||||||
Diluted | 34,194,878 | 34,245,127 | 34,357,745 | 46,078,768 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“Principal Executive Officer”) and Chief Financial Officer (“Principal Financial Officer”), as appropriate, to allow for timely decisions regarding required disclosure.
Management of the Company, with the participation of our Principal Executive Officer and our Principal Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rules
(b) Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
Under the supervision and with the participation of our Principal Executive Officer and our Principal Financial Officer, we conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020,2022, based on the criteria set forth in
The effectiveness of the Company’s internal control over financial reporting as of December 31, 20202022 has been audited by Samil PricewaterhouseCoopers, an independent registered public accounting firm, as stated in their report which appears in Item 8 of this Report.
(c) Changes in Internal Control Over Financial Reporting
There were no changes in internal control over financial reporting during the quarter ended December 31, 20202022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 9B. Other Information
Not Applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item relating to our executive officers is included in “Item 1. Business—Executive Officers of the Company.” The other information required by this item is incorporated by reference to our definitive proxy statement relating to our 20212023 annual meeting of stockholders or will be included by amendment to this Report within 120 days after the end of the fiscal year to which this Report relates.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to our definitive proxy statement relating to our 20212023 annual meeting of stockholders or will be included by amendment to this Report within 120 days after the end of the fiscal year to which this Report relates.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to our definitive proxy statement relating to our 20212023 annual meeting of stockholders or will be included by amendment to this Report within 120 days after the end of the fiscal year to which this Report relates.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to our definitive proxy statement relating to our 20212023 annual meeting of stockholders or will be included by amendment to this Report within 120 days after the end of the fiscal year to which this Report relates.
Item 14. Principal Accounting Fees and Services.
The information required by this item is incorporated by reference to our definitive proxy statement relating to our 20212023 annual meeting of stockholders or will be included by amendment to this Report within 120 days after the end of the fiscal year to which this Report relates.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
1. | Financial Statements |
The information required by this item is included in Item 8 of Part II of this Report.
2. | Financial Statement Schedules |
Financial Statement Schedules are omitted because of the absence of the conditions under which they are required or because the information required by such omitted schedules is set forth in the financial statements or the notes thereto.
3. | Exhibits |
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Footnotes:
(1) | Certain portions of this document have been omitted pursuant to a grant of confidential treatment by the SEC. |
* | Management contract, compensatory plan or arrangement |
# | Filed herewith |
† | Furnished herewith |
Item 16. Form
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
MAGNACHIP SEMICONDUCTOR CORPORATION
By: | /s/ Young-Joon Kim | |||
Name: | Young-Joon Kim | |||
Title: | Chief Executive Officer and Director | |||
Date: |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date | ||
/s/ Young-Joon Kim | ||
Young-Joon Kim, Chief Executive Officer and Director (Principal Executive Officer) | ||
/s/ Shin Young | ||
Shin Young Park, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||
/s/ Melvin Keating | ||
Melvin Keating, Director | ||
/s/ Ilbok Lee | ||
Ilbok Lee, Director | ||
/s/ Camillo Martino | ||
Camillo Martino, Non-Executive Chairman of the Board of Directors | ||
/s/ Gary Tanner | ||
Gary Tanner, Director | ||
/s/ Liz Chung | ||
Liz Chung, Director |
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