Full-year revenue of $337.7 million decreased 28.8% YoY due to significantly lower display revenue as a result of severe 28nm 12-inch OLED wafer shortages that impacted 2nd half design-in projects from large panel customers in Korea and weak demand for Android smartphones that led to an inventory correction by smartphone OEMs.
In addition, Magnachip closed Q4 with $61.0 million revenue, near the high-end of its guidance range. In display, the company expanded its OLED business into international markets by winning a new tier one panel customer outside of Korea and strengthened its global supply chain by qualifying two additional foundries. Further, in Q4, it qualified two OLED projects with two leading panel customers and expect to begin shipping at the end of this quarter.
The company’s near-term outlook is being challenged by previous OLED wafer allocation constraints that impacted 2nd half 2022 design-in projects and ongoing inventory correction in smartphones and other consumer end markets driven by weakening consumer demand. Q1 is also typically the company’s seasonally slowest quarter following holiday shipments and is impacted by slower activity around the Chinese New Year.
In response to the industry-wide slowdown and inventory correction, the company has reduced production at its Fab 3. As a result, the company expects Q1’23 gross profit margin will be further impacted by lower utilization as well as higher manufacturing input costs such as electricity and wages. The company currently expects gross profit margin to recover as volume and utilization improves in the 2nd half of 2023.
While actual results may vary, Magnachip currently expects the following for Q1’23:
- Revenue to be in the range of $55 million to $59 million, including about $5 million of Transitional Fab 3 Foundry Services.
- Gross profit margin to be in the range of 21% to 23%.