Magnachip to sell display business in H1 to focus on power semiconductors

South Korean chipmaker Magnachip Semiconductor Corp. plans to sell its display business by the end of the first half as part of a strategic shift toward its high-growth power semiconductor segment.

The company said other options for its display business include a merger, joint venture, licensing agreement and potential shutdown.

Company officials said the move is designed to improve profitability and strengthen its competitive edge in high-value segments such as automotive chips, data centers, industrial robotics and artificial intelligence (AI) infrastructure, where demand for power management semiconductors is surging.

Magnachip, based in South Korea but listed on the New York Stock Exchange, produces display driver integrated circuits (DDICs) and automotive power semiconductors.

The power semiconductor market, more than ten times larger than the OLED DDIC market, has a broad customer base across sectors such as electric vehicles, industrial equipment, AI infrastructure, and energy storage systems (ESS).

FINANCIAL GOAL

Magnachip aims to achieve $300 million in annual revenue and a 30% gross margin within three years by sharpening its focus on power semiconductors.

Magnachip, which entered the power chip market in 2007, has since expanded its portfolio through steady technological advancements.

The company has developed several next-generation products, including Gen 5 and Gen 6 insulated-gate bipolar transistors (IGBTs), Gen 6 SuperJunction metal-oxide-semiconductor field-effect transistors (MOSFETs) and Gen 8 medium- and low-voltage MOSFETs.

The company plans to introduce more than 40 new products this year.

To further solidify its position in the power semiconductor business, Magnachip plans to spend 100 billion won ($69 million) over the next three years on upgrading its manufacturing plant in Gumi, North Gyeongsang province.

Commenting on the planned display unit sale, Magnachip Chief Executive Kim Young-joon said, “Considering our valued customers and employees, it is not an easy choice. But our top priority is to secure sustainable profitability and maximize shareholder value.”

WASHINGTON BLOCKED EARLIER SALE TO CHINA

Last month, industry sources said Magnachip could sell its entire business if an interested buyer wants.

After selecting a foreign investment bank as an advisor for the sale, the chipmaker has held talks with potential buyers including Samsung Electronics Co., LG Electronics Inc., LX Group, Doosan Group and DB HiTek Co., according to investment banking industry sources in Seoul.

In 2021, Magnachip and Chinese private equity firm Wise Road Capital signed a $1.4 billion buyout deal, but Washington blocked the contract amid a protracted US-China trade dispute.

Wise Road had agreed to pay $29 in cash for each of Magnachip’s common shares to its shareholders at the time.

LX Group was once regarded as the top candidate as the conglomerate hopes to achieve economies of scale in the chip design and manufacturing business by combining its foundry affiliate LX Semicon with Magnachip.

Write to Jun-Ho Cha at chacha@hankyung.com
In-Soo Nam edited this article.