Magnachip CEO steps down as company slashes capex by over 50%

SEOUL - Magnachip Semiconductor Corporation (NYSE:MX), currently trading near its 52-week low at $2.67, announced on Monday that CEO YJ Kim has stepped down effective immediately, with Board Chairman Camillo Martino appointed as Interim Chief Executive Officer. According to InvestingPro data, the company’s stock has declined over 45% in the past year, reflecting ongoing challenges.

The leadership change comes as the South Korean chipmaker faces "strategic, operational and financial challenges" in its transition to become a pure-play power semiconductor company, according to a company press release. InvestingPro analysis shows the company maintains a strong balance sheet with more cash than debt and a healthy current ratio of 4.65, though its overall financial health score remains weak at 0.98.

As part of the transition, Magnachip plans to cut capital expenditures by more than 50% through 2027. The company has reduced its capex forecast from $65-70 million to $30-35 million, with a net cash outlay expected to be between $12-13 million. The remainder will be covered by the company’s bank equipment loan facility.

"I am fully committed as Interim CEO and will spend most of my time in South Korea to accelerate our transition to a pure-play power company, while also focusing intensely on achieving sustainable profitability and maximizing shareholder value," Martino said.

Magnachip is implementing additional cost-cutting measures, including headcount reductions primarily in shared corporate functions. The company targets annual savings of $2-3 million in operating expenses with a payback period of 1.5 years.

The board will continue to explore "all strategic alternatives including, but not limited to, a potential sale of the Company," according to the statement.

Kim had served as Magnachip’s CEO for the past decade. "I wish to thank Magnachip’s employees for their dedication to the Company, and the Board of Directors for its support," Kim said.

Magnachip, with approximately 45 years of operating history, designs and manufactures analog and mixed-signal power semiconductor solutions for various applications including industrial, automotive, communication, consumer and computing sectors. While currently trading below book value with a P/B ratio of 0.36, InvestingPro analysis suggests the stock is undervalued. For deeper insights into Magnachip’s valuation and prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, along with 15+ additional ProTips and detailed financial metrics.

In other recent news, Magnachip Semiconductor Corporation has announced the release of a new 80V MXT MV MOSFET, featuring an innovative TO-Leaded Top-Side Cooling (TOLT) package. This new design allows for improved thermal management by dissipating heat from the top, a departure from traditional methods. The company has already begun supplying this advanced MOSFET to a leading global electric motor manufacturer. Additionally, Magnachip is enhancing its board oversight as part of its strategic shift towards a dedicated Power business. This move is aligned with the company’s "3-3-3 strategy," which aims for $300 million in annual revenue and a 30% gross margin within three years. Chairman Camillo Martino will play a pivotal role in this transition, committing to spend significant time at the company’s headquarters in Korea. His increased presence is intended to facilitate direct communication with management and provide regular updates to the Board. These developments reflect Magnachip’s efforts to realign its operations and achieve sustainable profitability.

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