MagnaChip to Sell Foundry Biz

Article By : Brian Santo

MagnaChip is selling its foundry business and the larger of its two 200mm wafer fabs to a consortium that includes memory chip company SK Hynix...

MagnaChip Semiconductor Corp. said it is selling its Foundry Services Group and the larger of its two 8-inch wafer fabs to a pair of capital companies in a deal with a total value of about $435 million.

The buyer is a special-purpose company in South Korea established by the venture firms Alchemist Capital Partners Korea Co. and Credian Partners, Inc., specifically to buy those MagnaChip operations. SK Hynix is a limited partner (as is the Korean Federation of Community Credit Cooperatives).

Magnachip was formed in 2004 when SK Hynix spun out all of its non-memory IC operations. In the spinout, MagnaChip took with it a total of five wafer fabrication facilities. As of recently, it was down to three – the one it just sold, which is located in Cheongju, another in Cheongju, and the final one in Gumi.

The factory that MagnaChip is divesting is designated as Fab 4. Fab 4 is an analog and mixed signal fab that as of last August was responsible for over 70 percent of MagnaChip’s total wafer manufacturing capacity, according to one source.

The operations that MagnaChip is selling provides 40 percent of its annual revenue, according to a report from Nasdaq.

In 2019, SK Hynix had been openly preparing to buy back MagnaChip’s foundry business and Fab 4. SK Hynix invested in a fund organized by Alchemist to pull off the deal. Those negotiations were reported to have broken down in August.

MagnaChip still had other offers, to entertain however. On May 10, the company released updated guidance for the first quarter and said, “the strategic evaluation process of the Foundry business and Fab 4 continues to make progress, including having discussions with multiple interested parties toward a possible sale of the Company’s Foundry business and Fab 4, as well as consideration of accretive business conversions and other options related to that business.”

MagnaChip will net the rough equivalent of $344.7 million in South Korean won. The acquiring company will also assume statutory severance liabilities attributable to the employees who will be transferred together with the Target Business, which is currently estimated to be approximately $90 million, bringing the total value of the deal to roughly $435 million.

MagnaChip chief executive officer Y.J. Kim, said in a statement that the company is now a pure-play standard products company, with two business lines: Display Solutions and Power Solutions. Those operations include OLED display drivers and what Kim called the emerging MicroLED space.

The company’s power products portfolio, includes targets a range of markets, though Kim in his statement said many are “ideally suited to serve the requirements of the Electric Vehicle segment of the auto market.” F

“After conducting a thorough strategic evaluation process of the Foundry business and Fab 4, the Board of Directors and management team concluded that this transaction was the best option to maximize value for our shareholders,” said Nader Tavakoli, Chairman of the Board of MagnaChip.

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