The CEO of troubled South Korean power chipmaker Magnachip has resigned after a decade in the role, with the board deciding to sell the company and cut capital spending in half.

Leadership changes - CEO resigns and takes over

YJ Kim has resigned as CEO and member of the Board of Directors, effective immediately, and will be succeeded by Chairman of the Board, Camillo Martino.

Camillo Martino stated, "YJ Kim assumed the CEO role during a turbulent period in the Company's history and has led the company for the past decade. However, Magnachip faces numerous strategic, operational, and financial challenges as it transitions to a company focused on power semiconductors, which necessitates a new leadership team. On behalf of the Board, I thank YJ Kim for his contributions and wish him well in the future."

Strategic realignment

Capital expenditure reductions

The company is also considering business sales. In 2020, it sold its largest wafer fab and foundry business, focused on producing power MOSFETs and display drivers, for $350 million, a similar situation.

A takeover bid by Chinese firm Wise Road was blocked by US authorities, and the same situation is likely to occur again, as the company subsequently shifted to supplying MOSFETs to automotive suppliers and abandoned its display driver business.

The company fired YJ Kim as CEO just as the semiconductor market was recovering, signaling strategic disagreements with its major shareholders.

He stated, "As interim CEO, I will be fully committed, spending the majority of my time in Korea, to accelerating our transformation into a pure-play electric company while also focusing on achieving sustainable profitability and maximizing shareholder value."

As part of Magnachip's capital allocation process, the board of directors will review all strategic alternatives, including but not limited to a potential sale of the company. The board and management share the disappointment of shareholders with the company's performance and are determined to deliver the best return on capital for shareholders.

Capital expenditures will be reduced from approximately $65 million to $30 million, with the majority of this coming from borrowing. One of the first actions we plan to take is to reduce capital expenditures by more than 50% over the next two-plus years as we prioritize capital allocation. As part of our capital allocation plan, our investment in the Gumi fab is crucial to support the growth of our next-generation power products, which are essential to our financial recovery. These next-generation products are expected to enhance our market competitiveness and deliver higher average selling prices and gross margins. Capital expenditures, previously forecast to be between $65 million and $70 million through 2027, are now projected to be between $30 million and $35 million, but Magnachip currently projects total net cash outlays of between $12 million and $13 million, with the remainder to be covered by our bank equipment loan.

In addition, we will continue to review all other available cost-reduction initiatives to ensure our spending is consistent with our goal of achieving adjusted EBITDA breakeven as quickly as possible. One of the right-sizing initiatives we are implementing is a reduction in headcount, primarily through shared corporate functions. We are currently targeting annual operating expense savings of $2 million to $3 million, with a payback period of 1.5 years.

Source: Content compiled from eenews

Reference Link https://www.eenewseurope.com/en/magnachip-up-for-sale-as-boss-steps-down-capex-slashed/

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