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MagnaChip Semiconductor Reports Second Quarter Results

SEOUL, South Korea, July 18 /PRNewswire/ -- MagnaChip Semiconductor today announced results for the second quarter ended June 29, 2008.

Revenue for the three months ended June 29, 2008 was $194.7 million, compared to $194.1 million in the second quarter of 2007.

Sang Park, Chairman and CEO of MagnaChip Semiconductor, commented, "Despite challenging market conditions in Q2, revenue came in at $194.7 million, a slight increase as compared to the second quarter of 2007. We achieved this result even though demand was lower than expected as our customers tightened their inventory control due to the current uncertain economic environment. We recorded our first revenues in our power solutions business, which we launched less than one year ago. In our display and imaging solutions business we continued to launch new products, such as display driver ICs for mid-sized panels, and in our SMS business, we added new accounts and specialty technologies. Overall, we are confident with our progress and trajectory as we enter the second half of 2008."

Gross margin was $49.2 million or 25.2% of revenue for the quarter ended June 29, 2008, compared to $27.8 million or 14.3% of revenue for the second quarter of 2007.

Operating expenses for the second quarter of 2008 were $58.5 million or 30.1% of revenue, compared to $70.1 million or 36.1% of revenue for the second quarter of 2007 which included $13.4 million special charges. Excluding special charges, operating expenses for the second quarter of 2007 were $56.8 million or 29.3% of revenue.

Operating loss was $9.4 million during the second quarter, compared to an operating loss of $42.4 million in the prior year quarter.

Net interest expense for the second quarter of 2008 was $15.8 million, compared to $15.0 million in the second quarter of 2007.

Net loss for the three months ended June 29, 2008 was $59.6 million, compared to a net loss of $45.3 million in the second quarter of 2007. The net loss results were negatively impacted by a foreign currency loss of $31.1 million in the second quarter of 2008, compared to a foreign currency gain of $13.9 million in the second quarter of 2007. A substantial portion of this net foreign currency loss resulted from a non-cash translation loss recorded for intercompany borrowings at our Korea subsidiary that are denominated in U.S. dollars.

Robert Krakauer, President and CFO of MagnaChip Semiconductor, said, "We continued to make progress in the second quarter of 2008. In spite of the tough environment, we recorded a gross margin of over 25%, and we remain focused on improving profitability as a corporate priority. Though our markets continue to be slower than expected, we believe our new products and customer relationships position us well for performance improvement throughout 2008."

Investor Conference Call / Webcast Details

MagnaChip will report full results for the second quarter 2008 on Friday, July 18, 2008 at 10:00 a.m. in New York (11:00 p.m., Friday, July 18, 2008 in Seoul). The conference call will be available at www.magnachip.com and by telephone at +1-201-689-8560. A replay of the call will be available in two hours after the call through 11:59 pm on Thursday, July 24, 2008 in New York (1 p.m. on Friday, July 25, 2008 in Seoul) at www.magnachip.com and by telephone at +1-201-612-7415. The account number to access the replay is 3055 and the conference ID number is 289147, respectively.

About MagnaChip Semiconductor

Headquartered in Seoul, South Korea, MagnaChip Semiconductor is a leading, Asia-based designer and manufacturer of analog and mixed-signal semiconductor products for high volume consumer applications, such as mobile phones, digital televisions, flat panel displays, notebook computers, mobile multimedia devices and digital cameras. The Company has a broad range of analog and mixed-signal semiconductor technology, supported by its 29-year operating history, large portfolio of registered and pending patents and extensive engineering and manufacturing process expertise. For more information, visit www.magnachip.com.

Forward-Looking Statements:

Certain statements contained in this press release contain forward-looking statements regarding MagnaChip Semiconductor's operations, economic performance and financial condition. Although MagnaChip Semiconductor believes that the expectations reflected in these statements are reasonable, no assurance can be given that such expectations will prove to have been correct as a result of many factors, including those described in our annual report on Form 10-K for the year ended December 31, 2007, which was filed with the Securities and Exchange Commission on March 31, 2008.

    CONTACT:

    In Korea:                           In the U.S.:
    Mi-Jeong Han, PR Manager            Joseph Villalta at The Ruth Group
    Tel: 82-2-6903-3195                 Tel: +646-536-7003
    mj.han@magnachip.com                jvillalta@theruthgroup.com




                           MagnaChip Semiconductor
               Condensed Consolidated Statements of Operations
             (In thousands of U.S. Dollars, except per unit data)
                                 (Unaudited)

                                                Three months ended
                                           June 29,             July 1,
                                              2008                2007
    Net sales                                 $  194,676          $  194,053

    Cost of sales                                145,522             166,299

    Gross profit                                  49,154              27,754

    Operating expenses:
      Selling, general and administrative         23,010              25,531
      Research and development                    35,494              32,534
      Restructuring and impairment charges             -              12,084

    Operating loss                                (9,350)            (42,395)

    Other income (expenses):
      Interest expenses, net                     (15,816)            (14,952)
      Foreign currency gain (loss), net          (31,149)             13,868

    Loss before income taxes                     (56,315)            (43,479)
    Income tax expenses                            3,278               1,845
    Net loss                                  $  (59,593)         $  (45,324)

    Dividends accrued on preferred units           3,281               2,983
    Net loss attributable to common units     $  (62,874)         $  (48,307)

    Net loss per common unit
    Basic and Diluted                         $    (1.19)         $    (0.92)

    Common units used in per common unit
     calculation: Basic and Diluted
     (in thousands)                               52,737              52,773

    Key Ratios & Information:
    Gross Margin                                    25.2%               14.3%
    Operating Expenses as a % of Revenue            30.1%               36.1%
    Operating Margin                                (4.8%)             (21.8%)

    Depreciation & Amortization Expense           20,605              46,032
    Capital Expenditures                          11,121              16,612



                             MagnaChip Semiconductor
                      Condensed Consolidated Balance Sheets
                           (In thousands of US Dollars)
                                   (Unaudited)


                                               June 29,        December 31,
                                                 2008              2007
     Assets
     Current assets

       Cash and cash equivalents                 $   36,503       $   64,345
       Accounts receivable, net                     149,212          123,789
       Inventories, net                              63,532           75,867
       Other current assets                          22,938           16,722
                    Total current assets            272,185          280,723

     Property, plant and equipment, net             246,239          279,669
     Goodwill and intangible assets, net             82,079          104,725
     Other non-current assets                        44,780           42,766
                    Total assets                 $  645,283       $  707,883

     Liabilities & Unitholders' Equity
     Current liabilities
       Accounts and other payable                $  142,332       $  120,638
       Short-term borrowings                         85,000           80,000
       Other current liabilities                     24,030           24,477
                    Total current liabilities       251,362          225,115

     Long-term borrowings                           750,000          750,000
     Other non-current liabilities                   83,568           80,842
                    Total liabilities             1,084,930        1,055,957

     Redeemable convertible preferred units         135,804          129,405

     Unitholders' equity                           (575,451)        (477,479)

     Total liabilities, redeemable convertible
      preferred units and unitholders' equity    $  645,283       $  707,883



                              MagnaChip Semiconductor
                  Condensed Consolidated Statements of Cash Flows
                           (In thousands of US Dollars)
                                   (Unaudited)

                                                    Six Months Ended
                                                June 29,        July 1,
                                                   2008           2007
      Cash flows from operating activities
        Net loss                                   $(127,490)     $(112,306)
        Adjustments to reconcile net loss to net
         cash used in operating activities
          Depreciation and amortization               41,882         89,974
          Provision for severance benefits             6,890          9,379
          (Gain) loss on foreign currency
           translation, net                           73,078         (6,326)
          Impairment of long-term assets                   -         10,106
          Changes in accounts and other
           receivable                                (37,012)       (40,853)
          Changes in inventories                       5,142        (13,237)
          Changes in accounts and other payable       24,822         10,722
          Changes in accrued expenses                  3,658            392
          Other                                       (5,900)         2,182
          Net cash used in operating activities      (14,930)       (49,967)

      Cash flows from investing activities
        Capital expenditures                         (21,191)       (24,960)
        Other                                          3,256            834
          Net cash used in investing activities      (17,935)       (24,126)

      Cash flows from financing activities
        Exercise of unit options                         172             80
        Repurchase of common units                      (496)             -
        Proceeds from short-term borrowings          155,000         40,000
        Repayment of short-term borrowings          (150,000)             -
        Net cash provided by financing activities      4,676         40,080
        Effect of exchange rates on cash
         and cash equivalents                            347           (426)
        Net decrease in cash and cash equivalents    (27,842)       (34,439)

      Cash and cash equivalents
      Beginning of the period                         64,345         89,173
      End of the period                            $  36,503      $  54,734

Web site: http://www.magnachip.com/