August 27, 2018
MagnaChip, similar to Coherent, Applied and UDC benefited from being an early participant in the OLED market MagnaChip made the first drivers for LG’s OLED TVs. And its strategy to concentrate on higher-margin business like OLED drivers has paid off. Their Q218 results provide the proof.
Figure 1: MagnaChip Key Financial Data
Source: MX Revenue(TTM) data by YCharts
The company has two divisions:
Even with a stagnant Magna has been busy producing a raft of new OLED display drivers, and these have caught on, with the Chinese OEMs, which were waiting for Apple to come out with its new phone and have since ramped up design activity for their new models. And there is likely to be a resurgence in the market, which is slowly shifting toward OLED displays. (Smart2Zero: smartphone panel growth paused as the industry absorbed excess inventory built in 2017. OLED smartphone panel growth will resume in the second half of the year with 47 percent area growth forecast for the last six months of the year in this segment.)
Figure 2: OLED Panel Shipment Area Forecast
· 15 instead of the (Q1CC) predicted 10 smartphones with Magna's OLED display drivers hit the market in Q2.
· An additional 6 smartphones will hit the market in Q3.
· At the end of Q2, the company had 32 design wins with a dozen smartphone makers for its 40nm chip.
· The product mix will shift towards more complex and higher-margin drivers (for stuff like high-density, flexible and even bendable displays), like its new ultra-low power 28-nanometer OLED display driver.
Demand will maintain elevated, but Q2 was a little bit of an outlier with $62.2 million, as the company predicts a combined Q2 and Q3 revenue of $120 million, which supposes a mild sequential decline.
LCD display driversHere is where Magna is cutting back, because management wants to concentrate on higher-margin business. LCD revenues have declined to just 21% of display revenues (this was 69.5% in Q2 2017).