MagnaChip Semiconductor Reports Fourth Quarter Results

MagnaChip Semiconductor today announced results for the fourth quarter ended December 31, 2006.

Revenue for the three months ended December 31, 2006 was $162.3 million, compared to $245.2 million in the fourth quarter of 2005.

Gross margin was $18 million or 11.1% of revenue for the quarter ended December 31 2006, compared to $60.4 million or 24.6% of revenue for the fourth quarter of 2005.

Operating expenses for the fourth quarter of 2006 were $57 million or 35.1% of revenue. This included impairment and disposal loss of $2.1 million taken in association with dispositions of tangible assets previously classified as held-for-sale. Excluding the impairment and disposal loss, operating expenses for the fourth quarter of 2006 were $54.9 million or 33.8% of revenue, compared to $61 million or 24.9% of revenue in the fourth quarter of 2005 excluding restructuring and impairment charges of $27.5 million.

Operating loss was $39 million during the current quarter, compared to an operating loss of $28.1 million in the prior year quarter.

Net interest expense for the fourth quarter of 2006 was $14.1 million, compared to $14.4 million in the fourth quarter of 2005.

Net loss for the three months ended December 31, 2006 was $45.6 million compared to a net loss of $22.9 million in the fourth quarter of 2005.

Sang Park, Chairman and CEO of MagnaChip Semiconductor, commented, "Since I took the office of CEO last May, we all have worked hard to turn around the company and rebuild our leadership momentum and product pipeline. As a result of our coordinated efforts, our three major businesses, SMS, Display Solutions, and Imaging Solutions, have begun to recover and now have a solid foundation on which to continue to improve. We expect production to ramp on key new programs in the second half of this year and we are seeing a high level of new customer activity. We are well-positioned to make 2007 the year of MagnaChip's recovery and return to growth as we focus on bringing high- quality display and imaging solutions to market faster."

Robert Krakauer, President and CFO of MagnaChip Semiconductor, said, "We are pleased with our cash generation during the quarter on excellent working capital management and that we exceeded our goals for manufacturing cost improvement. We have made considerable progress on our new product roadmap, with a product portfolio refreshment. This is critical to the company's growth and success. As an example, we now have one of the few market solutions for digital auto focus. Customer feedback has been positive, and we are optimistic entering 2007. Our goal is to grow market share, drive revenue and profit growth, and strengthen our balance sheet as we regain our business momentum throughout the coming year."

First Quarter 2007 Outlook

For the first quarter of 2007, the Company expects revenues to be down by 10% to 12% compared to the fourth quarter of 2006 reflecting lower seasonal demand and an inventory correction in the analog and power areas of our foundry business. The Company expects gross margins of 4 to 6% due to reduced loadings partially offset by cost containment measures.

Investor Conference Call / Webcast Details

MagnaChip will report full results for the fourth quarter 2006 on Friday, January 26, 2007 at 10:00 a.m. in New York (12:00 a.m., Saturday, January 27, 2007 in Seoul). The conference call will be available at http://www.magnachip.com and by telephone at +1-(201) 689-8470. A replay of the call will be available in two hours after the call through midnight on Friday, February 2, 2007 in New York (2 p.m. on Friday, February 2, 2007 in Seoul) at http://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 224173, respectively.

About MagnaChip Semiconductor

MagnaChip Semiconductor is a leading designer, developer and manufacturer of mixed-signal and digital multimedia semiconductors addressing the convergence of consumer electronics and communications devices. We focus on CMOS image sensors and flat panel display drivers, which are complex, high performance, mixed signal semiconductors that capture images and enable and enhance the features and capabilities of both small and large flat panel displays. MagnaChip also provides wafer foundry services utilizing CMOS high voltage, embedded memory, analog and power process technologies for the manufacture of IC's for customer-owned designs. MagnaChip has world-class manufacturing capabilities and an extensive portfolio of approximately 9,500 registered and pending patents. As a result, MagnaChip is a valued partner in providing leading technology solutions to its customers worldwide. For more information, visit http://www.magnachip.com.

Forward-Looking Statements:

Certain statements in this press release including statements regarding expected future financial and industry growth are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially. In some cases, you can identify forward-looking statements by such terms as "believes," "expects," "anticipates," "intends," "estimated," the negative of these terms, or other comparable terminology. Factors that could cause actual results to differ include general business and economic conditions and the state of the semiconductor industry; demand for end-use products by consumers and inventory levels of such products in the supply chain; changes in demand from significant customers; changes in customer order patterns; changes in product mix; capacity utilization; level of competition; pricing pressure and declines in average selling price; delays in new product introduction; continued success in technological innovations and delivery of products with the features customers demand; shortage in supply of materials or capacity requirements; availability of financing; exchange rate fluctuations; litigation and other risks as described in the Company's SEC filings, including its quarterly report on Form 10-Q for the quarter ended October 1, 2006.

Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements.

CONTACT:

In the U.S.:

David Pasquale, EVP at The Ruth Group

Tel: +646-536-7006

dpasquale@theruthgroup.com

MagnaChip Semiconductor

Condensed Consolidated Statements of Operations

(In thousands of U.S. Dollars, except per unit data)

(Unaudited)

Three Months Ended

December 31, December 31,

2006 2005

Net sales $162,313 $245,154

Cost of sales 144,332 184,765

Gross profit 17,981 60,389

Operating expenses:

Selling, general and administrative 21,309 34,048

Research and development 35,384 26,960

Restructuring and impairment charges 318 27,514

Operating loss (39,030) (28,133)

Other income (expenses):

Interest expenses, net (14,128) (14,400)

Foreign currency gain, net 9,947 21,199

Loss before income taxes (43,211) (21,334)

Income tax expenses 2,427 1,560

Net loss $(45,638) $(22,894)

Dividends accrued on preferred units (2,842) (2,549)

Net loss attributable to

common units $(48,480) $(25,443)

Net loss per common unit

Basic and Diluted (0.92) (0.48)

Common units used in per common unit

calculation: Basic and Diluted (in

thousands) 52,721 53,051

Key Ratios & Information:

Gross Margin 11.1 % 24.6 %

Operating Expenses as a % of Revenue 35.1 % 36.1 %

Operating Margin (24.0)% (11.5)%

Depreciation & Amortization

Expense 43,079 48,181

Capital Expenditures 13,379 23,055

MagnaChip Semiconductor

Reconciliation of US GAAP Gross Profit, Operating Income (Loss) and

Net Income (Loss) to Non-US GAAP Gross Profit, Operating Income (Loss)

and Net Income (Loss)

(In thousands of US Dollars)

(Unaudited)

Use of Non-US GAAP Financial Information

To supplement our condensed consolidated financial statements presented on a US GAAP basis, MagnaChip Semiconductor uses non-US GAAP measures of gross profit, operating income (loss) and net income (loss), that are US GAAP gross profit, operating income (loss) and net income (loss) adjusted to exclude certain costs, expenses or gains, referred to as special items. Non-US GAAP adjusted gross profit, operating income (loss) and net income (loss) measure give an indication of our baseline performance before other charges that are considered by management to be outside of our core operating results. In addition, our non-US GAAP adjusted measure of gross profit, operating income (loss) and net income (loss) are among the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information should not be considered in isolation or as a substitute for gross profit, operating income (loss) and net income (loss) prepared in accordance with generally accepted accounting principles in the United States of America.

Three Months Ended Three Months Ended

December 31, 2006 December 31, 2005

Gross Operating Net Gross Operating Net

Profit Income Income Profit Income Income

(Loss) (Loss) (Loss) (Loss)

US GAAP Amounts $17,981 $(39,030) $(45,638) $60,389 $(28,133) $(22,894)

Special items

(1) Inventory

loading

effect - - - 8,133 8,133 8,133

(2) Restructuring

and

impairment

charges - 318 318 - 27,514 27,514

(3) Loss from

disposal of

held-for-sale

assets - 1,819 1,819 - - -

Total special

items - 2,137 2,137 8,133 35,647 35,647

Non-US GAAP

Profit (Loss) $17,981 $(36,893) $(43,501) $68,522 $7,514 $12,753

Adjusted Gross

Margin 11.1% 28.0%

Adjusted

Operating

Expense - % of

Revenue 33.8% 24.9%

Adjusted

Operating

Margin (22.7)% 3.1%

Non-US GAAP adjusted condensed consolidated statements of operations are intended to present the Company's operating results, excluding special items. The special items excluded for the three months ended December 31, 2006 and 2005 are as follows:

(1) Inventory adjustment made under SFAS 151 to reflect the normal cost of

manufacturing, excluding abnormal period costs.

(2) Impairment charges under SFAS 144 during the fourth quarter of 2006

and restructuring and impairment charges taken during the fourth

quarter of 2005 in association with divesture of application processor

business.

(3) Loss from disposition of assets classified as "held-for-sale" in

2005.

MagnaChip Semiconductor

Condensed Consolidated Balance Sheets

(In thousands of US Dollars)

(Unaudited)

December 31, December 31,

2006 2005

Assets

Current assets

Cash and cash equivalents $89,173 $86,574

Accounts receivable, net 76,665 112,053

Inventories, net 57,846 88,677

Other current assets 20,380 22,486

Total current assets 244,064 309,790

Property, plant and equipment, net 336,279 485,077

Goodwill and intangible assets, net 139,729 191,389

Other non-current assets 49,981 54,391

Total assets $770,053 $1,040,647

Liabilities & Unitholders' Equity

Current liabilities

Accounts and other payable $ 94,822 $129,279

Other current liabilities 26,627 39,070

Total current liabilities 121,449 168,349

Long-term borrowings 750,000 750,000

Other non-current liabilities 65,771 62,320

Total liabilities 937,220 980,669

Redeemable convertible preferred units 117,374 106,462

Unitholders' equity (284,541) (46,484)

Total liabilities, redeemable convertible

preferred units and unitholders' equity $770,053 $1,040,647

MagnaChip Semiconductor

Condensed Consolidated Statements of Cash Flows

(In thousands of US Dollars)

(Unaudited)

Three Months Ended

December 31, December 31,

2006 2005

Cash flows from operating activities

Net loss $(45,638) $(22,894)

Adjustments to reconcile net loss to net

cash provided by (used in) operating activities

Depreciation and amortization 43,079 48,181

Impairment charges 318 25,580

Gain on foreign currency translation, net (10,891) (21,331)

Changes in accounts and other receivable 7,237 2,943

Changes in inventories 2,569 (3,443)

Changes in accounts and other payable 2,505 23,003

Changes in accrued expenses (10,332) (9,748)

Other 5,052 4,150

Net cash provided by (used in)

operating activities (6,101) 46,441

Cash flows from investing activities

Capital expenditures (13,379) (23,055)

Other 180 1,271

Net cash used in investing activities (13,199) (21,784)

Cash flows from financing activities

Repayment of borrowings - (11,061)

Other - 114

Net cash used in financing activities - (10,947)

Effect of exchange rates on

cash and cash equivalents 984 1,837

Net increase (decrease)

in cash and cash equivalents (18,316) 15,547

Cash and cash equivalents

Beginning of the period 107,489 71,027

End of the period $89,173 $86,574

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