Good afternoon. My name is Lacy and I will be your conference operator today. At this time, I’d like to welcome everyone to MagnaChip Semiconductor’s Q2 2013 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. Mr. Robert Pursel, you may begin your conference.

Thank you, Lacy. Good afternoon and thank you for joining us for MagnaChip’s second quarter 2013 earnings conference call. A copy of the press release issued today is available on our Investor Relations website. A 72-hour telephone replay will be available shortly after today’s call and this webcast will be archived in the company website for one year. Access information is provided in today’s press release. Joining us today are Sang Park, MagnaChip Chairman and CEO, and Margaret Sakai, Executive Vice President and Chief Financial Officer. Sang will begin the call with an overview of our second quarter business highlights and Margaret will discuss our financial results. Following Margaret’s financial discussion, Sang will provide our third quarter guidance, after which we’ll open the call for questions. During the course of this conference call, we may make forward-looking statements about MagnaChip’s business outlook, including statements regarding our expectations for revenue, target gross and operating margin, as well as cost savings for 2013 and beyond. Our forward-looking statements and all other statements that are not historical facts reflect our beliefs and predictions as of today and, therefore, are subject to risks and uncertainties as described in the Safe Harbor discussion found in today’s press release. During the call, we will also discuss non-GAAP financial measures. The non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in today’s press release. I would now like to turn the call over to Sang Park for a review of our second quarter business. Sang?

Thank you, Robert. We delivered solid result in the second quarter; revenue of $215.3 million was up 4.9% sequentially and up 6.2% year-over-year. Gross margin 33% was up 100 basis points compared to the last quarter and up 200 basis points compared to Q2 of last year. We are excited that our effort to focus on fast growing markets with our expanding list of partners has enabled us to deliver 10 consecutive quarters of meeting or exceeding our financial guidance. Our smartphone and tablet related revenue increased to 35% of company revenue this quarter from 19% in Q2 of last year. Our diversified smartphone and tablet business with 53 products and 24 customers helped to differentiate us from our peers and minimize the impact of unexpected softness in the high-end, smartphone and tablet market. Currently, we are working with a mid-to-low end smartphone makers and their partners to increase our design win opportunities. In this newly expanding market where we support five smartphone makers and their seven phone models. We expect this effort along with the launch of several new product lines including our new sensor family will help us to continue our growth momentum into next year. I’m happy to report that our Power business continued to expand quite nicely and represented 17% of our revenue in Q2 up from 15% in Q1. We expect that our power business will grow throughout the second half of this year as we introduce our new line of Super Junction MOSFET and other premium products. For our Display business, as you may have seen from our recent product announcement, we have launched our own family of intelligent sensors targeted at mobile and medical applications with the growing demand from our AMOLED customer and our alignment with them for their new product plan.…

Thank you, Sang. Let me provide some financial highlights and several very positive developments over the last few weeks. Today, we announced that our board of directors approved a new $100 million stock repurchase program that runs from August 2013 to December 2014. The new program replaces our existing program under which we repurchased 4.3 million shares or 12% of our outstanding issuers over six quarters. We are extremely proud to announce that our outstanding financial performance together with the steady free cash flows and the strong balance sheet allows us to continue our share repurchase program. This month we completed our private offering of $225 million of new senior notes. The net proceeds were used to redeem our outstanding 10.5% of senior notes due 2018. As a result, we reduced the coupon to 6.625% and extended the maturity by three years through 2021. We are also able to reduce cash interest expense by 30.3% or approximately $6.5 million annually. The new senior notes will be the only outstanding long-term debt on our balance sheet. This successful transaction benefited from an upgrade of our co-pay family are rating to B1 by Moody’s Investors Services in June which highlighted our significantly diversified source of earnings, our ability to retain key customers and low CapEx requirements. We were upgraded to BB minus by S&P in April of this year. Adjusted EPS, a non-GAAP measurement, was $0.71 per diluted share for the second quarter compared to $0.48 in the second quarter of 2012. This is the highest second quarter adjusted EPS we have achieved in our history. A reconciliation of the non-GAAP financial measures to GAAP measures can be found in today’s press release. Second quarter revenue of $215.3 million and gross margin of 33% represented the 10th consecutive quarter we met or…

Thank you, Margaret. Our third quarter guidance when we look at the current billings and bookings and the market dynamics we expect that our revenue will be in the range of $215 million to $225 million. Based on this revenue level and our wafer loading forecast we anticipate our gross margin will be in the range of 33% to 34%.

So, Lacy, this concludes our prepared remarks. We will now open the call for questions.

Thank you. (Operator Instructions). Your first question comes from Blayne Curtis with Barclays.

It looks like I missed a part of the – your preamble. The display business it sounded like you said the high-end smartphone was weak which I think echoes a lot else others have said. If you could just provide a little bit more color there that I missed? And then, when you look at the guidance for September, is that business expected to be down, I thought you mentioned the AMOLED was still going to continue to ramp?

Well, our AMOLED business for the smartphone definitely is a growth driver for us. When we are looking at smartphone high-end even from Samsung they increased from last year 2012 to 2013 49%. So that’s a real additional volume that available to sell our product into and plus that we are in the new the flagship platform of Samsung. So, for AMOLED and smartphone is actually additional revenue for this year.

Okay, thanks. And then, as you look to September, did I hear that right, that or maybe you didn’t say it -- well, when you look at September the display segment going to be down as part of your forecast?

We’re looking at display flat or slightly up.

Okay. So, is it a assumption of you’re able to you’re seeing some corrections but you’re able to offset with other models? Is that the best way to look at it?

Exactly, because we have so many diversified business in smartphone and tablet and obviously its a little lower than originally we expect, but we’re able to manage it. And yeah, that’s the story.

Okay, thanks. And then, just finally on the sensor business, you mentioned that you had a win, and then you’re sampling the Compass product. Is that – could you talk about how quickly if you get that to revenue? Is that win for this year on the hall sensor? And then for the Compass, what’s the right time for to think about revenue from that?

Yeah this is a real exciting product and the whole concept came from customer’s request and I say actually design-in not win yet, but we’re very close. We expect some revenue before this year over, and as I say we have a number of customers interested not only in Korea also China as well as the U.S. they are smartphone and tablet makers. So, they really welcome our samples and they’re actively evaluating.

Okay, thanks, nice job.

You’re welcome.

Your next question comes from Suji De Silva with Topeka.

Hi guys, nice job on the quarter. Can you talk about the utilization here and what’s your wafer capacity growth expectations are for the remainder of the year?

We had about low 90 utilization in Q2 and Q3 we’re expecting high 80s, but again these are the numbers based on a partially closed six-inch fab that we did during the first quarter, but that’s only six-inch fab.

Okay, thanks, Sang. And then on the smartphone side, when you talk about these products that you think would help you in the low end smartphone market different from what you’ve already been able to accomplish in the premium smartphone market, different products, different foundry processes perhaps?

Well, actually to both from our product and as well as a foundry, maybe foundry side has more opportunity. It’s mainly touch IC that the Korean fabless company and successfully shipping to Korean company as well as to the Chinese new makers, and also we do have our own product goes into mid to low. So, it’s potentially a good business for us.

Okay, great. Thanks guys.

You’re welcome.

Your next question comes from Mehdi Hosseini with SIG.

Yes, thanks for taking my question. Back to the earlier question, should we assume that foundry will be similar to display in Q3 flat to up?

Foundry business will be flat to down.

Flat to down, okay. So, it is the power business that could be growing double digit on a sequential basis?

I didn’t say its double digit, Mehdi, but yeah it is growing yes.

Okay. And then historically, sorry.

Outside Korea. It is growing with the new product family so that’s even better news.

Sure. And then, in regards to the new products especially power solution and new customer in foundry, how should we think about the seasonality that kicks-in in the Q4 timeframe some of your Korean handset customers and others may typically reduce inventories in the later months of the year? Could the new products or new programs be enough to offset any of those seasonal trends?

Obviously and historically, we usually pick at Q3 and slightly down in Q4, still we have a limited visibility in high-end smartphone and that’s heavily in foundry business. So, the next few weeks is critical to looking to Q4, but we don’t provide any guidance for the Q4 but I think it’s a seasonably little lower.

Okay. Thank you.

You’re welcome.

Your next question comes from Rajvindra with Needham & Company. Rajvindra - Needham & Company: Yes, thanks and congrats on a good result, lot of a pretty tough market. On the gross margin, Margaret, you said there is some improvement sequentially as part of the guidance but it’s still down year-over-year last year September, 2012 I think it was like 34.5%. What’s the cost of the year-over-year I guess drop in terms of gross margin percentages? Is it just mix shift? And how should we think about margins in Q4 and going forward if you’re starting to see more of a ramp of power management?

Okay. For us it’s the two major factors of our gross margin improvement, it’s utilization and the product mix. And the main reason is the comparison in the third quarter year-over-year last year. Last year our utilization on the third quarter was 94 middle kind of it’s the high middle of the 90% compared to what we are expecting this coming quarter is around a little bit higher than – mid 80% and so that is the major factor of it. Rajvindra - Needham & Company: And the margins kind of going forward how we should think about that, I mean, I know in the past you talked about one to two point margin improvement per year?

Well, we say that our business model providing the utilization equal to we can do 1% or 2%. So, let's close the Q4 and maybe that’s the number still is possible but it’s all depends on our foundry business so. Rajvindra - Needham & Company: So, the foundry was down or expect to be flat to down slightly in Q3 which is down year-over-year although I think Q3 you had a very tough compared to Q3 of last year foundry was up 45% year-over-year. Can you talk about the - why is it down sequentially at least, is it seasonally down in Q3? And you talked about slowdown of high-end smartphone offsetting it by low to mid range. When do you think we’ll see that offset start to occur in the foundry business?

Well, couple other things. Obviously, the reason it’s down is the high-end smartphone demand but the - we got a lot of non-smartphone tablet related foundry, new customers in the pipeline, they will coming into revenue starting from Q4 and on. We will see more diversified customer list and revenue starting from next year. And also one correction, I believe that our foundry business going to grow from 2012 into 2013 again then let’s close our Q4 and maybe we can look at the number. And Q2 which is closed, it’s a 20% up year-to-year so the first half of foundry business has been very strong and that’s going to help us to continue through the – that providing a strong foundation. So our foundry business, yes, there is a crossing which all the market and industry experience. We’ve been working on this diversifications of our low end and new business I think they will probably help us into next year. So, we have high expectation and particularly new product that with our new technology family we introducing such as the ultra-high voltage 700, it’s well popular. We will see actual revenue starting from next year, that’s a 0.35 micron, and as well as RF SOI probably available to customer starting from next year will be real good product attracting new list of customers. So, we are the specialized foundry and we will even offer more options and more technology that unique to us and our customers are very interesting. Rajvindra - Needham & Company: Very good. Just last question if I may, Margaret, on the OpEx. Should we think about OpEx at these kind of levels $40 million to $41 million or is there any up takes that we should consider?

I think it’s between $40 million to $43 million again depending on our R&D project. Rajvindra - Needham & Company: Thanks a lot and congrats again.

Thank you.

Thank, Rajvi.

Your next question comes from Ross Seymore from Deutsche Bank.

Bob Gujavarty for Ross. I was just curious I mean obviously the growth was coming from low and medium and smartphone to tablets. How does that dynamic change from maybe a margin perspective or even an ASP per wafer, is there an impact as you kind of go to these new customers compared to your traditional high end customers?

For us there is a very minimum impact even though it’s a mid to low end yet I think that we offer a very attractive price to the customer so we don’t expect that happen. And also we are in mid to end - mid to low smartphone but that’s one of the additional business opportunity for us and sensor family is going to win the new sockets and as well as the new – the technology by foundry business. So, all these are more diversifying it’s not only mid to low end.

Okay. May be then on the opposite side, you talked a little bit about the high power high voltage application. Is that -- are those kind of products kind of accretive to your margins? Do they come in at a higher ASP and high margin level? And is that a potential offset to some of the --

Yeah, definitely like a 0.35 high voltage, ultra-voltage. Only if I remember correctly may be about two, three foundry provider offering that technology so obviously that is a premium product. And same thing with the RF SOI, that’s a real high premium and as we deliver technology solution to the customer.

Great. Thank you.

You’re welcome.

Your next question comes from Nat Gaudois with UBS.

Hi there, that should be as Nick Gaudois from UBS. Just first question on the digital side. You just talked about new tablet customers in Q4, I just wanted to know if you’re seeing an increase in market shares in to the fourth quarter for the main tablet maker who of course is a exporter in displays in Korea? And I have a couple of follow-ups, thank you.

Okay. I think that you’re referring to our sensor product and being marketed at China and U.S. so they are either smartphone and tablet PC makers. So that’s the new opportunity that I was referring to and we may able to get some revenue ending this year or more likely only next year. Did I answer your question?

Not really but that’s still interesting in itself. But my question was more if I look at one of your fabless partners in Korea, it looks as like they’re regaining market share into both 7.9 and 9.7-inch tablets the main tablet maker into the (inaudible) to the fourth quarter and in Q1, I wanted to know if you’re actually seeing any benefit on your side of that?

Yes, we do. We’re shipping tick ons and the timing controller; we’re shipping display driver and we see the volume increasing.

Okay, great. Just wanted to go back to your touch IC maker exposure increasing in Korea if not effectively one or two fabless companies you’re supplying into, I mean, one in particular being quite significant into the low-to-mid end at Samsung?

I think we can probably share the customer name, its Images. That’s the customer name very active. We can’t really reveal the Samsung business or Chinese business but they are lowering and increasing their wafers into our fab.

So as you may drill that…

We got three others as well.

Okay. Three others in Korea or three others global along the flip side?

It’s in Korea, Images.

Okay, okay, great. Sorry Images but it wouldn’t be Melfas as well you’re aiming at?

No, we’re not in Melfas.

Oh its not a Melfas, no.

Okay.

Melfas, yeah, it’s another company, totally different company.

Yeah okay, okay, well, understood. And last question you seem I mean you still seem to be able to grow your display revenues in Q3 despite the fact that the panel TV market is slowing down quite significantly. Is that just the function of - on the mobile side of setting the TV side or is it also a function of increased silicon contents per panel basically helping you?

Yeah, we think that getting into the third quarter traditional LCD market is very stable, but we got more sockets now, sockets including the OLED TVs but more towards its AMOLED. AMOLED we’re expecting that a good ramp this year for us for the smartphone but the next year we have a much better alignment. I think they will be a strong growth driver for us into next year, we have a perfect alignment at the same time our main customer they’re increasing their products and capacity so that will be a great opportunity for us next year. And we have a much better alignment into new platform of TV and typically that ramping up in the fourth quarter but I believe they probably stuck up some of that in third quarter. So, display business looks good, better than ever now.

Great, that’s great. Thank you very much.

You’re welcome.

Thanks, Nick.

Your next question comes from Jay Srivatsa with Chardan Capital Markets.

Thanks for taking my question. Sang, I want to focus on the power segment even with the PC business being weak you’ve managed to grow that business very nicely. Can you talk about the phenomenon that’s going on the there I mean are you getting more sockets or are you sensing better opportunities in other markets outside of PCs. Can you just give us a landscape of what you’re seeing in the power segment?

Actually our past Korea is adding new product line. As a matter of fact we’re expecting that throughout rest of the year this business going to grow and strictly because of our new product line our Super Junction MOSFET which is a premium product for us, it is growing. We’re not growing our low price MOSFET, that business stays out flat but at the same time this Super Junction MOSFET and the power management IC finally expanding into other sectors and all these kind of drive our growth and throughout the year. So, we are really exciting about it.

All right. Going back to the attention you’re focusing on the low-end and the mid-end smartphone market that dynamic, lot of the demand is now coming from China there. What is your strategy in terms of attacking the white-box manufacturers in China will appear to be gaining a lot of momentum in the low-end, mid-end smartphone segment?

Obviously the foundry, through the foundry we’re going to have some upside opportunity and our sensor product we’re going to directly marketing to them, we’re not going to go into any low margin products such as display driver and we have no intention to it. This is not a big company, we do have a limited product, limited – the offerings and we will focus more into premium product selling to China, but we’re looking forward to.

Okay. Thank you good luck.

Thank you, Mr. Jay.

Your final question comes from Terence Whalen with Citi.

Hi, good afternoon, congratulations on the intact results in the choppy environment. So, one question I had its actually administrative question on tax. Margaret, I think that you said you expected your NOL to be fully used up by the end of 2014. What sort of tax rate should we be modeling after that into 2015?

Between 23% to 25%.

Okay.

So you can see the tax rate, yeah.

Okay, terrific.

But I don’t know whether you caught it, but with our tax expense use to be $10 million to $15 million per year with the refinancing its $5 million to $10 million. So, we are saving significant tax until NOL expires.

Yeah, thank you, Sang, that was actually one of my follow-up question is, it seems like $5 million to $10 million you’re still expecting on a quarterly basis to have a little bit of a tax. Should we think about that as evenly distributed maybe in the third and fourth quarter to get to that $5 million to $10 million for 2013?

Yes, it is evenly distributed, you can do that for your model.

Okay, thank you. And then just a quick one I’m not sure if I had missed this, but just specifically on interest expense, did you specify your expectation for interest income and interest expense next quarter?

What I said is as so we expect with the debt refinancing we expect annual basis our interest expense will be decreased by the $6.5 million level approximately on going basis.

Okay, okay, thank you. And then the other question I had is more fundamental in nature. I think at Analyst Day in New York you had talked about efforts to diversify the foundry customer base. Sang you talked a little bit about having some a promising business with some touch controller suppliers. I want to also understand how progress is with other diversified U.S. customers in particular. So, I guess the question would be as you make an effort to diversify the foundry business how do you see the regional opportunity is playing out and are some more immediate than others and how in particular are prospects for U.S. customers with higher margin foundry business looking right now?

It looks real good. All the foundry business takes time to bring the revenue but the pipeline is strong. I expect that before year end I’m going to announce couple of names that new U.S. customers you can easily recognize. And other than that existing U.S. foundry customers and also moving into one other technology platforms and that’s going to enhance that our business into next year. Again be aware with us, it is a slow moving business but once that engaged I think that it complement smartphone and tablet-related business. So, we look forward to it.

Okay, terrific. And then, I apologize because I was bouncing in between another call. The buyback, did you provide any sort of context around how you think about buyback? Is it something that you’d like to evenly meet around over the next four quarters? Is it something that’s more price sensitive as you see the stock sort of day-in, day-out, week-in, week-out? Thanks.

Obviously, we do have some internal target but in statement I say we proactively executed, it’s all depends on the stock price and business specification, but I say one more time we proactively executed them.

Terrific. My last question is sort of one more fundamental in nature. Just regarding the prognosis for thinking about the general state of inventory in the supply chain, we’re seeing deceleration in high-end smartphone. GSMC I think made the comment that they expect their fourth quarter this year to decline a little bit more than the fourth quarter last year. I need just general thoughts or insights into how you feel may be about the inventory levels in context of deceleration that we’re seeing? Thanks.

I think it’s not our inventory problem, it’s a visibility problems; it’s all depends on two major player and when they’re going to place the order and traveling down to foundry provider like us. So, fourth quarter typically seasonally a little bit low and but we don’t have clear visibility. We’ll probably share our insight into fourth quarter may be a little bit later during may be third quarter our earning release.

I thought of it, anyway thank you so much, Sang. Best of luck.

Thank you, Terence.

So, in closing, MagnaChip will be presenting at the Deutsche Bank dbAccess Technology Conference as well as the Citi 2013 Global Technology Conference in September. Both events will be webcast live and archived for replay for 90 days. Also, our next earnings release and conference call is scheduled for October 29, 2013. So, please look for details of these and other upcoming financial events on MagnaChip’s Investor Relations’ website at www.magnachip.com. Thank you for joining us today.

Thank you for participating in today’s conference call. You may now disconnect.