Magnachip Semiconductor Corporation Annual Report 2022

FY2022 Annual Report · Magnachip Semiconductor Corporation

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c/o Magnachip Semiconductor, Ltd.
15F, 76 Jikji-daero 436beon-gil, Heungdeok-gu
Cheongju-si, Chungcheongbuk-do, Republic of Korea 28581

To Our Stockholders:

You are invited to attend the Annual Meeting of Stockholders of Magnachip Semiconductor Corporation to

be held on May 18, 2023, at 8:00 p.m. Eastern Daylight Time.

We are pleased to announce that this year’s Annual Meeting will again be held completely virtually via live
interactive webcast on the Internet. You will be able to attend, vote and submit your questions during the meeting
at www.virtualshareholdermeeting.com/MX2023. We have enclosed the notice of our Annual Meeting of
Stockholders, together with this Proxy Statement, a proxy and an envelope for returning the proxy.

You are asked to act upon proposals to:

(1) elect the six director nominees named in the Proxy Statement to our Board of Directors;

(2) conduct an advisory (non-binding) vote on the compensation of our named executive officers as

described in this Proxy Statement;

(3)

ratify the appointment of Samil PricewaterhouseCoopers as our independent registered public
accounting firm for the fiscal year ending December 31, 2023; and

(4) approve our Amended and Restated 2020 Equity and Incentive Compensation Plan.

Your Board of Directors unanimously recommends that you vote ‘‘FOR’’ each nominee for director that the

Board of Directors has selected, ‘‘FOR’’ the approval of the compensation of our named executive officers as
described in the Proxy Statement, ‘‘FOR’’ the appointment of Samil PricewaterhouseCoopers as our independent
registered public accounting firm for the fiscal year ending December 31, 2023, and ‘‘FOR’’ the approval of our
Amended and Restated 2020 Equity and Incentive Compensation Plan.

Please carefully review the Proxy Statement and then complete and sign your proxy and return it promptly.
If you attend the virtual meeting and decide to vote during the meeting, you may withdraw your proxy by voting
at the meeting.

Your time and attention to this letter and the accompanying Proxy Statement and proxy are appreciated.
Your vote is important. Please take the time to read the enclosed Proxy Statement and cast your vote via proxy
or at the Annual Meeting of Stockholders.

Sincerely,

/s/ Young-Joon Kim

Young-Joon Kim
Chief Executive Officer

April 17, 2023

Magnachip Semiconductor Corporation
c/o Magnachip Semiconductor, Ltd.
15F, 76 Jikji-daero 436beon-gil, Heungdeok-gu
Cheongju-si, Chungcheongbuk-do, Republic of Korea 28581

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 18, 2023

The Annual Meeting of Stockholders of Magnachip Semiconductor Corporation, a Delaware corporation,
will be held on Thursday, May 18, 2023, at 8:00 p.m. Eastern Daylight Time, via live interactive webcast on the
Internet, for the following purposes:

(1)

to elect the six director nominees named in the Proxy Statement to our Board of Directors;

(2)

(3)

to conduct an advisory (non-binding) vote on the compensation of our named executive officers as
described in the Proxy Statement;

to ratify the appointment of Samil PricewaterhouseCoopers as our independent registered public
accounting firm for the fiscal year ending December 31, 2023;

(4)

to approve our Amended and Restated 2020 Equity and Incentive Compensation Plan; and

(5)

to transact such other business as may properly come before the meeting.

Holders of record of our common stock at the close of business on Thursday, April 6, 2023, are entitled to

vote at the meeting. A list of stockholders entitled to vote will be available for inspection by stockholders of
record for any purpose germane to the Annual Meeting during ordinary business hours at our corporate offices
located at Magnachip Semiconductor Corporation, c/o Magnachip Semiconductor, Ltd., 15F, 76 Jikji-daero
436beon-gil, Heungdeok-gu, Cheongju-si, Chungcheongbuk-do, Republic of Korea 28581, for a period of
ten days immediately prior to the Annual Meeting. If you are a stockholder of record and would like to view this
stockholder list, please contact Investor Relations Department at investor.relations@magnachip.com and
arrangements will be made to review the records in person during the ten days prior to the Annual Meeting.
Additionally, such list of stockholders will be made available for viewing electronically during the Annual
Meeting, and instructions to access such list will be available on the date of the Annual Meeting at
www.virtualshareholdermeeting.com/MX2023.

By Order of the Board of Directors

/s/ Theodore Kim

Theodore Kim
Chief Compliance Officer, Executive Vice President,
General Counsel and Secretary

April 17, 2023

Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to Be Held on May 18, 2023

The 2023 Proxy Statement and 2022 Annual Report are available, free of charge, at

www.proxyvote.com.

Magnachip Semiconductor Corporation’s Annual Report for the year ended December 31, 2022 is
being mailed to stockholders concurrently with the 2023 Proxy Statement. The Annual Report contains
financial and other information about Magnachip Semiconductor Corporation, but is not incorporated into
the Proxy Statement and is not deemed to be a part of the proxy soliciting materials.

Even if you expect to attend the Annual Meeting, please promptly complete, sign, date and mail the

enclosed proxy card. A self-addressed envelope is enclosed for your convenience. No postage is required if
mailed in the United States. Alternatively, if you are a holder of record of our common stock on the record
date, you may vote your shares electronically either over the internet at www.proxyvote.com or by
touch-tone telephone at 1-800-690-6903. Stockholders who attend the Annual Meeting may revoke their
proxies and vote during the meeting at www.virtualshareholdermeeting.com/MX2023 if they so desire.

TABLE OF CONTENTS

GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL ONE: ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attendance at Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Role in Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Orientation and Continuing Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Code of Business Conduct and Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of the Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications with Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Human Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Interlocks and Insider Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPENSATION COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants of Plan-Based Awards Table for Fiscal Year 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding Equity Awards at Fiscal Year End 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Option Exercises and Stock Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension Benefits for the Fiscal Year Ended December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonqualified Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential Payments Upon Termination or Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Compensation Plan Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Compensation Plan Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pay Versus Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related Person Transactions Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . .
PROPOSAL TWO: ADVISORY (NON-BINDING) VOTE ON THE COMPENSATION OF OUR

NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS PROXY STATEMENT . . . . . . . . . . . . .

PROPOSAL THREE: RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2023. . . . . . . .
Fees Paid to Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy and Procedure for Approval of Audit and Permitted Non-Audit Services. . . . . . . . . . . . . . . . . . . .

PROPOSAL FOUR: APPROVAL OF OUR AMENDED AND RESTATED 2020 EQUITY AND

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INCENTIVE COMPENSATION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
STOCKHOLDER PROPOSALS FOR 2024 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SOLICITATION OF PROXIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Magnachip Semiconductor Corporation
c/o Magnachip Semiconductor, Ltd.
15F, 76 Jikji-daero 436beon-gil, Heungdeok-gu
Cheongju-si, Chungcheongbuk-do, Republic of Korea 28581

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 18, 2023

GENERAL INFORMATION

Why am I receiving these materials?

We sent you these proxy materials because the Board of Directors (the ‘‘Board’’) of Magnachip Semiconductor

Corporation (the ‘‘Company,’’ ‘‘Magnachip,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’) is soliciting your proxy to vote at the 2023
Annual Meeting of Stockholders (the ‘‘Annual Meeting’’) and at any postponements or adjournments of the Annual
Meeting. The Annual Meeting will be held virtually via live interactive webcast on the Internet on May 18, 2023, at
8:00 p.m. Eastern Daylight Time. If you held shares of our common stock, par value of $0.01 per share (the
‘‘Common Stock’’), on April 6, 2023 (the ‘‘Record Date’’), you are invited to attend the Annual Meeting at
www.virtualshareholdermeeting.com/MX2023 and vote on the proposals described below under the heading ‘‘What am
I voting on?’’ However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may
complete, sign, date and return the enclosed proxy card. You may also vote over the Internet or by telephone.

The Notice of Annual Meeting of Stockholders, the Proxy Statement, the enclosed proxy card and our

Annual Report on Form 10-K for the fiscal year ended December 31, 2022 are being mailed to stockholders
commencing on or about April 17, 2023.

What am I voting on?

There are four proposals scheduled to be voted on at the Annual Meeting:

Election of the six director nominees specified in this Proxy Statement to serve until the 2024 annual
meeting of stockholders and until their respective successors are elected and qualified;

2. Approval on an advisory (non-binding) basis of the compensation of our named executive officers as

described in this Proxy Statement;

3. Ratification of the appointment of Samil PricewaterhouseCoopers as our independent registered public

accountants for the fiscal year ending December 31, 2023; and

4. Approval of our Amended and Restated 2020 Equity and Incentive Compensation Plan.

How does the Board recommend that I vote?

Our Board recommends that you vote your shares:

‘‘FOR’’ the election of each of the six director nominees named in this Proxy Statement to hold office until

the 2024 annual meeting of stockholders and until their respective successors are elected and qualified;

‘‘FOR’’ the approval on an advisory (non-binding) basis of the compensation of the named executive

officers as described in this Proxy Statement;

‘‘FOR’’ the ratification of the appointment of Samil PricewaterhouseCoopers as our independent registered

public accountants for the fiscal year ending December 31, 2023; and

‘‘FOR’’ the approval of our Amended and Restated 2020 Equity and Incentive Compensation Plan.

Who can vote at the Annual Meeting?

If you were a holder of record of the Company’s Common Stock as of the close of business on April 6,
2023, the Record Date for the Annual Meeting, you may vote your shares at the Annual Meeting. As of the
Record Date, there were 42,514,556 shares of Magnachip Common Stock outstanding, excluding treasury shares.
Company treasury shares will not be voted. Each stockholder has one vote for each share of Common Stock held
as of the Record Date.

If, on the Record Date, your shares were held in an account at a broker, bank, or other financial institution
(we will refer to those organizations collectively as ‘‘broker’’), then you are the beneficial owner of shares held
in ‘‘street name’’ and these proxy materials are being forwarded to you by that broker. The broker holding your
account is considered the stockholder of record for purposes of voting at the Annual Meeting. As the beneficial
owner, you have the right to direct your broker on how to vote the shares in your account. As a beneficial owner,
you are invited to attend the Annual Meeting via the Internet at www.virtualshareholdermeeting.com/MX2023.
However, since you are not a stockholder of record, you may not vote your shares at the Annual Meeting unless
you request and obtain a valid proxy from your broker.

How can I attend the Annual Meeting?

If you are a stockholder of record or a beneficial owner as of April 6, 2023, you are invited to attend the

Annual Meeting live via the Internet at www.virtualshareholdermeeting.com/MX2023. You must have your
Control Number listed on the enclosed proxy card to enter the meeting. The webcast starts at 8:00 p.m. Eastern
Daylight Time. You may vote and submit questions while attending the meeting on the Internet. Instructions on
how to attend and participate in the Annual Meeting via the Internet, including how to demonstrate proof of
stock ownership, are posted at www.virtualshareholdermeeting.com/MX2023. The audio broadcast will be
archived on that website for one year.

What if I return the proxy card to the Company but do not make specific choices?

If you return a signed, dated, proxy card to the Company without making any voting selections, the named
proxies will vote your shares (1) ‘‘FOR’’ the election of each of the six director nominees named in this Proxy
Statement to hold office until the 2024 annual meeting of stockholders and until their respective successors are
elected and qualified; (2) ‘‘FOR’’ the approval on an advisory (non-binding) basis of the compensation of our
named executive officers as disclosed in this Proxy Statement; (3) ‘‘FOR’’ the ratification of the appointment of
Samil PricewaterhouseCoopers as our independent registered public accountants for the fiscal year ending
December 31, 2023; and (4) ‘‘FOR’’ the approval of our Amended and Restated 2020 Equity and Incentive
Compensation Plan.

The Company does not expect that any matters other than the election of directors and the other proposals
described in this Proxy Statement will be brought before the Annual Meeting. The persons appointed as proxies
will vote in their discretion on any other matters that may properly come before the Annual Meeting or any
postponements or adjournments thereof, including any vote to postpone or adjourn the Annual Meeting.

How many shares must be present or represented to conduct business at the Annual Meeting?

A quorum of stockholders is necessary to hold a valid annual meeting. A quorum will be present if the
holders of at least a majority of the total number of shares of Common Stock entitled to vote are present, in
person or by proxy, at the Annual Meeting. There were 42,514,556 shares of our Common Stock outstanding and
entitled to vote on the Record Date. Therefore, a quorum will be present if 21,257,279 shares of our Common
Stock are present in person or represented by executed proxies timely received by us at the Annual Meeting.
Abstentions and shares represented by broker non-votes are counted for the purpose of determining whether a
quorum is present. If there are insufficient votes to constitute a quorum at the time of the Annual Meeting, we
may adjourn the Annual Meeting to solicit additional proxies.

How are votes counted and what is a broker non-vote?

Votes will be counted by the inspector of election appointed for the Annual Meeting, who will separately
count ‘‘FOR,’’ ‘‘AGAINST,’’ ‘‘WITHHOLD,’’ abstentions and broker non-votes. A ‘‘broker non-vote’’ occurs

when your broker submits a proxy card for your shares of Common Stock held in street name, but does not vote
on a particular proposal because the broker has not received voting instructions from you and does not have the
authority to vote on that matter without instructions. Under the rules that govern brokers who are voting shares
held in street name, brokers have the discretion to vote those shares on routine matters but not on non-routine
matters. For purposes of these rules, the only routine matter in this Proxy Statement is Proposal Three—the
ratification of our independent registered public accounting firm for the fiscal year ending December 31, 2023.
Non-routine matters in this Proxy Statement are Proposal One—the election of directors, Proposal Two—the
advisory (non-binding) vote on the compensation of our named executive officers as described in this Proxy
Statement, and Proposal Four—the approval of our Amended and Restated 2020 Equity and Incentive
Compensation Plan. Therefore, if you hold your shares in street name and do not provide voting instructions to
your broker, your broker does not have discretion to vote your shares on any proposal at the Annual Meeting
other than Proposal Three—the ratification of our independent registered public accounting firm for the fiscal
year ending December 31, 2023. However, your shares will be considered present at the Annual Meeting for
purposes of determining the existence of a quorum.

What is the voting requirement to approve each of the proposals?

Proposal One—Election of Directors

The election of director nominees requires a plurality vote of the shares present in person or represented by
proxy at the Annual Meeting and entitled to vote in the election of directors. The director nominees receiving the
highest number of ‘‘FOR’’ votes cast by the holders of our Common Stock entitled to vote at the Annual
Meeting will be elected. Accordingly, ‘‘WITHHOLD’’ votes and broker non-votes will have no effect on the
outcome of the election of directors. Stockholders have no right to cumulative voting as to any matters, including
the election of directors.

Proposal Two—Advisory (Non-Binding) Vote on the Compensation of our Named Executive Officers

The proposal to approve on an advisory (non-binding) basis the compensation of our named executive
officers as described in this Proxy Statement requires the affirmative vote of a majority of the shares present in
person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions will be
included in the number of shares present and entitled to vote and will therefore have the same effect as a vote
‘‘AGAINST’’ the proposal. Broker non-votes will not be included in calculating the number of votes entitled to
vote on this proposal and will therefore have no effect on the outcome of this proposal.

Proposal Three—Ratification of the Appointment of our Independent Registered Public Accounting Firm for
the Fiscal Year Ending December 31, 2023

The proposal to ratify the appointment of Samil PricewaterhouseCoopers requires the affirmative vote of a
majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on
such proposal. Abstentions will be included in the number of shares present and entitled to vote and will
therefore have the same effect as a vote ‘‘AGAINST’’ this proposal. Brokers have discretionary authority to vote
uninstructed shares on this proposal.

Proposal Four—Approval of our Amended and Restated 2020 Equity and Incentive Compensation Plan.

The proposal to approve our Amended and Restated 2020 Equity and Incentive Compensation Plan requires
the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting
and entitled to vote on such proposal. Abstentions will be included in the number of shares present and entitled
to vote and will therefore have the same effect as a vote ‘‘AGAINST’’ this proposal. Broker non-votes will not
be included in calculating the number of votes entitled to vote on this proposal and will therefore have no effect
on the outcome of this proposal.

How do I vote my shares of Magnachip Common Stock?

Stockholders may vote shares of our Common Stock using any of the following means:

Voting by Proxy Cards. A registered stockholder may vote shares until voting is completed at the Annual
Meeting by returning a duly completed and executed proxy card in the postage-paid envelope included. All proxy
cards received by us that have been properly signed and have not been revoked will be voted in accordance with
the instructions contained in the proxy cards. For your mailed proxy card to be counted, we must receive it prior
to the close of business on May 17, 2023.

Voting by Telephone or Internet. A registered stockholder may vote shares until 11:59 p.m. Eastern Daylight

Time on May 17, 2023 by calling the toll-free number indicated on the proxy card and following the recorded
instructions or by accessing the website indicated on the proxy card and following the instructions provided.
When a stockholder votes by telephone or Internet, his, her or its vote is recorded immediately.

Voting by Internet During the Annual Meeting. Instructions on how to attend and vote at the meeting are
described at www.virtualshareholdermeeting.com/MX2023. If a stockholder attends the Annual Meeting and votes
his, her or its shares during the meeting via the voting instructions described at
www.virtualshareholdermeeting.com/MX2023, then any previous votes that were submitted by the stockholder,
whether by Internet, telephone or mail, will be superseded by the vote that such stockholder casts during the
Annual Meeting. Further, if the shares are held of record by a broker and a stockholder wishes to vote at the
Annual Meeting, he, she or it must obtain a proxy issued in his, her or its name from the record holder in
accordance with the materials and instructions for voting provided by his, her or its broker.

Voting by ‘‘Street Name’’ Stockholders. If stockholders hold shares in ‘‘street name,’’ then those stockholders

may vote in accordance with the materials and instructions for voting the shares provided by their broker. If
‘‘street name’’ stockholders wish to vote shares at the Annual Meeting, then they must obtain proxies from their
broker in order to vote their shares at the Annual Meeting in accordance with the materials and instructions for
voting provided by his, her or its broker. If a ‘‘street name’’ stockholder does not vote by proxy or otherwise
give voting instructions to their broker, such shares will not be voted by the broker for Proposal One, Two or
Four at the Annual Meeting.

Changing Votes. A stockholder may change his, her or its vote at any time before it is voted at the Annual
Meeting by (1) delivering a proxy revocation or another duly executed proxy bearing a later date to Magnachip
Semiconductor Corporation, c/o Magnachip Semiconductor, Ltd., 15F, 76 Jikji-daero 436beon-gil, Heungdeok-gu,
Cheongju-si, Chungcheongbuk-do, Republic of Korea 28581, Attention: Secretary, which revocation or later-dated
proxy is received by us prior to the close of business on May 17, 2023; (2) voting again by telephone or Internet
in the manner described above prior to 11:59 p.m., Eastern Daylight Time, on May 17, 2023; or (3) attending the
Annual Meeting and voting via the Internet during the meeting using the procedures described at
www.virtualshareholdermeeting.com/MX2023. Attending the Annual Meeting via the Internet will not revoke a
proxy unless the stockholder actually votes via the Internet during the meeting. ‘‘Street name’’ stockholders who
wish to revoke or change their votes after returning voting instructions to their broker may do so in accordance
with the materials and instructions provided by their broker or by contacting such broker to effect the revocation
or change of vote.

How can I find out the results of the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting. We will publish final results in a
Current Report on Form 8-K that we expect to file with the Securities and Exchange Commission (the ‘‘SEC’’)
within four business days of the Annual Meeting. After the Form 8-K is filed, you may obtain a copy by visiting
the investor relations section of our website or www.magnachip.com or by writing to Magnachip Semiconductor
Corporation, c/o Magnachip Semiconductor, Ltd., 15F, 76 Jikji-daero 436beon-gil, Heungdeok-gu, Cheongju-si,
Chungcheongbuk-do, Republic of Korea 28581, Attention: Secretary.

PROPOSAL ONE

ELECTION OF DIRECTORS

The members of our Board are elected to one-year terms, with each director to serve until such director’s

successor is elected and qualified or until such director’s earlier resignation or removal. We have six authorized
members on our Board. The number of directors may be changed by our Board from time to time by resolution
of a majority of the authorized directors, or by amendment of our bylaws by the affirmative vote of 66-2/3% of
the outstanding voting stock of the Company, voting together as a single class.

At the Annual Meeting, six directors are to be elected to hold office for a one-year term and until their
successors are elected and qualified. The nominees to the Board are Mr. Camillo Martino, Ms. Kyo-Hwa Chung,
Mr. Melvin L. Keating, Mr. Young-Joon Kim, Dr. Ilbok Lee and Mr. Gary Tanner.

Information regarding the nominees and each continuing director is set forth below. Each of the nominees

listed in the Proxy Statement has agreed to serve as a director if elected. If for some unforeseen reason a
nominee becomes unwilling or unable to serve, proxies will be voted for a substitute nominee selected by the
Board.

The following table sets forth certain information regarding our director nominees:

Name

Camillo Martino . . . . . . . . . . . . . . .

Kyo-Hwa (Liz) Chung . . . . . . . . . .
Melvin L. Keating. . . . . . . . . . . . . .

Young-Joon (YJ) Kim. . . . . . . . . . .

Ilbok Lee . . . . . . . . . . . . . . . . . . . . .

Gary Tanner. . . . . . . . . . . . . . . . . . .

Age

50
76

Position

Director, Non-Executive Chairman of the Board, Chair of the
Compensation Committee and Member of the Audit Committee
and the Nominating and Corporate Governance Committee
Director, Member of the Compensation Committee
Director, Chair of the Audit Committee and Member of the
Nominating and Corporate Governance Committee
Director, Member of the Risk Committee and Chief Executive
Officer
Director, Chair of the Nominating and Corporate Governance
Committee and Member of the Risk Committee
Director, Chair of the Risk Committee and Member of the Audit
Committee and the Compensation Committee

Camillo Martino, Non-Executive Chairman of the Board, Chair of the Compensation Committee and Member

of the Audit Committee and the Nominating and Corporate Governance Committee. Mr. Martino became our
Non-Executive Chairman of the Board in June 2020 and director in August 2016. Mr. Martino currently also serves as
a member of the board of directors for CXApp (formerly, KINS Technology Group) and Sensera Limited. Mr. Martino
also serves as a member of the board of directors at multiple privately-held companies, including VVDN Technologies
and Sakuu Corporation. Mr. Martino previously served as a director of Cypress Semiconductor from June 2017
through to April 2020 and was also the Chief Executive Officer of Silicon Image Inc. from January 2010 until the
completion of its sale to Lattice Semiconductor Corporation in March 2015. From January 2008 to December 2009,
Mr. Martino served as Chief Operating Officer of SAI Technology Inc., where he also served as a director from June
2006 to November 2010. From July 2005 to June 2007, Mr. Martino served as a director, the President and Chief
Executive Officer of Cornice Inc. From August 2001 to July 2005, Mr. Martino served as the Executive Vice President
and Chief Operating Officer at Zoran Corporation. Prior to that, Mr. Martino held multiple positions with National
Semiconductor Corporation for a total of nearly 14 years, and in four different countries. Mr. Martino holds a Bachelor
of Applied Science degree from the University of Melbourne and a Graduate Diploma from Monash University in
Australia. Our Board has concluded that Mr. Martino should serve on the Board based upon his extensive experience
advising technology companies.

Kyo-Hwa (Liz) Chung, Director, Member of the Compensation Committee. Ms. Chung was appointed as

our director in July 2020 and to the Compensation Committee of the Board on January 5, 2022. Ms. Chung
currently serves as the Director of Legal for Netflix Services Korea, a position she has held since April 2021. In
March 2022, she was appointed as an outside director of NCSoft Corporation, a Korean video game developer
and publisher listed on the Korea Exchange. Prior to Netflix Services Korea, Ms. Chung served as the Head of
Corporate, External and Legal Affairs for Microsoft Korea from November 2018 until March 2021. Ms. Chung

was with the Korean law firm Kim & Chang, from April 2003 until November 2018, most recently as a partner
focusing on the areas of international disputes, government investigations and crisis management. During
September 2008 to March 2009, Ms. Chung was engaged with the international law firm Skadden, Arps, Slate,
Meagher & Flom LLP, as a visiting attorney at its New York office. Ms. Chung served as a judge on the Seoul
Administrative Court from 2001 to 2003 and the Seoul Central District Court from 1999 to 2001. Ms. Chung
received an LLM degree from Harvard Law School in 2008 and a Bachelor of Law degree from Korea
University in 1996. Ms. Chung is licensed to practice law in Korea and New York. Our Board has concluded that
Ms. Chung should serve on the Board based upon her extensive experience advising technology companies.

Melvin L. Keating, Director, Chair of the Audit Committee and Member of the Nominating and

Corporate Governance Committee. Mr. Keating became our director in August 2016. Mr. Keating has served as
a consultant, providing investment advice and other services to private equity firms and corporations, since
November 2008. In addition, since September 2015, Mr. Keating serves as a director of Agilysys Inc., a leading
technology company that provides innovative software for point-of-sale (POS), property management, inventory
and procurement, workforce management, analytics, document management and mobile and wireless solutions
and services to the hospitality industry. Previously, Mr. Keating served on the boards of directors of the
following public companies: SPS Commerce, Inc. (2018-2019); Vitamin Shoppe, Inc. (2018-2019); Red Lion
Hotels Corporation (2010-2017); and Harte Hanks, Inc. (2017-2020). Additionally, he also served on the boards
of many other technology hardware companies, including, Tower Semiconductor; White Electronics; Integral
Systems; and API Technologies. Mr. Keating holds a B.A. degree in Art History from Rutgers University
(where he was a Henry Rutgers Scholar), an M.S. in Accounting (where he was a Shell Oil Fellow) and an
M.B.A. in Finance (where he was a Benjamin Franklin Fellow) both from the Wharton School of the University
of Pennsylvania. Our Board has concluded that Mr. Keating should serve on the Board based upon his extensive
experience advising technology companies.

Young-Joon (YJ) Kim, Director, Member of the Risk Committee and Chief Executive Officer. Mr. YJ Kim
became our Chief Executive Officer in May 2015 and has also served as a director on our Board since that time.
In February 2020, Mr. Kim assumed the additional role of General Manager of the Display business to capitalize
on attractive growth opportunities in OLED display and other relevant emerging markets. He also served as the
acting General Manager of Foundry Services Group from January 2019 until the completion of the sale of the
Foundry Services Group and the factory in Cheongju (‘‘Fab 4’’) on September 1, 2020. Mr. Kim joined our
company in May 2013 and served as our Executive Vice President and General Manager, Display Solutions
Division. He was promoted to Interim Chief Executive Officer in May 2014. Prior to joining our company,
Mr. Kim held a variety of senior management roles at several global semiconductor firms. His past roles include
marketing, engineering, product development and strategic planning, and his product expertise includes
microprocessors, network processors, multi-core processors, FLASH, EPROM, analog, mixed-signal, sensors,
3G/4G/5G base stations, workstations and servers. Immediately before joining our company, Mr. Kim served as
Vice President, Infrastructure Processor Division, and General Manager of the OCTEON Multi-Core Processor
Group of Cavium, Inc., where he worked from 2006 to 2013. Prior to Cavium, Mr. Kim served as Core Team
Lead and General Manager of the Tolapai Program at Intel Corporation from 2004 to 2006. In 1998, Mr. Kim
co-founded API Networks, a joint venture between Samsung and Compaq, where he served as the head of
product management, worldwide sales and business development for Alpha processors. Prior to API Networks,
Mr. Kim served as Director of Marketing at Samsung Semiconductor, Inc. from 1996 to 1998. Mr. Kim began
his career as a product engineer at Intel Corporation in 1988. Mr. Kim holds B.S. and M. Eng. degrees in
Electrical Engineering from Cornell University. Our Board has concluded that Mr. YJ Kim is a valuable member
of the Board based on his understanding of our company’s products and technology as our Chief Executive
Officer and his deep knowledge of the semiconductor industry.

Ilbok Lee, Director, Chair of the Nominating and Corporate Governance Committee and Member of the

Risk Committee. Dr. Lee has been our director since August 2011. Dr. Lee was an advisor/consultant to the
Configurable Mixed-signal Business Unit of Dialog Semiconductor, Inc., which acquired Silego Technology Inc.,
a semiconductor company from October 2017 to December 2018. Dr. Lee served as Executive Chairman of
Silego from August 2016 to October 2017. Dr. Lee served as Silego’s Chairman of the Board from March 2015
to August 2016 and as Silego’s Chief Executive Officer from Silego’s inception in October 2001 until August
2016. From April 1999 to September 2001, Dr. Lee served as Senior Vice President and General Manager of the
Timing Division at Cypress Semiconductor Corp., a public semiconductor company, and from May 1992 to
March 1999 served as President and Chief Executive Officer of IC Works, Inc., a semiconductor company he

co-founded that was acquired by Cypress in 2001. Dr. Lee co-founded Samsung Semiconductor, Inc. (U.S.A.) in
July 1983 and served in various positions at the Company, including President and Chief Executive Officer, until
May 1992. Prior to Samsung, Dr. Lee served in various technical and managerial positions at Intel and National
Semiconductor. Dr. Lee served as a member of the board of directors for Sierra Monolithic, a privately held
semiconductor company, from 2002 through 2009. Dr. Lee also served on the board of directors of two public
companies: ESS Technology and V3 Semiconductor. Dr. Lee received a Ph.D. and M.S.E.E. from the University
of Minnesota and a B.S.E.E. from Seoul National University. Our Board has concluded that Dr. Lee should serve
on our Board based upon his extensive experience in the semiconductor industry.

Gary Tanner, Director, Chair of the Risk Committee and Member of the Audit Committee and the
Compensation Committee. Mr. Tanner became our director in August 2015. Mr. Tanner also served as our
Non-Executive Chairman of the Board from September 2016 to November 2018. Mr. Tanner served as a director of
Winstek Semiconductor Corp. which is listed on the Taiwan Stock Exchange (OTC) from September 2015 until
November 2017 when majority ownership of Winstek Semiconductor was acquired by Siguard Corporation.
Mr. Tanner served as Executive Vice President and Chief Operations Officer of International Rectifier Corporation
from January 2013 to July 2015. Mr. Tanner also served as a director at STATS ChipPac Ltd. from July 2012 until
August 2015. Prior to joining International Rectifier Corporation, Mr. Tanner was the principal in GWT Consulting
and Investments LLC, a firm that provided consulting services to International Rectifier Corporation from January
through December 2012. Mr. Tanner previously served as Chief Executive Officer at Zarlink Semiconductor, Inc.
(‘‘Zarlink’’), from May 2011 to October 2011, at which point Zarlink was acquired by Microsemi Corporation. Prior to
his role as Chief Executive Officer of Zarlink, from November 2009 to May 2011, Mr. Tanner served as Chief
Operating Officer at that company. Mr. Tanner joined Zarlink in August 2007 as Senior Vice President of Worldwide
Operations via the acquisition of Legerity, Inc., where Mr. Tanner served as the Vice President of Operations from
November 2002 until August 2007. Before Legerity and Zarlink, Mr. Tanner worked for nine years at Intel
Corporation, where he held various positions managing domestic and international manufacturing operations. Prior to
Intel, Mr. Tanner held various management positions in fab operations at National Semiconductor, Texas Instruments
and NCR Corporation. Our Board has concluded that Mr. Tanner should serve on the Board based upon his extensive
experience in the semiconductor industry.

THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Director Independence

The Board reviews the independence of each director annually. In determining the independence of our

directors, our Board considered Section 303A of the NYSE listing standards and broadly considered the
materiality of each director’s relationship with us. Based upon the foregoing criteria, our Board has determined
that the following directors are independent: Mr. Martino, Ms. Chung, Mr. Keating, Dr. Lee and Mr. Tanner.

Board Meetings

The Board held 14 meetings during fiscal year 2022. None of the directors attended fewer than 92 percent of the

aggregate number of Board meetings and meetings of committees of the Board on which each of them served.

Attendance at Annual Meeting

The Company’s Corporate Governance Guidelines as currently in effect provide that all directors shall make

every effort to attend the Company’s annual meeting of stockholders. In 2022, all of our directors attended our
Annual Meeting of Stockholders.

Committees

The Board has four standing committees: the Audit Committee, the Compensation Committee, the Nominating

and Corporate Governance Committee, and the Risk Committee. The Board establishes ad hoc committees from time
to time on an as-needed basis. As announced in the Company’s Current Report on Form 8-K on August 8, 2022, the
Board activated the Strategic Review Committee, consisting of Mr. Keating, as Chair, Dr. Lee, Mr. Martino and
Mr. Tanner, to assist the Board in reviewing, considering, exploring and evaluating strategic alternatives that may be
available to the Company to maximize shareholder value.

The Board has adopted written charters for the Audit Committee, the Compensation Committee, the

Nominating and Corporate Governance Committee and the Risk Committee. These charters, as well as our Code
of Business Conduct and Ethics and our Corporate Governance Guidelines, are posted and available on our
website at https://investors.magnachip.com/corporate-governance/highlights. The information on or accessible
through our website is not a part of or incorporated by reference into this Proxy Statement.

Audit Committee

Our Audit Committee consists of Mr. Keating, as Chair, Mr. Martino and Mr. Tanner. Our Board has

determined that Mr. Keating is an audit committee financial expert as defined in Item 407(d)(5) of
Regulation S-K promulgated under the Securities Act of 1933, as amended. Our Board has also determined that
each of Mr. Keating, Mr. Martino and Mr. Tanner is independent as that term is defined in Section 303A of the
New York Stock Exchange (‘‘NYSE’’) listing standards and Rule 10A-3 promulgated under the Exchange Act of
1934, as amended (the ‘‘Exchange Act’’).

The Audit Committee held 10 meetings in fiscal year 2022. The primary purpose of the Audit Committee is

to assist our Board in fulfilling its oversight responsibilities by reviewing and reporting to the Board on the
integrity of the financial reports and other financial information provided by the Company to the public, the SEC
and any other governmental regulatory body, and on the Company’s compliance with other legal and regulatory
requirements. The Audit Committee is responsible for the appointment, retention, review and oversight of the
Company’s independent auditor, and the review and oversight of the Company’s internal financial reporting,
policies and processes. The Audit Committee is also responsible for reviewing related party transactions, risk
management, and legal and ethics compliance.

Compensation Committee

Our Compensation Committee consists of Mr. Martino, as Chair, Ms. Chung and Mr. Tanner. Our Board
has determined that each of Mr. Martino, Ms. Chung and Mr. Tanner is independent under applicable NYSE
listing standards.

The Compensation Committee held 7 meetings in 2022. The Compensation Committee has the overall
responsibility for evaluating and approving our executive officer and director compensation plans, policies and

programs, as well as all equity-based compensation plans and policies. In March 2016, the Board created the
Employee Equity Committee and delegated to it the authority to determine the recipients, amounts and timing of
awards under the Company’s equity-based compensation plans within the parameters established by the Board.

On April 13, 2023, the Board adopted the amended and restated Charter of the Compensation Committee,
assigning to the Compensation Committee the responsibility of periodically reviewing and advising the Board
concerning the Company’s human capital strategies, initiatives and programs with respect to the Company’s
culture, talent, recruitment, retention, employee engagement, and employee diversity, equity and inclusion efforts.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee consists of Dr. Lee, as Chair, Mr. Keating and
Mr. Martino. Our Board has determined that each of Dr. Lee, Mr. Keating and Mr. Martino is independent under
applicable NYSE listing standards.

The Nominating and Corporate Governance Committee held 5 meetings in 2022. The Nominating and
Corporate Governance Committee identifies individuals qualified to become Board members, recommends
director nominees, recommends Board members for committee membership, develops and recommends corporate
governance principles and practices and director orientation and continuing education, oversees the evaluation of
our Board and its committees and formulates a description of the skills and attributes of desirable Board
members. The Nominating and Corporate Governance Committee will also consider candidates recommended by
our stockholders so long as the proper procedures are followed.

Our bylaws provide that stockholders seeking to nominate candidates for election as directors at an annual
meeting must provide timely notice of such nominations in writing. To be timely, a stockholder’s notice generally
must be received in writing at the Company’s offices at Magnachip Semiconductor Corporation, c/o Magnachip
Semiconductor, Ltd., 15F, 76 Jikji-daero 436beon-gil, Heungdeok-gu, Cheongju-si, Chungcheongbuk-do,
Republic of Korea 28581, Attention: Secretary, not earlier than the close of business on the 120th day, nor later
than the close of business on the 90th day, prior to the first anniversary of the date of the preceding year’s
annual meeting as first specified in the Company’s notice of meeting (without regard to any postponements or
adjournments of such meeting after such notice was first sent), except that if no annual meeting was held in the
previous year or the date of the annual meeting is more than 30 days earlier or later than such anniversary date,
notice by the stockholders to be timely must be received not later than the close of business on the later of the
90th day prior to the annual meeting or the 10th day following the date on which public announcement of the
date of such meeting is first made. A stockholder’s notice must set forth, among other things;

•

the name and address of the stockholder who intends to make the nomination, and the names and
addresses of the beneficial owners, if any, on whose behalf the nomination is being made and of the
person or persons to be nominated;

a representation that the stockholder is a holder of record of stock of the Company entitled to vote for
the election of Directors on the date of such notice and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice;

certain information regarding the ownership and other interests of the stockholder or such other
beneficial owner;

a description of all arrangements or understandings between the stockholder or such beneficial owner
and each nominee and any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder;

a description of all direct and indirect compensation and other material monetary agreements,
arrangements and understandings during the past three years, and any other material relationships,
between or among such stockholder and such other beneficial owner, if any, and their respective
affiliates and associates and each proposed nominee;

certain other information regarding each nominee proposed by such stockholder as would be required
to be included in a Proxy Statement filed pursuant to the proxy rules of the SEC; and

the consent of each nominee to serve as a director of the Company if so elected.

A stockholder must also comply with all other applicable requirements of the Exchange Act and the rules

and regulations under the Exchange Act with respect to matters relating to nominations of candidates for
directors. The preceding is a summary of the stockholder nomination procedures set forth in our bylaws as
currently in effect, and we refer our stockholders to the full text of Section 2.15 of our bylaws and such other
applicable provisions of our bylaws as in effect from time to time for the specific requirements of such director
nomination procedures by stockholders.

In addition to the formal procedures set forth in our bylaws for the nomination of directors by stockholders,

the Nominating and Corporate Governance Committee has adopted a Policy Regarding Director Nominations
pursuant to which it may from time to time evaluate candidates for nomination as director that come to its
attention through incumbent directors, management, stockholders or third parties. Such informal
recommendations by stockholders should be directed to the attention of the Nominating and Corporate
Governance Committee as set forth below under ‘‘—Communications with Directors.’’ The Nominating and
Corporate Governance Committee has and may in the future, if it deems appropriate under the circumstances,
engage a third-party search firm to assist in identifying qualified candidates.

The Nominating and Corporate Governance Committee seeks director candidates who possess high quality
business and professional experience, possess the highest personal and professional ethics, integrity and values,
and who have an inquisitive and objective perspective and mature judgment. Director candidates must also be
committed to representing the best interests of our stockholders and have sufficient time available in the
judgment of the Nominating and Corporate Governance Committee to perform all Board and committee
responsibilities. The Nominating and Corporate Governance Committee has no formal policy on diversity in
identifying potential director candidates, but does regularly assess the needs of the Board for various skills,
background and business experience in determining if the Board requires additional candidates for nomination.

Risk Committee

Our Risk Committee consists of Mr. Tanner, as Chair, Mr. YJ Kim and Dr. Lee. The Risk Committee held

5 meetings in 2022. The Risk Committee assists the Board in its oversight of the Company’s management of key
risks, as well as the guidelines, policies and processes for monitoring and mitigating such risks. The Risk
Committee’s primary responsibility is to oversee and approve the implementation of Company-wide risk and
crisis management best practices. Other responsibilities of the Risk Committee include providing input to
management in identifying, assessing, mitigating and monitoring enterprise-wide risks the Company faces,
including cybersecurity risks, and reviewing the Company’s business practices, compliance activities and
enterprise risk management and making recommendations to the Board related to such review.

On February 10, 2023, the Board adopted the amended and restated Charter of the Risk Committee,
assigning to the Risk Committee the responsibility of overseeing the Company’s corporate objectives, goals,
strategies and initiatives relating to, and attending risks associated with, environmental, social and governance
(‘‘ESG’’) matters, including corporate social responsibility, sustainability, public policy and other related matters
(‘‘ESG Matters’’). Accordingly, our Risk Committee has been engaged in reviewing and assessing our
capabilities in compliance with ESG standards and regulations and working with the Company to improve
disclosure and transparency relating to the Company’s ESG profile.

Board Leadership Structure

Separation of Chairperson and Chief Executive Officer

Our Corporate Governance Guidelines state that the Board shall elect its Chairperson and appoint the
Company’s Chief Executive Officer according to its view of what is best for the Company at any given time.
The Board does not believe there should be a fixed rule as to whether the offices of Chairperson and Chief
Executive Officer should be vested in the same person or two different persons, or whether the Chairperson
should be an employee of the Company or should be elected from among the non-employee directors. The needs
of the Company and the individuals available to play these roles may dictate different outcomes at different
times, and the Board believes that retaining flexibility in these decisions is in the best interest of the Company.

Currently, Mr. Martino serves as the Company’s Chairman of the Board, and Mr. YJ Kim serves as the

Company’s Chief Executive Officer. The Board may, however, make changes to its leadership structure in the
future as it deems appropriate.

Lead Director

In the event that positions of Chairperson and Chief Executive Officer are held by the same person, on an

annual basis the independent members of the Board will select a lead director from the independent directors
then serving on the Board (the ‘‘Lead Director’’). As a general matter, there will be no Lead Director if the
positions of Chairperson and CEO are not held by the same person and the Chairperson is an independent
director. The length of service as Lead Director is subject to the Board’s discretion, but will be a minimum of
one year. The Lead Director has the authority to call meetings of the independent directors.

Executive Sessions of the Board

The Company’s non-management directors meet at regularly scheduled Board meetings in executive session

without management present. In 2022, the Chairman of the Board presided over the meetings of the
non-employee directors. In addition, in accordance with our Corporate Governance Guidelines, the independent
members of the Board meet at least twice a year in executive session, with the Chairperson setting the agenda
and presiding over such meetings.

Presiding Director

In accordance with our Corporate Governance Guidelines, the presiding director of the Board is the
Chairman of the Board, if present, or in such person’s absence and if applicable, the Lead Director, or in such
person’s absence, the Audit Committee Chairman, or in such person’s absence, the independent director present
who has the most seniority on the Board. The presiding director presides at all meetings of the Board and is
responsible for chairing the Board’s executive sessions.

Board Role in Risk Oversight

Our Board is responsible for overseeing our management of risk. The Board created a Risk Committee to
assist in overseeing management’s identification and evaluation of key enterprise risks to the Company, as well
as guidelines, policies and processes for monitoring and mitigating such risks. In particular, the Risk Committee
focuses on strategic enterprise risks, including risks associated with intellectual property; business operations and
disaster recovery capabilities; and data security, privacy, technology and information security policies, procedures,
and internal controls, including those related to cybersecurity and cyber incident responses and reporting
procedures.

Our Board also fully understands its duties to navigate the challenges presented by climate change, social

injustice, inequality, and numerous other issues that are fundamental to the success and sustainability of the
Company. We are committed to sustainable business practices to advance our long-term ambitions as well as to
mitigate business risks. Our Risk Committee oversees the Company’s objectives, goals, strategies and initiatives
relating to ESG Matters and the related impacts and risks related thereto.

Company management reports on a quarterly basis to the Risk Committee their assessment of key enterprise

risks across multiple categories and mitigation plans for those that fail to meet relevant tolerance standards
established from time to time. During quarterly Risk Committee meetings, the members of the Risk Committee
review management’s assessment report and discuss with management measures to be implemented to better
control against existing risks and identify emerging risks. For example, the Risk Committee may consider
replacing specific existing risk categories, adding new risk categories, or adjusting the tolerance standards of
risks to preemptively respond to changes in the Company’s business and the environment in which we operate.

The Risk Committee works closely with Theodore Kim, our Chief Compliance Officer, who was appointed
by our Chief Executive Officer as the Company’s Risk Officer, with respect to the above-described oversight. In
this capacity, Mr. Kim reports directly to the Risk Committee, the Board as a whole and the Company’s Chief
Executive Officer. The Risk Committee may discuss certain risks with the Audit Committee or the Board if
certain material disclosure issues arise. The Risk Committee and the Company have engaged outside experts
from time to time to obtain assistance with the identification and mitigation of key risks.

Our Audit Committee also has certain statutory, regulatory and other responsibilities with respect to

oversight of risk assessment and risk management. Specifically, the Audit Committee is responsible for
overseeing policies with respect to financial risk assessment and those other items specifically set forth in our
Audit Committee charter. The Risk Committee coordinates with the Audit Committee as necessary and
appropriate to enable the Audit Committee to perform its responsibilities.

The Board’s other independent committees also oversee risks associated with their respective areas of
responsibility. For example, the Compensation Committee considers the risks to our business associated with our
compensation policies and practices, with respect to both executive compensation and compensation generally.

Our Board believes that our compensation programs are designed such that they will not incentivize

unnecessary risk taking. The base salary component of our compensation program is a fixed amount and does not
depend on performance. Payout levels under our cash incentive program are generally capped and payout
opportunities may generally be achieved on a straight-line interpolation basis between threshold and target levels,
and between the target and maximum levels. Our equity awards are limited by the terms of our equity plans to
not more than a fixed maximum amount specified in the plan, and are subject to vesting to align the long-term
interests of our executive officers with those of our stockholders. Our Board adopted a clawback policy to
provide for the recoupment of certain executive compensation in the event of an accounting restatement resulting
from the Company’s material noncompliance with financial reporting requirements under the federal securities
laws. See ‘‘Executive Compensation—Compensation Discussion and Analysis—Clawback Policy’’ contained
elsewhere in this Proxy Statement.

Director Orientation and Continuing Education

Our Nominating and Corporate Governance Committee oversees the orientation process for new members of

our Board to ensure that they are familiar with the Company’s operations, financial matters, corporate
governance practices and other key policies and practices through the preparation and review of background
material and management meetings as appropriate. In addition, our Nominating and Corporate Governance
Committee seeks to identify and encourage training and continuing education opportunities for all directors in
order to improve both our Board and its committees’ performance. Senior management assist in identifying and
advising our directors about opportunities for continuing education, including conferences provided by
independent third parties. In furtherance of these efforts, the Company maintains membership for each Company
director in the National Association of Corporate Directors (NACD), which provides corporate governance
resources, education, information, and research on leading Board practices.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and
employees. We will provide a copy of our Code of Business Conduct and Ethics without charge to any person
upon written request made to our Secretary at Magnachip Semiconductor Corporation, c/o Magnachip
Semiconductor, Ltd., 15F, 76 Jikji-daero 436beon-gil, Heungdeok-gu, Cheongju-si, Chungcheongbuk-do,
Republic of Korea 28581. Our Code of Business Conduct and Ethics is also available on our website at
https://investors.magnachip.com/corporate-governance/highlights. We will disclose any waivers or amendments to
the provisions of our Code of Business Conduct and Ethics on our website.

Report of the Audit Committee

The Audit Committee has reviewed and discussed with our management and Samil PricewaterhouseCoopers,

our independent registered public accounting firm, our audited financial statements contained in our Annual
Report to Stockholders for the year ended December 31, 2022. The Audit Committee has also discussed with our
independent registered public accounting firm the matters required to be discussed under Public Company
Accounting Oversight Board standards.

The Audit Committee has received and reviewed the written disclosures and the letter from Samil

PricewaterhouseCoopers required by applicable requirements of the Public Company Accounting Oversight Board
regarding Samil PricewaterhouseCoopers’s communications with the Audit Committee concerning independence,
and has discussed with Samil PricewaterhouseCoopers its independence.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board

(and the Board subsequently approved the recommendation) that the audited financial statements be included in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on
February 22, 2023.

Audit Committee:

Melvin L. Keating, Chair
Camillo Martino
Gary Tanner

Communications with Directors

A stockholder or other interested party who wishes to communicate directly with the Board, a committee of

the Board, the non-management or independent directors as a group, or with the Chairman of the Board or any
other individual director, regarding matters related to the Company should send the communication to:

Board of Directors
or Chairman, individual director, committee or group of directors
Magnachip Semiconductor Corporation
c/o Magnachip Semiconductor, Ltd.
Corporate Secretary
15F, 76 Jikji-daero 436beon-gil, Heungdeok-gu
Cheongju-si, Chungcheongbuk-do, Republic of Korea 28581

We will forward all stockholder and other interested party correspondence about the Company to the Board,
a committee of the Board, the non-management or independent directors as a group, or an individual director, as
appropriate. Please note that we will not forward communications that are spam, junk mail or mass mailings,
resumes and other forms of job inquiries, surveys and business solicitations or advertisements.

Human Capital Management

Our Company strives to accelerate the advancement of technology to empower the makers of tomorrow, and

we recognize that it is our employees who make this happen. Our goal is to enable our employees to leverage
their extensive expertise in engineering, design and process to accelerate the advancement of our technology,
allowing us to compete globally and to be leaders in our industry. To that end, we are committed to fostering
employee talent, cultivating a culture and environment that is open, productive and fair, in which all of our
employees feel safe, valued, and respected and in which our employees are empowered to achieve their full
potential.

We understand that our success across a broad range of human capital related areas of focus at all levels of

our organization is important to serving the long-term interests of our stockholders, and we have been working to
improve our disclosure and transparency on this topic, to ensure that our strategy and approach to human capital
management is communicated to our stockholders effectively. In addition to the disclosure contained within this
Proxy Statement, information regarding our approach to human capital management, including related policies
and programs, is highlighted in the ‘‘Human Capital’’ section of our 2022 Annual Report, which accompanies
this Proxy Statement, and the ‘‘About Us’’ section of our website.

As a global semiconductor company headquartered in Korea, our Company, including our Board and our

employee workforce, is reflective of the broader population of the country in which we are based. Our
worldwide workforce consisted of 897 employees (full- and part-time) as of December 31, 2022, of which 866
are located in Korea. Of our worldwide workforce, 202 were involved in sales, marketing, general and
administrative, 222 in research and development (including 87 with advanced degrees), 44 in quality, reliability
and assurance, and 429 in manufacturing (comprised of 46 in engineering and 383 in operations, maintenance
and others). Because we are headquartered in Korea, we are not subject to EEO-1 (Equal Employment
Opportunity) reporting.

As a global competitor, we believe that our success is tied to our ability to attract and retain talent at all
levels of our organization, including our Board, that is reflective of our employees, our communities of operation
and our customers. As a result, we place great importance on inclusion and diversity within the workplace, we
aim to create a workplace where all employees feel valued and respected, and we promote the culture of more
female voices. Currently, women represent approximately 22% of our executive management team, comprised of
the CEO, the CFO, the CCO and the respective heads of Worldwide Sales, Display, Power, Manufacturing,
Corporate Strategy and Human Resources.

The market in which we compete is constantly evolving, which requires continuous innovation and agility to
remain competitive, and requires us to attract and retain a highly skilled workforce. We compete based on design
experience, manufacturing capabilities, the ability to satisfy customer needs from the design phase through the
shipping of a completed product, length of design cycle and quality of technical support and sales personnel.
Some of our human capital management related policies and programs supporting our workforce are highlighted
below.

Competitive Compensation and Pay Equity
• We periodically evaluate market practices for compensation and benefits, including with respect to job
function, role and responsibility, job level and region, and regularly review whether our compensation
levels and distribution methods are fair and equitable.

• We offer cash and equity-based compensation programs to incentivize achievement of our short-term

financial, operational and strategic goals, as well as long-term value creation, and to attract and retain the
highly skilled workforce necessary for our success.

• We offer various employee benefits under the company philosophy that ensuring employees enjoy a
happier life with their families is as critical as promoting their own health and well-being. Consistent
with local practice, all employees have access to annual health examination programs. Employees also
have access to other benefits, as applicable, such as health examination for spouse, personal pensions,
housing assistance, medical reimbursement plans and educational assistance programs.

Growth and Development
•

Talent pipeline development strategy: We have adopted a structured approach to identifying, training,
mentoring and developing talented individuals within the organization, with the goal of ensuring a
steady supply of skilled and competent employees to fill key roles now and in the future, in order to
achieve our long-term strategic goals and drive long-term stockholder value.

•

Graduate traineeship/apprenticeship program: Designed for recent university graduates who are looking
to gain practical work experience in their chosen field, our program involves a combination of
classroom training and on-the-job learning, where trainees work alongside experienced professionals to
gain hands-on experience.

Specialized staff training programs: We offer step-by-step training courses specifically designed for the
semiconductor industry to help employees build their job expertise through partnership with educational
institutions focused on education and research in semiconductors, with the goal of training future
experts in the industry. We also offer soft skills training for non-technical competencies that are
essential for job success, including communication, teamwork and problem-solving.

Regular performance appraisal and feedback: Performance appraisal and feedback processes are
conducted annually using the MBO (Management by Objectives) method for employees’ development,
growth and performance improvement.

As part of our strategy for employee retention, training and advancement at all levels, through our
annual performance review process we evaluate all employees with the intent to capture employee
potential, based on considerations related to three primary factors:

•

Aspiration (advancement, training and development and overall job satisfaction);

Engagement (retention and emotional commitment to the organization); and

Ability (including job performance, emotional intelligence and interpersonal skills).

Managers are also encouraged to deliver informal feedback throughout the year, to ensure that
employees have an opportunity to improve their performance and are aware of training or development
opportunities.

R&D reward program: To ensure R&D technical professionals continue to advance their skills and
knowledge, we have technology committees that attend regular seminars and conduct periodic research.
We have a reward program for exemplary research.

Culture and Employee Engagement
•

Engagement and satisfaction surveys: Employee surveys are conducted regularly to gain valuable
insight into how employees feel about their job, their work environment and the Company as a whole.
Areas surveyed include opportunities for employee engagement, job satisfaction, communication,
work-life balance and compensation. Survey results are communicated to both management and
employees, and we develop action plans to address any areas identified as needing improvement.

•

Grievance reporting and escalation procedures: We are committed to promoting open and honest lines
of communication, and we strive to provide a work environment where every employee believes that
they can raise concerns without fear of retaliation. To ensure that each employee feels comfortable
raising questions and concerns, we provide an online reporting tool, which can be found in the Ethics
and Compliance section of our website. Reporting and escalation procedures have been adopted to
address and resolve complaints or grievances raised by employees in a structured and systematic
manner. Procedures are followed in a predetermined sequence to ensure that each grievance is
addressed in a fair, consistent and timely manner, and that all parties involved are treated with respect.
We do not tolerate retaliation against anyone who discloses actual or suspected ethical, legal or
regulatory violations in good faith. Our hotline is available to anyone, including employees, contractors,
customers, suppliers, who wishes to report potential misconduct. All submissions will be treated
confidentially, and may be provided anonymously where permitted by law.

Safety

We appreciate the fact that our employees constitute one of the most critical assets of Magnachip, and therefore,

their safety and wellness are key factors to our success. We have a dedicated Environmental Health & Safety (‘‘EHS’’)
team that establishes and reviews internal EHS regulations based on international agreements as well as local laws and
regulations. Our EHS team is also responsible for identifying, evaluating and improving EHS issues within the overall
manufacturing process to ensure a safe and comfortable work environment. Magnachip has implemented and maintains
an Occupational Health and Safety Management System as well as an Environmental Management System. Our sites
are certified to the internationally recognized ISO 45001 and ISO 14001 standards.

In January 2021, the Korean legislature enacted the Serious Accident Punishment Act (‘‘SAPA’’), which
imposes criminal liability on individuals and entities responsible for ‘‘serious accidents,’’ including industrial
accidents that cause death, serious injury or occupational illness. SAPA essentially requires enterprises to
establish relevant standards and measures to ensure a certain level of operational safety, including the health and
safety of all employees. SAPA went into effect in January 2022, and in connection therewith, we appointed
Mr. Seunghoon Lee as the Chief Safety Officer of our Korean operating subsidiary, who then formed a dedicated
team to evaluate, improve and monitor the policies, practices, standards and systems relating to health and safety
to ensure compliance with SAPA. Mr. Lee, who has over 35 years of manufacturing and industrial EHS
experience at Magnachip, concurrently serves as the Chief of Manufacturing of our Korean operating subsidiary.

Policy Statement

Magnachip adheres to human rights and labor standards of international labor organizations, such as the
United Nations and the International Labor Organization. Magnachip prohibits all forms of discrimination based
on gender, race, nationality, religion and age to ensure that all employees work in a safe and fair environment.
These values are embedded in our policies:

•

Labor and Ethical Management

Equal Employment Policy

Training and Education Policy

Code of Business Conduct and Ethics

2022 Director Compensation

Each of our non-employee directors was eligible to earn a quarterly cash retainer, additional fees based on

committee service and equity awards in 2022 pursuant to our director compensation policy, which is described in
further detail below. All such cash fees are paid quarterly in advance. A non-employee director who joins the

Board after the beginning of a quarter receives a prorated cash retainer reflecting his or her actual period of
Board and committee service for such quarter and a non-employee director who joins the Board after the
beginning of the Company’s annual director service period receives a pro-rated equity award reflecting his or her
actual period of Board and committee service during such annual service period.

Cash Compensation

In 2022, our non-employee directors were eligible to receive the following types of cash compensation for

their services on the Board.

•

Quarterly Board Service Retainer (all non-employee directors): $18,750

Quarterly Chair Service Fees:

Chairperson of the Board: $18,750

Chair of our Audit Committee: $6,250

Chair of our Compensation Committee: $3,750

Chair of our Nominating and Corporate Governance Committee: $2,500

Chair of our Risk Committee: $2,500

Quarterly Committee Member (non-Chair) Service Fees:

Audit Committee: $3,750

Compensation Committee: $2,500

Nominating and Corporate Governance Committee: $1,250

Risk Committee: $1,250.

Our director compensation policy also provides that the Lead Director of the Board, if any, would receive

an additional cash fee of $11,250 per quarter. No Lead Director was appointed for 2022.

Equity Compensation

In 2022, our non-employee directors were also eligible to receive the following types of equity awards for

their service on the Board:

•

Annual Equity Awards: Each non-employee director was eligible to receive a restricted stock unit
(‘‘RSU’’) award having a grant date fair value equal to $165,000. In addition, each non-employee
director was eligible to receive an RSU award having a grant date fair value equal to $20,000 for such
director’s service as the Chair of the Board’s Audit Committee, Compensation Committee, Nominating
and Corporate Governance Committee or Risk Committee, as applicable; and an RSU award having a
grant date fair value equal to $10,000 for such director’s service as a non-Chair member of the Board’s
Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee or
Risk Committee, as applicable. Each RSU award vests in full on the earlier of (x) the first anniversary
of the date of grant, and (y) the meeting date of the Annual Meeting of Stockholders that occurs in the
year following the year in which the RSU is granted, with such grants being made on the earlier of (A)
the meeting date of the Company’s Annual Meeting of Stockholders for such year and (B) August 31
of such year. Vested RSUs settle as soon as administratively practicable following the date the
non-employee director’s service terminates for any reason.

Initial Equity Awards: If a non-employee director’s initial appointment to the Board or a Board
committee occurs other than at an Annual Meeting of Stockholders, such director will be granted
pro-rated RSU awards having an aggregate grant date fair value equal to (x) the applicable grant date
fair value amount for applicable Board or committee membership described above, multiplied by
(y) the quotient obtained by dividing the number of days elapsed from the date of initial appointment
to the date of the Company’s next Annual Meeting of Stockholders (or, if earlier, August 31 of such
year), by 365, with such grants to vest in full on the date of the Company’s next Annual Meeting of
Stockholders (or, if earlier, August 31 of such year).

All non-employee director equity awards will be granted under the Company’s equity incentive plan in
effect at the time of such grants. Non-employee directors are subject to our Stock Ownership Policy, as described
under the heading ‘‘Stock Ownership Guidelines’’.

The following table sets forth the total compensation earned by our non-employee directors during the year

ended December 31, 2022. Mr. YJ Kim, our Chief Executive Officer, does not earn any fees for his service on
the Board.

2022 Director Compensation Table

Fees
Earned
or Paid
in Cash
($)(1)

Stock
Awards
($)(2)(3)

All Other
Compensation
($)

Name

Liz Chung . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84,889 171,253
Melvin Keating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,000 183,500
Ilbok Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,000 183,500
Camillo Martino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,000 192,920
Gary Tanner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000 192,920

—
—
—
—
—

Total
($)

256,142
288,500
273,500
377,920
302,920

(1)

Consists of the amount of cash compensation earned in 2022 for Board service and committee service as described in the table below.

Name

Board
Retainer
($)

Chair
Service
Fees ($)

Committee
Service
Fees ($)

Liz Chung . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Melvin Keating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ilbok Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Camillo Martino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gary Tanner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

75,000
75,000
75,000
75,000
75,000

—
25,000
10,000
90,000
10,000

9,889
5,000
5,000
20,000
25,000

Total ($)

84,889
105,000
90,000
185,000
110,000

(2)

The amounts reported represent the aggregate grant date fair value of the RSUs awarded to the directors, calculated in accordance with
FASB ASC Topic 718. Such aggregate grant date fair values do not take into account any estimated forfeitures related to service
vesting conditions. The amounts reported in this column reflect the accounting cost for these RSUs and do not correspond to the actual
economic value that may be received by the directors upon vesting and/or settlement of the RSUs.

(3) As of December 31, 2022, the number of outstanding stock options and RSU awards held by our non-employee directors who served

during 2022 were as follows:

Name

RSUs (#)

Stock Options (#)

Liz Chung . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Melvin Keating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ilbok Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Camillo Martino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gary Tanner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,236
93,688
100,002
94,998
103,884

—
49,737
179,593
49,737
93,117

As of December 31, 2022, the following number of RSUs included in the table above were vested but not yet settled under the terms
of the applicable RSU agreements: Ms. Chung—12,946 RSUs; Mr. Keating—79,994 RSUs; Dr. Lee—86,308 RSUs;
Mr. Martino—80,601 RSUs; and Mr. Tanner—89,487 RSUs. Stock options were last granted to our non-employee directors under our
director compensation policy in effect in 2017. Please see the section entitled ‘‘Security Ownership of Certain Beneficial Owners and
Management’’ for additional information regarding all shares of Common Stock beneficially owned by our non-employee directors.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee has been an officer or employee of our Company
during the last fiscal year. During 2022, decisions regarding executive officer compensation were made by our
Compensation Committee. Mr. YJ Kim, our Chief Executive Officer, participated in the deliberations of our
Compensation Committee regarding the determination of the compensation of our executive officers other than
himself for 2022 and prior periods. None of our executive officers currently serves, or in the past has served, as
a member of the Board or the compensation committee of another entity that has one or more executive officers
serving on our Board.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Introduction

This Compensation Discussion and Analysis describes and analyzes our executive compensation program for
the following executive officers who served the Company in 2022 (collectively, our ‘‘named executive officers’’):

•

Young-Joon Kim, our Chief Executive Officer (‘‘CEO’’);

Shin Young Park, our Chief Financial Officer (‘‘CFO’’);

Theodore Kim, our Chief Compliance Officer, Executive Vice President, General Counsel and Secretary
(‘‘CCO’’);

• Woung Moo Lee, our Executive Vice President and General Manager of Display Solutions and

Worldwide Sales (‘‘GM of Display and WW Sales’’); and

•

Chan Ho Park, our General Manager of Power Solutions (‘‘GM of Power’’).

Compensation Philosophy and Objectives

The Compensation Committee of our Board has primary responsibility for developing and maintaining a

compensation program for our senior management, including our named executive officers.

The Compensation Committee believes that our executive compensation program should play a key role in

our operating and financial success, and has worked with outside legal counsel and Compensia Inc.
(‘‘Compensia’’), a national compensation consulting firm, to develop a comprehensive executive compensation
program that is intended to attract and retain talent with competitive compensation, and further align the interests
of our executive officers with our stockholders by linking a significant component of executive compensation to
variable cash-based compensation tied to the achievement of our short-term financial, operational and strategic
goals, as well as equity-based compensation tied to the achievement of our long-term strategic goals that in turn
lead to stockholder value creation. As part of our ‘‘Pay for Performance’’ philosophy described below, the
Committee believes it is important to maintain a compensation program that includes significant ‘‘at risk’’
compensation and performance-focused equity awards. In 2022 approximately 89% of our CEO’s target total
direct compensation and approximately 73% of the average target total direct compensation of our other named
executive officers was delivered in the form of variable or ‘‘at risk’’ compensation tied to Company or stock
price performance.

In light of the highly competitive market in which we compete for business, and our dependence on the
highly skilled workforce that is necessary in order to innovate and compete in that market, the Compensation
Committee believes that our ability to attract and retain talent at all levels of the Company is critical to our
long-term success. In view of our unique situation in that all of our senior executives live and work in South
Korea (herein referred to as ‘‘Korea’’), we offer competitive expatriate benefits intended to minimize adverse tax
and financial impacts associated with our CEO’s and CCO’s expatriate assignments, because they are subject to
taxation in both the U.S. and Korea. More information about our human capital management strategy and
approach can be found under the heading ‘‘Human Capital Management’’ on page 13.

Key 2022 Compensation Decisions

The Compensation Committee made the following key compensation decisions in respect of fiscal year 2022:
•

Entered into an executive service agreement with Ms. Park in connection with her appointment as CFO
effective January 1, 2022;

•

Increased the annual base salary of our named executive officers effective January 1, 2022. The
increases ranged from 0.5% to 6.1% with a view toward remaining competitive with our peers, except
our CFO’s salary was increased by 14.2% to reflect her increased responsibilities in connection with
her promotion to CFO;

Awarded retention bonuses to ensure the continued retention of key executives and employees in what
remains a tight market for talent and to reward substantial individual contributions in connection with
the previously contemplated merger with an affiliate of Wise Road Capital LTD; and

•

Granted annual equity awards to our key executives using a combination of performance-based stock
units (‘‘PSUs’’) (based on both relative total stockholder return (‘‘TSR’’) and financial performance
goals) and RSUs, consistent with our practice in prior years.

‘‘Pay for Performance’’ Philosophy

As illustrated below, our target total direct compensation, which is the sum of base salary, target short-term cash

incentive bonus opportunity and the aggregated target value of long-term equity awards granted under our 2020 Equity
and Incentive Compensation Plan, was weighted heavily towards variable performance-based compensation.

At-Risk
89%

Young-Joon
Kim

At-Risk
73%

Other NEO
(Average)

Target Cash
Incentive
11%

Financial
PSUs
50%

TSR
PSUs
13%

Target Cash
Incentive
16%

Financial
PSUs
27%

TSR
PSUs
7%

•

Approximately 89% of our Chief Executive Officer’s target total direct compensation and
approximately 73% of the average target total direct compensation of our other named executive
officers was delivered in the form of variable or ‘‘at risk’’ compensation tied to Company, individual,
or stock price performance;

Long-term equity awards (the ultimate value of which depends on our stock price) continued to be the
largest element of compensation, representing approximately 78% of our Chief Executive Officer’s
target total direct compensation and approximately 57% of the average target total direct compensation
of our other named executive officers; and

The target annual (short-term) cash incentives payable to our named executive officers were tied to the
pre-established performance goals and/or criteria under our short-term incentive program.

Executive Compensation-Related Policies and Practices

We endeavor to maintain sound executive compensation policies and practices, including

compensation-related corporate governance standards, consistent with our pay for performance philosophy. The
following summarizes our executive compensation and related governance policies and practices:

•

Pay-for-Performance Philosophy

Performance-Based Equity
Awards

‘‘Double Trigger’’ Change in
Control Arrangements

What We Do

A significant portion of our named executive officers’ compensation is
directly linked to corporate performance. We structure target total direct
compensation with a significant long-term equity component in the form
of RSUs and PSUs, thereby making a vast majority of each named
executive officer’s target total direct compensation dependent upon our
corporate performance, stock price and/or total shareholder return.
Our CEO and our other named executive officers receive
performance-based equity awards in the form of PSUs that vest based on
the achievement of financial goals and relative TSR performance.

With the exception of our PSU awards that vest at target level upon a
change in control, our change in control compensation arrangements
include a ‘‘double trigger’’ provision that requires both a change in control
of the Company plus a qualifying termination of employment before
payments and benefits are paid. It is our expectation that all future RSUs
and PSUs will be structured with the same format.

• Human Capital Management
and Succession Planning

•

Independent Compensation
Committee

• Compensation Recovery
(‘‘Clawback’’) Policy

•

Stock Ownership Guidelines

• Equity Award Grant Policy

What We Do

We provide opportunities for training and advancement to all
employees as part of our human capital management program.
Furthermore, we conduct succession planning and executive
assessments for all key employees to ensure orderly succession plans
are in place.

The Compensation Committee consists solely of independent directors.

We have a policy providing for the recovery of certain cash incentive
compensation and equity or equity-based awards from our CEO and
other executive officers (including our other named executive officers).

We maintain stock ownership guidelines for our CEO, our other
executive officers (including our other named executive officers) and
the non-employee members of our Board.

Equity awards are granted in accordance with our Equity Award Grant
Policy. We do not have any program, practice or plan to time equity
awards in coordination with the release of material non-public
information.

• Retain an Independent
Compensation Advisor

The Compensation Committee has engaged its own independent
compensation advisor to provide information, analysis and other advice
on executive compensation independent of management.

• Annual Executive Compensation

Review

The Compensation Committee conducts an annual review of our
compensation strategy, including a review of our compensation used
for comparative purposes.

• Balanced Time Horizon for
Incentive Compensation

• No Special Retirement Plans

• No Stock Option Re-Pricing

• No Excise Tax Payments on
Future Post-Employment
Compensation Arrangements

• No Hedging or Pledging

• No Special Welfare or Health

Benefits

• No Dividends or Dividend
Equivalents Payable on
Unvested Equity Awards

What We Do

We have a balance of time horizons for our incentive awards, including
an annual cash incentive plan, a three-year performance period for our
TSR PSUs and a three-year vesting period for our RSUs and Financial
PSUs.

What We Don’t Do

We do not currently offer pension arrangements or retirement plans to
our executive officers other than statutory severance benefits required
under the Employee Retirement Benefit Security Act of Korea.

Our equity compensation plan does not permit stock options or stock
appreciation rights (‘‘SARs’’) to be repriced to a lower exercise or
strike price without the approval of our stockholders.

We do not provide any excise tax reimbursement payments (including
‘‘gross-ups’’) with respect to payments or benefits contingent upon a
change in control of the Company. The Company does, however, have
the obligation to provide tax equalization to the CEO and the CCO
with respect to such payments and benefits, as a part of their expatriate
benefit package because they are subject to taxation in both the U.S.
and Korea.

We prohibit our employees, including our executive officers, and the
non-employee members of our Board from pledging, engaging in short
sales and certain derivative transactions relating to our securities.

We do not provide our executive officers with any welfare or health
benefit programs, other than participation on the same basis as our
full-time employees in the employee programs that are standard in our
industry sector. The Company does provide customary international
health insurance to the CEO, the CCO and the GM of Power as a part
of their expatriate benefit package.

We do not pay dividends or dividend equivalents on unvested equity
awards.

Say on Pay Vote and Stockholder Input

The Compensation Committee has responsibility to ensure that the compensation paid to our executive
officers aligns with the interests of our stockholders and the Company’s compensation philosophy. Approximately
94.2% of the stockholders at the 2022 Annual Meeting voted to approve the compensation of the Company’s
named executive officers as disclosed in the Company’s 2022 proxy statement. With the result of the advisory
votes, the Compensation Committee determined that the Company’s executive compensation program continues
to be appropriate. Nevertheless, in response to stockholder input regarding topics of concern from our investors,
we made changes aimed at increasing the quality and transparency of the disclosures in our Compensation
Discussion and Analysis (‘‘CD&A’’) this year, with a particular emphasis on disclosures related to variable,
performance-based compensation and human capital management. We remain committed to listening to
stockholder feedback as we continue to evaluate and refine our compensation programs.

Timing of Compensation Decisions

Generally, at the end of each annual evaluation period, our CEO reviews the performance of the other executive

officers and presents his conclusions and recommendations to the Compensation Committee. At that time and

throughout the year, the Compensation Committee also evaluates the performance of our CEO, which is measured in
substantial part against our consolidated financial performance.

Equity awards are made in accordance with our Equity Award Grant Policy described below. We do not

have any program, plan or practice to time equity award grants in coordination with the release of material
non-public information.

Role of the Compensation Committee in Compensation Decisions

The Compensation Committee’s responsibilities include evaluating, approving and monitoring our named
executive officer and director compensation plans, policies and programs, as well as each of our equity-based
compensation plans and policies. In addition, the Compensation Committee has the responsibility of periodically
reviewing and advising the Board concerning our human capital strategies, initiatives and programs with respect
to our culture, talent, recruitment, retention, employee engagement, and employee diversity, equity and inclusion
efforts.

Consistent with our compensation philosophy and objectives, the Compensation Committee evaluates our

executive officer compensation packages annually to ensure that:

• We maintain our ability to attract and retain superior executives in critical positions;
•

Our executives are incentivized and rewarded for corporate growth, achievement of long-term corporate
objectives and individual performance that meet or exceed our expectations without encouraging
unnecessary risk-taking; and

•

Compensation provided to critical executives remains competitive relative to the compensation paid to
similarly situated executives of companies in the semiconductor industry.

In addition to the annual reviews, the Compensation Committee also typically considers compensation

changes upon a named executive officer’s promotion or other change in job responsibility.

Role of CEO in Compensation Decisions

For named executive officers other than our CEO, we have historically sought and considered input from

our CEO and our independent compensation consultant as described below, in making determinations regarding
executive compensation.

Our CEO annually reviews the performance of our other named executive officers. Thereafter, he presents

conclusions and recommendations regarding the compensation of such officers, including proposed salary
adjustments and incentive amounts, to the Compensation Committee. The Compensation Committee then takes
this information into account when it makes final decisions regarding any adjustments or awards.

The review of performance by the Compensation Committee and our CEO of our other named executive

officers is both an objective and subjective assessment of each named executive officer’s contribution to our
performance, leadership qualities, strengths and weaknesses and performance relative to goals set by the
Compensation Committee or our CEO, as applicable. The Compensation Committee and our CEO do not
systematically assign a weight to the factors, and may, in their discretion, consider or disregard any one factor
which, in their sole discretion, is important to or irrelevant for a particular executive.

Role of Compensation Consultant

The Compensation Committee engages an external compensation consultant to assist it by providing

information, analysis and other advice relating to our executive compensation program and the decisions resulting
from its annual executive compensation review. For 2022, the Compensation Committee retained Compensia, a
national compensation consulting firm, to serve as its independent compensation consultant. This compensation
consultant serves at the discretion of the Compensation Committee.

During 2022, Compensia attended some of the meetings of the Compensation Committee (both with and

without management present) during the period of its engagement and provided the following services:

•

Consulting with the Compensation Committee Chair and other members between Compensation
Committee meetings on compensation matters as needed;

•

Assisting in the drafting of the Compensation Discussion and Analysis and Pay Versus Performance
disclosures;

Reviewing and updating the compensation peer group used to assess executive compensation;

Providing market data for selected executive officer positions covering target total direct compensation
levels and design to help the Compensation Committee determine how to competitively set
compensation for the selected executive officer positions;

Updates on compensation trends and regulatory developments; and

Assistance with the design of the PSUs.

In 2022, Compensia did not provide any services to us other than the consulting services to the

Compensation Committee. The Compensation Committee regularly reviews the objectivity and independence of
the advice provided by its compensation consultant on executive compensation. In 2022, the Compensation
Committee considered the six specific independence factors adopted by the SEC and reflected in the NYSE
listing standards and determined that the work performed by Compensia did not raise any conflicts of interest.

Elements of Compensation

In making decisions regarding the pay of the named executive officers, the Compensation Committee looks
to set a total compensation package for each officer that will retain high-quality talent and motivate the officer to
achieve the goals set by our Board. Our executive compensation package is generally comprised of the following
elements:

Element

Annual base salary

Purpose

Description

Provides a fixed source of annual cash
compensation for our named executive
officers.

Based upon each individual’s skills,
experience and performance as well as the
criticality of the role.

Short-term cash
incentives

Incentivizes achievement of key annual
financial, operational and strategic goals.

Variable cash compensation based on
performance.

Long-term equity
incentives

Aligns the interests of our named executive
officers with those of our stockholders by
increasing stock ownership, incentivizing
increases in stockholder value and
strengthening retention.

Variable equity compensation delivered
through three vehicles:
- Service-based RSUs with a three-year

vesting period;

- PSUs with a one-year performance
period and subsequent three-year
vesting period; and

- Relative total shareholder return PSUs

(TSR PSUs) with a three-year
performance period.

Expatriate and other
executive benefits

Allows us to remain competitive with peer
and market practices and to retain key
personnel on expatriate assignments by
minimizing adverse financial impacts
associated with such assignments.

Benefits include housing allowances,
relocation and repatriation allowances,
insurance premiums, reimbursement for the
use of a car, home leave flights, tax
equalization payments and tax advisory
services.

Our executives also participate in a health and welfare benefits package that is generally available to all of
our employees and are each party to an employment agreement that provides for limited post-employment and
change in control payments and benefits.

Sources of Market Data

For purposes of comparing our executive compensation against the competitive market, the Compensation

Committee reviews and considers the compensation levels and practices of a group of comparable technology
companies. The companies in this compensation peer group were selected on the basis of their similarity to us in
size, industry focus and being based in the U.S. We focused on U.S.-based companies because our highest
ranking executives are U.S. expatriates who have opportunities to work with U.S.-based technology companies.

Compensia provided the Compensation Committee with an analysis of the prior compensation peers with a

recommendation of ten companies to exclude based on the companies being acquired or being outside the
financial ranges noted below. Compensia also provided eight potential additions based on the selection criteria
noted below. The Compensation Committee reviewed the proposed changes to our compensation peer group and
adopted the final group to be used for this year’s analysis. The companies in this compensation peer group were
selected on the basis of their similarity to us, based on the following criteria:

•

Industry — semiconductors; semiconductor equipment, electronic equipment and instruments and
electronic components;

Company type — Public companies primarily headquartered in the U.S. and traded on a major stock
exchange;

Similar revenue size — 0.25x – 2.5x Magnachip’s revenue of $505 million ($126 million to
$1.3 billion);

• Market capitalization — $50 million to $4 billion;
•

Executive positions similar in breadth, complexity and/or scope of responsibility; and

•

Competitors for executive talent.

The Compensation Committee approved the use of market data from the following group of peer companies,

which was reviewed and approved in November 2021, for our 2022 executive compensation market assessment:

Alpha and Omega Semiconductor
Ambarella
Axcelis Technologies
Cohu
Diodes
DSP Group
Ichor Holdings
Impinj

MaxLinear
NeoPhotonics
Photronics
Rambus
SkyWater Technology
Veeco Instruments
Vishay Precision Group

The Compensation Committee seeks to establish a total cash compensation package for our named executive

officers that is competitive with the compensation for similarly situated executives in this compensation peer
group, while also considering each executive’s experience and performance. Accordingly, the Compensation
Committee used the market data from this peer group as a reference point in its 2022 executive compensation
process.

Elements of Compensation and Weighting

The Compensation Committee does not apply a formula or assign relative weight in apportioning

compensation among the various elements used. Instead, it makes a subjective determination after considering all
information collectively for each element of compensation.

Annual Base Salary

The Compensation Committee seeks to set the base salaries of our named executive officers at competitive

levels as compared to similarly situated executives in our select peer group, but also takes into account the
named executive officer’s experience, skill set and the value of that skill set and performance. The Compensation
Committee makes a subjective decision regarding any changes in base salary based on these factors and the data
from our select peer group. The Compensation Committee does not systematically assign weights to any of the
factors it considers, and may, in its discretion, ignore any factors or deem any one factor to have greater
importance for a particular executive officer. Base salary adjustments, if applicable, generally take effect in the
middle of our fiscal year. In 2022, the Compensation Committee increased the annual base salary of our named

executive officers effective January 1, 2022. Those increases ranged from 0.5% to 6.1%, except our CFO’s salary
was increased by 14.2% to reflect her increased responsibilities in connection with her promotion to CFO. The
2022 base salary for each named executive officer is set forth below:

Named Executive Officer

Young-Joon Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shin Young Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Theodore Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Woung Moo Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chan Ho Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2022 Base Salary

$560,100
$310,000
$350,000
$275,633
$336,600

Short-Term Cash Incentives

We have been providing short-term cash incentive opportunities to encourage our named executive officers

to achieve certain short-term corporate performance goals. The employment agreement that each of our named
executive officers has entered into includes a target bonus amount, which is expressed as a percentage of base
salary.

The Compensation Committee typically makes annual determinations regarding short-term cash incentive

compensation based on various performance-related factors, including our annual operating plan, which is
generally adopted in the December preceding each fiscal year. The Compensation Committee also considers for
each year the cash bonus payout percentage earned by our non-executive employees pursuant to the terms of the
collective bargaining agreement entered into by our Korean operating subsidiary, Magnachip Semiconductor, Ltd.
(‘‘MSK’’), which typically takes into account a myriad of factors, including the Company’s financial performance
in the applicable year. The Compensation Committee’s annual determination regarding short-term cash incentive
compensation for our executives, including our named executives officers, is conducted generally with a view
toward applying a payout percentage (applicable to the target bonus amount) to our executives that is similar to,
or commensurate with, that determined under the applicable collective bargaining agreement.

For 2022, the Compensation Committee determined that the payout percentage of short-term cash incentive

compensation for our executives would be 0%. This determination was based on a variety of relevant factors,
including the Company’s performance relative to its 2022 annual operating plan, as well as its general financial
performance in 2022.

Target bonus as a percentage of base salary, the target bonus amount and the actual amount of 2022 bonus

award for each of our named executive officers are set forth below.

Named Executive Officer

Target Bonus
(% of Base Salary)

Target Bonus
Amount

Actual
Amount

Young-Joon Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shin Young Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Theodore Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Woung Moo Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chan Ho Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%
50%
75%
60%
50%

$560,100
$155,000
$262,500
$165,380
$168,300

$0
$0
$0
$0
$0

On April 25, 2022, we awarded a one-time cash award (the ‘‘Retention Awards’’) to certain executives and

employees of the Company, including our named executive officers, to ensure continued retention of key
executive officers and employees in what remains a tight market for executive talent as well as to reward those
individuals for their substantial contributions in connection with the previously contemplated merger with an
affiliate of Wise Road Capital LTD. The Retention Awards paid to our named executive officers are as set forth
adjacent to their respective names in the table below.

Named Executive Officer

Retention Awards

$605,538
$330,274
$528,439
$178,248
$132,110

Long-Term Equity Incentives

Equity awards are not tied to base salary or cash incentive amounts and constitute lesser or greater

proportions of total compensation depending on market practices and the Compensation Committee’s
determination of target grant values. The Compensation Committee, relying on the professional and market
experience of our Compensation Committee members, as well as information provided by our compensation
consultant, generally seeks to set equity awards at competitive levels based on both U.S. and Korean market
practices and taking into account our equity plan share pool and projected dilution of our shares outstanding. The
Compensation Committee does not target a specific percentile within our peer group with respect to equity-based
compensation.

Consistent with the Compensation Committee’s desire to provide compensation that is largely ‘‘at risk’’

while still competitive with our peers with whom we compete for talent, our equity compensation program for
our named executive officers includes PSUs each year along with RSUs. The Compensation Committee believes
that the inclusion of PSUs in our executive compensation program is consistent with, explicitly linked to, and
supports our strategic objective of enhancing stockholder value.

In 2022, consistent with aligning our named executive officers’ interests with sustained value creation, the

Compensation Committee determined that it was appropriate to switch from one-year vesting to three year
vesting with respect to our annual Financial PSU awards. This switch would have caused a ‘‘lag’’ in the
realizable value of the Financial PSUs that could be recognized by the grantees in the first two years the 2022
award was to be outstanding. To avoid that lag, the Compensation Committee determined that each 2022
Financial PSU award should include a special grant of ‘‘make-whole’’ Financial PSUs, with a shorter one-year
vesting period (‘‘Make-Whole Financial PSUs’’), in addition to the Financial PSUs vesting over a three year
period. As a result, in 2022 each grantee was granted Make-Whole Financial PSUs as part of each Financial PSU
award, with the number of the Make-Whole Financial PSUs equal to two thirds (2/3) of the total number of
Financial PSUs that were originally intended for that grantee.

In order for any PSUs to be earned and vest, the performance must meet or exceed a threshold level of

performance during the applicable performance period, and the level of achievement of the applicable
performance milestones will be determined by the Compensation Committee within 60 days following the end of
the applicable performance period.

In the event a named executive officer is terminated without cause or resigns for good reason in each case
not in connection with a ‘‘change in control’’ prior to the settlement of the award, the named executive officer
will remain eligible to vest in a pro-rata portion of the award on the Certification Date, based on the number of
full months the executive officer provided continuous service through the applicable performance period (the
‘‘Continued Service Condition’’).

The general terms of the equity awards contemplated by our 2022 executive compensation program are

summarized in the table below.

Service-Based RSUs

Financial PSUs

• Annual grants with one-year

performance period.

TSR PSUs
• Annual grants with three-year

performance period.

• Vest over three years in three
equal annual installments,
subject to the executive’s
continued employment through
each applicable vesting date.

• Vesting is based on (i) the

• Performance is measured within

60 days of the end of the
three-year performance period.

• Vesting is based on three-year

TSR of the Company relative to
other entities in the S&P
Semiconductor Index,
determined by the percentile
rank of the Company’s TSR
relative to the TSR of each
other entity in such index,
subject to the satisfaction of the
Continued Service Condition.

achievement of financial goals
that measure our performance
against our business strategy,
with specific performance goals
established by the
Compensation Committee
annually, and (ii) satisfaction of
the Continued Service
Condition through each
applicable date in the following
vesting schedule: 1/3 of
Vestable Units on the
Certification Date; 1/3 of
Vestable Units on December 31,
2023; and 1/3 of Vestable Units
on December 31, 2024(1).

• For 2022, performance goals
are based on revenue (1/3
weighting), gross profit margin
(1/3 weighting) and Adjusted
EBITDA (1/3 weighting).(2)

(1) As described above, Make-Whole Financial PSUs have a one-year vesting period, with the entire amount vesting on the Certification
Date, provided that the other conditions of vesting have been met. As a result, including the Make-Whole Financial PSUs, 60% of the
2022 Financial PSUs were eligible to vest on the Certification Date.

(2)

‘‘Adjusted EBITDA’’ means EBITDA (as defined below) adjusted to exclude (i) equity-based compensation expense, (ii) foreign
currency loss (gain), net, (iii) derivative valuation loss (gain), net, and (iv) various non-recurring expense (income), net. ‘‘EBITDA’’ is
defined as the Company’s net income (loss) before interest income, interest expense, income tax expense, and depreciation and
amortization.

The below tables summarize the RSUs, Financial PSUs, and TSR PSUs granted to each of the named

executive officers of the Company in 2022.

Name

Young-Joon Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shin Young Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Theodore Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Woung Moo Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chan Ho Park. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Grant Date

2/28/2022
2/28/2022
2/28/2022
2/28/2022
2/28/2022

FV of
Grant Date

$18.20
$18.20
$18.20
$18.20
$18.20

RSUs
Granted
(#)

43,000
15,000
25,000
11,747
10,000

RSUs

Aggregate fair value
of grant date ($)

782,600
273,000
455,000
213,795
182,000

Name

Young-Joon Kim . . . . . . . . . . . . . . . . .
Shin Young Park . . . . . . . . . . . . . . . . .
Theodore Kim . . . . . . . . . . . . . . . . . . .
Woung Moo Lee . . . . . . . . . . . . . . . . .
Chan Ho Park. . . . . . . . . . . . . . . . . . . .

Grant Date

2/28/2022
2/28/2022
2/28/2022
2/28/2022
2/28/2022

FV of Grant
Date ($) (at
Target)

2,711,800
318,500
531,440
249,431
212,339

Financial PSUs

Threshold
Shares (#)

74,500
8,750
14,600
6,853
5,834

Target
Shares (#)

149,000
17,500
29,200
13,705
11,667

Maximum
Shares (#)

223,500
26,250
43,800
20,558
17,501

TSR PSUs

Name

Young-Joon Kim . . . . . . . . . .
Shin Young Park . . . . . . . . . .
Theodore Kim . . . . . . . . . . . .
Woung Moo Lee . . . . . . . . . .
Chan Ho Park . . . . . . . . . . . .

Grant Date

2/28/2022
2/28/2022
2/28/2022
2/28/2022
2/28/2022

FV of Grant
Date ($) (at
Target)

717,080
81,900
136,500
64,137
54,600

Threshold
Shares (#)

Target
Shares (#)

Maximum
Shares (#)

Supermaximum
Shares (#)

19,700
2,250
3,750
1,762
1,500

39,400
4,500
7,500
3,524
3,000

59,100
6,750
11,250
5,286
4,500

78,800
9,000
15,000
7,048
6,000

Vesting of the Financial PSUs granted in 2022 was based on the actual level of achievement for three
corporate financial performance metrics—revenue, gross profit margin and Adjusted EBITDA. Achievement at or
above the maximum level of achievement for each performance goal would result in a maximum payout of
150% of the portion of the named executive officer’s target level award attributable to that performance goal,
while achievement below the threshold level of achievement for each performance goal would result in no
payout for the portion of the named executive officer’s target level award attributable to that performance goal.

In February 2023, the Compensation Committee determined that the 2022 Financial PSUs were to be
forfeited, as the Company did not achieve the threshold level of achievement for any of the three performance
goals. As a result, Financial PSUs granted in 2022 covering the following number of shares of our Common
Stock were forfeited by our named executive officers: Mr. YJ Kim, 149,000; Ms. SY Park 17,500, Mr. T. Kim
29,200, Mr. WM Lee 13,705 and Mr. CH Park 11,667.

The applicable goals and weighting, and the level of achievement for the Financial PSUs granted in 2022

are as follows:

Performance Metrics

Revenue (in millions) . . . .
Gross Profit Margin (as

Goal
Weighting

Threshold

Target

Maximum

2022
Achievement

Vesting Ratio
by Category

Weighed
Vesting Ratio

33.33%

$450.0

$459.0

$485.0

$301.9

% of revenue) . . . . . . . .

33.33%

33.5%

35.0%

37.2%

33.0%

Adjusted EBITDA (in

millions) . . . . . . . . . . . .

33.33%

$72.2

$78.6

$88.0

$19.5

0.0%

The performance metric of the 2022 TSR PSUs is the three-year TSR relative to the S&P Semiconductor

Index. In structuring the relative TSR calculation and selecting the index, the Compensation Committee wanted
to compare our stock price performance to that of a large, steady-state sampling of semiconductor companies on
a basis designed to eliminate any short-term aberrations in stock price at the start or at the end of the
performance period. The TSR payout percentage is represented by four performance levels: ‘‘Threshold,’’
‘‘Target,’’ ‘‘Maximum’’ and ‘‘Supermaximum.’’ Supermaximum is achieved only if Magnachip ranks first in the
S&P Semiconductor Index.

As of December 31, 2022, the performance period applicable to the TSR PSUs granted in 2020 (the ‘‘2020

TSR PSUs’’) ended. The performance metric applicable to the 2020 TSR PSUs was the same as that described
above with respect to the 2022 TSR PSUs. In February 2023, based on such performance metric, the
Compensation Committee determined that the vesting percentage of the 2020 TSR PSUs to be 0%, as the
Company recorded a TSR of -20.46% for the performance period, placing it at the 9th percentile within the S&P

Semiconductor Index, which was below the achievement threshold of the 35th percentile. As a result, TSR PSUs
covering the following number of shares of our Common Stock were forfeited by our named executive officers:
Mr. YJ Kim, 29,040; Ms. SY Park, 1,500; Mr. T. Kim 6,000; and Mr. WM Lee 5,250.

Health and Welfare Benefits

Our named executive officers are eligible to participate in our employee benefit plans that are generally
provided to all full-time employees, and on the same basis as all of our full-time employees in the country in
which they are resident. For Messrs. YJ Kim, T. Kim and CH Park, these benefits included individual health
insurance (medical, dental and vision).

Perquisites and Other Benefits

We provide the named executive officers with perquisites and other benefits, including expatriate benefits,

which the Compensation Committee believes are reasonable and consistent with our overall compensation
program to better enable us to attract and retain superior employees for key positions. Generally, perquisites are
determined based upon what the Compensation Committee considers to be customary perquisites offered by our
select peer group and are not based upon a median cost for specific perquisites or for the perquisites in
aggregate. The Compensation Committee determines the level and types of expatriate benefits for the named
executive officers based on local market surveys taken by our human resources group. These surveys are not
limited to our select peer group, but include a broad range of companies based outside of Korea but with
significant operations in Korea. Attributed costs of the personal benefits for the named executive officers are set
forth in the Summary Compensation Table below. Consistent with the industry practice of hiring key expatriate
executives and relocating such executives to a foreign country, like Korea, the provision of expatriate benefits to
key expatriate executives allows us to retain key personnel on expatriate assignments and minimize any financial
impacts associated with such assignments.

Mr. YJ Kim and Mr. T. Kim were expatriates during 2022 and received expatriate benefits commensurate

with market practice in Korea. The Compensation Committee determined the appropriate benefits for each
expatriate in accordance with internal policies approved by our Board from time to time, which generally
included housing allowances, relocation and repatriation allowances, insurance premiums (including, in addition
to health and welfare benefits described above, group personal accident and business travel insurance),
reimbursement for the use of a car, home leave flights, tax equalization payments and tax advisory services.

Employment Agreements and Post-Employment Severance Benefits

Each of our named executive officers is party to an employment agreement or executive service agreement
that provides for certain payments upon termination of the executive’s employment and/or a change in control of
the Company and that is intended to align the interests of the executive and stockholders if a transaction were to
occur. Please see the section below entitled ‘‘Potential Payments Upon Termination or Change in Control’’ for
further discussion of those benefits. We believe that the use of severance arrangements appropriately mitigates
some of the risk that exists for executives working in our highly competitive industry and allows the executives
to focus on our business objectives. We entered into an executive services agreement with Ms. Park in
connection with her appointment as CFO consistent with the existing agreements with our other named executive
officers.

Pursuant to the Employee Retirement Benefit Security Act, certain executive officers residing in Korea with
one or more years of service are entitled to severance benefits upon the termination of their employment for any
reason. For purposes of this section, we call this benefit ‘‘statutory severance.’’ The base statutory severance is
approximately one month of base salary per year of service. Each of our named executive officers accrued
statutory severance in 2022.

Clawback Policy

The Company has adopted a clawback policy that applies to incentive compensation approved, awarded or

granted to our current and former executive officers, including our named executive officers, following the
adoption of the policy in 2017. Under the clawback policy, if we are required to prepare an accounting
restatement due to the Company’s material noncompliance with any financial reporting requirement under U.S.
federal securities laws and the Board determines that a covered executive officer has willfully committed an act

of fraud, dishonesty or recklessness in the performance of his or her duties as an executive officer of the
Company that contributed to the noncompliance, the Board may require reimbursement or forfeiture of any
excess incentive compensation that is received by any covered executive officer during the three completed fiscal
years preceding the date on which the Company is required to prepare such accounting restatement. We intend to
amend this policy to be consistent with the listing standards of the New York Stock Exchange once it adopts and
SEC-approved listing standard that complies with Exchange Act Rule 10D-1.

Anti-Hedging and Pledging Policy

The Company has adopted the Securities Trading Policy which applies to all of the directors, officers and

employees of the Company, to describe the standards concerning the handling of non-public information relating
to the Company and the buying and selling of securities of the Company. The policy prohibits engaging in
pledging, short sales and buying or selling puts, calls, options or other derivatives in respect of securities of the
Company. The policy also strongly discourages speculative hedging transactions where even long-term hedging
transactions that are designed to protect an individual’s investment in Company securities (i.e., the hedge must be
for at least twelve (12) months and relate to stock or options held by the individual) are only permitted after
being pre-cleared with the Chairman of the Board and the Company’s General Counsel.

Equity Award Grant Policy

Effective September 1, 2022, the Company adopted an Equity Award Grant Policy. The policy provides that
equity awards made in connection with the hiring of a new employee or the promotion of an existing employee
will generally be made on a bi-monthly basis, and that, unless the Board, the Compensation Committee, or its
delegate determines otherwise, will be effective on the earlier of the 1st or the 15th day of the month during
which such grant is approved, or the month immediately following the date on which such grant is approved, as
appropriate. In addition, new hire grants will generally become effective at least fourteen days after the date on
which an employee’s employment begins. Annual and other equity awards to continuing employees, if made, will
generally be made at a meeting of the Board or the Compensation Committee, or its delegate established in
advance, and will generally become effective on the earlier of the 1st or the 15th day of the month during which
such grant is approved, or of the month immediately following the date on which such grant is approved, as
appropriate.

Equity awards denominated in a number of shares will be priced in accordance with the terms of the Company’s

2020 Equity and Incentive Compensation Plan. If a grant of restricted stock or RSUs is denominated in dollars, the
number of shares of restricted stock or RSUs subject to such grant will be calculated by dividing the dollar value of
the approved award by the volume-weighted average closing market price on the NYSE (or such other market on
which the Company’s stock is then principally listed) of one share of the Company’s stock over the trailing 30-day
period ending on the last day immediately prior to the grant date.

Stock Ownership Guidelines

The Company has adopted our Stock Ownership Policy (the ‘‘Stock Ownership Policy’’), that is applicable

to our non-employee directors and our executive officers. The Stock Ownership Policy requires that:

•

The Chairman of the Board hold equity in the Company with a value equal to the lesser of
(i) three times his or her then current annual Board and Chairman cash retainer and (ii) three times his
or her initial annual Board and Chairman cash retainer paid at the time he or she became subject to the
Stock Ownership Policy as the Chairman of the Board;

Non-employee directors hold equity in the Company with a value equal to the lesser of (i) three times
the non-employee director’s annual Board cash retainer and (ii) three times his or her initial annual
Board cash retainer paid at the time he or she became subject to the Stock Ownership Policy as a
director of the Company;

The Chief Executive Officer owns equity in the Company equal to the lesser of (i) five times his or her
then current annual base salary and (ii) five times his or her annual base salary paid at the time he or
she became subject to the Stock Ownership Policy as the Chief Executive Officer of the Company; and

All other covered executives own equity in the Company equal to the lesser of (i) two times his or her
annual base salary and (ii) two times his or her annual base salary as of the date such individual’s
entered into their role that made them subject to the Stock Ownership Policy.

The Stock Ownership Policy provides that an individual subject to the policy is required to be in
compliance with the minimum equity ownership requirement by the later of the five-year anniversary of the
implementation date of the Stock Ownership Policy and the five-year anniversary of such individual’s entrance
into their role that made them subject to the Stock Ownership Policy.

The Stock Ownership Policy provides that shares of our Common Stock directly owned by covered
executives and directors, vested, but not settled, RSUs, 50% of any vested unexercised options, shares owned
jointly with a spouse and shares of our Common Stock held in a trust established by a covered executive or
director for the benefit of the such covered executive or director and/or family members will count towards
satisfying the minimum equity ownership requirement of the Stock Ownership Policy.

Accounting Considerations

The Compensation Committee considers the accounting impact of equity awards when designing
compensation plans and arrangements for our executive officers and other employees. Chief among these is
Financial Accounting Standards Board Accounting Standards Codification Topic 718 (‘‘ASC 718’’), the standard
which governs the accounting treatment of stock-based compensation awards. However, accounting cost is just
one factor considered when designing such compensation plans and arrangements for our executive officers and
other employees.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis as set

forth above under ‘‘Compensation Discussion and Analysis’’ with our management and, based on such review
and discussion, has recommended to our Board that the Compensation Discussion and Analysis be included in
this Proxy Statement.

The foregoing report was submitted by the Compensation Committee and shall not be deemed to be
‘‘soliciting material’’ or to be ‘‘filed’’ with the SEC or subject to Regulation 14A promulgated by the SEC or
Section 18 of the Exchange Act and shall not be incorporated by reference in any of our other filings under the
Securities Act or Exchange Act except to the extent we specifically incorporate this report therein.

Members of the Compensation Committee:

Camillo Martino, Chair
Kyo-Hwa (Liz) Chung
Gary Tanner

Summary Compensation Table

The following table sets forth certain information concerning the compensation earned during the years

ended December 31, 2022, 2021 and 2020, of our named executive officers:

Name and Principal
Position

Salary
($)(1)

Bonus
($)(2)

Year

Option
Awards
($)

Stock
Awards
($)(3)

Non-Equity
Incentive Plan
Compensation
($)

Young-Joon Kim . . . .
Chief Executive
Officer

2022 560,420
605,538 — 4,211,480
2021 557,136 1,576,245 — 2,335,967
125,000 — 1,486,335
2020 556,399

Shin Young Park(6) . . .
Chief Financial
Officer

2022 312,048
2021 —
2020 —

330,274 —
—
—

—
—

673,400
—
—

Theodore Kim . . . . . .
Chief Compliance
Officer, General
Counsel and
Secretary

Woung Moo Lee . . . .
General Manager of
Display Solutions
and Worldwide
Sales

2022 350,259
2021 329,846
2020 329,410

528,439 — 1,122,940
875,709
801,724 —
539,350
74,250 —

2022 275,633
2021 306,158
2020 296,913

178,248 —
127,203 —
57,527 —

527,363
471,760
406,210

Chan Ho Park . . . . . .
General Manager of
Power Solutions

2022 336,808
2021 329,846
2020 192,203

132,110 —
118,306 —
28,943 —

448,939
202,186
166,350

—
—
—

Change in
Pension
Value
and Non-
qualified
Deferred
Compensation
Earnings
($)(4)

All Other
Compensation
($)

Total
($)

100,280
68,656
26,089

1,565,327(5) 7,043,045
5,572,785
1,034,781
2,951,667
757,844

51,264
—
—

72,468
40,016
16,096

25,691
25,827
24,350

35,470
29,353
15,344

41,548(7) 1,408,534
—
—

—
—

644,107(8) 2,718,213
2,490,436
443,141
1,293,060
333,954

47,783(9) 1,054,718
978,307
47,360
823,644
38,645

168,030(10) 1,121,358
844,743
165,052
592,586
189,747

Note: A monthly average exchange rate was used to convert amounts in the above table that were originally paid in Korean won.

(1)

(2)

(3)

(4)

(5)

The base salary amounts for Mr. YJ Kim, Ms. SY Park, Mr. T. Kim and Mr. CH Park in this table differ from the contractual base
salary amounts described in the section above subtitled ‘‘Compensation Discussion and Analysis—Annual Base Salary’’ due to
fluctuation in the exchange rate between U.S. dollars and Korean won during the year. The increase in base salary amounts between
2020 and 2021 is also a result of fluctuation in the exchange rate between 2020 and 2021. Mr. WM Lee’s annual base salary in USD
appears to have decreased between 2021 and 2022, but is the result of fluctuation in the exchange rate. Mr. CH Park’s base salary in
2020 was calculated based on his service with the Company from his date of hire on June 1, 2020 through December 31, 2020.

Represents retention bonuses earned by the applicable named executive officer in 2022. See the section subtitled ‘‘Compensation
Discussion and Analysis’’ for a description of the short-term cash incentive amounts paid in 2022.

The amount reported represents the aggregate grant date fair value of RSUs and PSUs granted to our named executive officers in 2022,
2021 and 2020, determined in accordance with FASB ASC 718. Such grant date fair value does not take into account any estimated
forfeitures. The amount reported in this column reflects the accounting cost for these RSUs and PSUs and does not correspond to the
actual economic value that may be received by the applicable NEO upon the vesting/settlement of the RSUs or any sale of the
underlying shares of Common Stock. The Financial PSUs and the TSR PSUs are reported here at the target performance level based on
the probable outcome of such performance conditions. When calculated at the maximum performance level (which is referred to as
‘‘supermaximum’’ with respect to the TSR PSUs), the amount of the PSUs in 2022 would be $5,501,860 for Mr. YJ Kim, $641,550 for
Ms. SY Park, $1,070,160 for Mr. T. Kim, $502,420 for Mr. WM Lee and $427,709 for Mr. CH Park. Payout percentages for the 2020
TSR PSUs and the 2022 Financial PSUs were determined by the Compensation Committee on February 24, 2023, and as a result of
actual performance over the performance period, these awards were forfeited. See the section subtitled ‘‘Compensation Discussion and
Analysis—Long-Term Equity Incentives’’ for further information.

Consists of statutory severance accrued for each of the years ended December 31, 2022, 2021 and 2020, as applicable. See the section
below subtitled ‘‘Pension Benefits for the Fiscal Year Ended December 31, 2022’’ for a description of the statutory severance benefit.

Includes the following personal benefits paid to Mr. YJ Kim for 2022: (a) $195,183 for Mr. YJ Kim’s housing lease; (b) $11,051 for
Mr. YJ Kim’s home leave flights; (c) $9,767 for reimbursement of tuition expenses for Mr. YJ Kim’s child; (d) $76,975 for health
insurance premiums; (e) $6,060 for accident insurance and business travel insurance premiums; (f) $26,907 for annual cash special
allowance (the amount reported in this table differs from the $27,000 contractual annual cash special allowance due to fluctuation in
the exchange rate between U.S. dollars and Korean won during the year); (g) $13,559 for car and driver expense (including personal

use of a car service provided by the Company); (h) $18,607 for tax consulting expense; (i) $19,273 for living expense; (j) $1,543 for
annual health examination for spouse, (k) $921 for fitness allowance; (l) $893 for meal allowance, welfare points and similar benefits;
(m) $86,093 of reimbursement for the difference between the actual tax Mr. YJ Kim already paid and the hypothetical tax he had to
pay for the fiscal year 2022; (n) $1,445 of additional reimbursement for the difference between the actual tax Mr. YJ Kim already paid
and the hypothetical tax he had to pay for the fiscal year 2021; and (o) $1,097,050 for reimbursement of Korean tax.

(6) Ms. Park became a named executive officer effective January 1, 2022.

(7)

(8)

(9)

(10)

Includes the following personal benefits paid to Ms. SY Park for 2022: (a) $34,567 for health insurance premiums; (b) $2,181 for
personal use of a car service provided by the Company; (c) $1,810 for fitness allowance; (d) $1,006 for meal allowance; and (e) $1,984
for family allowance, medical expense support, welfare points and similar benefits.

Includes the following personal benefits paid to Mr. T. Kim for 2022: (a) $55,025 for Mr. T. Kim’s housing lease; (b) $23,069 for
Mr. T. Kim’s home leave flights; (c) $54,559 for health insurance premiums; (d) $1,691 for accident insurance and business travel
insurance premiums; (e) $3,157 for reimbursement of tuition expense for Mr. T. Kim’s child; (f) $4,063 for personal use of a car
service provided by the Company; (g) $12,251 for tax consulting expense; (h) $5,323 for living expense; (i) $705 for fitness allowance;
(j) $1,351 for meal allowance, welfare points and similar benefits; (k) $46,349 of reimbursement for the difference between the actual
tax Mr. T. Kim already paid and the hypothetical tax he had to pay for the fiscal year 2022; and (l) $436,564 for reimbursement of
Korean tax.

Includes the following personal benefits paid to Mr. WM Lee for 2022: (a) $39,185 for health insurance premiums; (b) $3,148 for
personal use of a car service provided by the Company; (c) $1,850 for private pension; (d) $1,157 for annual health examination for
spouse; (e) $866 for fitness allowance; and (f) $1,577 for meal allowance, family allowance, welfare points and similar benefits.

Includes the following personal benefits paid to Mr. CH Park for 2022: (a) $76,975 for health insurance premiums; (b) $2,369 for
personal use of a car service provided by the Company; (c) $80,045 for special bonus (the amount reported in this table differs from
the $80,000 contractual special bonus due to fluctuation in the exchange rate between U.S. dollars and Korean won during the year);
(d) $4,785 for tax consulting expense; (e) $1,157 for annual health examination for spouse; (f) $790 for fitness allowance; and (g)
$1,909 for meal allowance, family allowance, welfare points and similar benefits.

Grants of Plan-Based Awards Table for Fiscal Year 2022

The following table sets forth information regarding grants of plan-based awards made to our named
executive officers during 2022. The vesting schedule applicable to each award is set forth in the ‘‘Outstanding
Equity Awards as of Fiscal Year End 2022’’ table. See the section subtitled ‘‘Compensation Discussion and
Analysis—Long-Term Equity Incentives’’ for further information regarding grants made to our named executive
officers during 2022.

Estimated Future
Payouts Under
Equity Incentive Plan Awards (#)
Target

Maximum

Name
Young-Joon Kim . . . . . . . . . . . . . . . . . . . . . .

Shin Young Park . . . . . . . . . . . . . . . . . . . . . .

Theodore Kim . . . . . . . . . . . . . . . . . . . . . . . .

Woung Moo Lee . . . . . . . . . . . . . . . . . . . . . .

Chan Ho Park . . . . . . . . . . . . . . . . . . . . . . . .

Threshold
Grant Date
2/28/2022(1)
—
2/28/2022(2) 74,500
2/28/2022(3) 19,700

2/28/2022(1)
2/28/2022(2)
2/28/2022(3)

—
8,750
2,250

2/28/2022(1)
—
2/28/2022(2) 14,600
2/28/2022(3)
3,750

2/28/2022(1)
2/28/2022(2)
2/28/2022(3)

—
6,853
1,762

—
5,834
1,500

—
149,000
39,400

—
17,500
4,500

—
29,200
7,500

—
13,705
3,524

—
11,667
3,000

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(1)

Grant Date
Fair Value
of Stock
and
Option
Awards
($)(5)
782,600
— 2,711,800
717,080
—

— 43,000

223,500
78,800(4)

— 15,000
—
—

26,250
9,000(4)

— 25,000
—
—

43,800
15,000(4)

— 11,747
—
—

20,558
7,048(4)

— 10,000
—
—

17,501
6,000(4)

273,000
318,500
81,900

455,000
531,440
136,500

213,795
249,431
64,137

182,000
212,339
54,600

(1)

Represents the RSUs granted during fiscal year 2022 to our named executive officers. Further information on the RSU awards can be
found in the ‘‘Compensation Discussion & Analysis’’ section above.

(2)

(3)

(4)

(5)

Represents the Financial PSUs granted during fiscal year 2022 to our named executive officers. The Compensation Committee is
required to certify the actual amount earned for each performance goal for the performance period, within 60 days following the end of
the performance period. Upon such determination, the portion of the award structured as Make-Whole Financial PSUs vests, and the
remainder of the 2022 Financial PSU award corresponding to the payout percentage vests, subject to the satisfaction of the Continued
Service Condition. Further information on the Financial PSUs, including the portion structured as Make-Whole Financial PSUs can be
found in the ‘‘Compensation Discussion & Analysis’’ section above.

Represents the TSR PSUs granted during fiscal year 2022 to our named executive officers. The Compensation Committee is required to
certify the actual amount earned for each performance goal, within 60 days following the end of the performance period. Upon such
determination, the applicable portion of the units corresponding to the payout percentage vests, subject to the satisfaction of the
Continued Service Condition. Further information on the Financial PSUs can be found in the ‘‘Compensation Discussion & Analysis’’
section above.

Represents in the ‘‘Supermaximum’’ performance level. The TSR payout percentage is represented by four performance levels:
‘‘Threshold,’’ ‘‘Target,’’ ‘‘Maximum’’ and ‘‘Supermaximum.’’ Supermaximum is achieved only if Magnachip ranks first in the TSR
Index and the applicable payout percentage is 200%. The payout percentage is 150% for ‘‘Maximum’’ performance.

Represents the grant date fair value of each equity-based award as determined in accordance with FASB ASC 718. For the
performance-based equity awards, the amounts are reported at the target performance level based on the probable outcome of the
applicable performance conditions.

Outstanding Equity Awards at Fiscal Year End 2022

The following table sets forth all outstanding equity awards held by our named executive officers as of
December 31, 2022. Please see the section below entitled ‘‘Potential Payments Upon Termination or Change in
Control’’ for information regarding the impact of certain employment termination scenarios on outstanding equity
awards.

Name

Young-Joon Kim . . . . . . . . . . . . . . . . . . . . . . . .

Shin Young Park. . . . . . . . . . . . . . . . . . . . . . . . .

Theodore Kim. . . . . . . . . . . . . . . . . . . . . . . . . . .

Woung Moo Lee. . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

200,000
90,610
45,305

1,000
1,500

50,000
51,740
25,870

50,000
43,940
25,870

Grant
Date

5/6/2013
6/9/2015
3/11/2016

8/11/2015
3/11/2016

10/26/2013
6/9/2015
3/11/2016

11/1/2013
6/9/2015
3/11/2016

Chan Ho Park . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Option Awards
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

—
—
—

—
—

—
—
—

—

Option
Exercise
Price($)

15.96
7.64
5.53

8.45
5.53

21.79
7.64
5.53

19.56
7.64
5.53

Option
Expiration
Date

5/6/2023
6/9/2025
3/11/2026

8/11/2025
3/11/2026

10/26/2023
6/9/2025
3/11/2026

11/1/2023
6/9/2025
3/11/2026

—

Stock Awards

Number of Shares or
Units of Stock
That Have Not Vested
(#)

Market Value of
Shares or Units
of Stock
That Have
Not Vested
($)(1)

—
9,749(5)
28,667(6)

—
3,333(7)
2,238(5)
10,000(6)

—
7,269(5)
16,667(6)

—
3,916(5)
7,832(6)

5,000(8)
1,679(5)
6,667(6)

—
91,543
269,183

—
31,297
21,015
93,900

—
68,256
156,503

—
36,771
73,542

46,950
15,766
62,603

Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That
Have Not
Vested (#)(2)
29,040(4)
26,126
188,400(4)

Equity Incentive
Plan Awards:
Market or Payout
Value of
Unearned
Shares,
Units or Other
Rights That
Have
Not Vested ($)(3)

272,686
245,323
1,769,076

1,500(4)
—
2,013
22,000(4)

6,000(4)
6,541
36,700(4)

5,250(4)
3,524
17,229(4)

—
1,510
14,667(4)

14,085
—
18,902
206,580

56,340
61,420
344,613

49,298
33,090
161,780

—
14,179
137,723

Name

Young-Joon Kim . . . . . . . . . .

Shin Young Park . . . . . . . . . .

Theodore Kim . . . . . . . . . . . .

Woung Moo Lee . . . . . . . . . .

Chan Ho Park . . . . . . . . . . . .

Grant
Date

5/7/2020
2/19/2021
2/28/2022

5/7/2020
3/12/2020
2/19/2021
2/28/2022

5/7/2020
2/19/2021
2/28/2022

6/1/2020
2/19/2021
2/28/2022

(1)

Represents the market value of RSUs based on our closing per share price of $9.39 on December 30, 2022, the last trading day of
2022.

(2) Represents unvested TSR PSUs granted on May 7, 2020, February 19, 2021 and February 28, 2022 at target performance level. The

TSR PSUs vest based on achievement of the TSR performance goal over the 2020-2022 performance period (for the 2020 grants), the
2021-2023 performance period (for the 2021 grants) and 2022-2024 performance period (for the 2022 grants), subject to the completion
of the Continued Service Condition.

(3)

(4)

(5)

(6)

(7)

(8)

Represents the market value of TSR PSUs at target performance level based on our closing per share price of $9.39 on December 30,
2022, the last trading day of 2022.

Payout percentages for TSR PSUs granted on May 7, 2020 for Mr. YJ Kim, Ms. SY Park, Mr. T. Kim and Mr. WM Lee, and Financial
PSUs granted on February 28, 2022 for Mr. YJ Kim, Mr. T. Kim, Mr. WM Lee, Mr. CH Park and Ms. SY Park were determined on
February 24, 2023, and as a result of actual performance over the performance period, these awards were forfeited. See ‘‘Compensation
Discussion and Analysis—Long-term Equity Incentives’’ for additional details.

RSUs vest over three years in three equal annual installments, subject to executive’s continued employment through each applicable
vesting date. Represents the third installment, scheduled to vest on December 31, 2023.

RSUs vest over three years in three equal annual installments, subject to executive’s continued employment through each applicable
vesting date. Represents the second and third installments, scheduled to vest on December 31, 2023 and December 31, 2024.

Represents the third installments of unvested RSUs granted on March 12, 2020 for Ms. SY Park that vest over a period of three years
at a rate of one-third (1/3) of the total granted RSUs vesting on each anniversary of the date of the grant.

Represents the third installments of unvested RSUs granted on June 1, 2020 for Mr. CH Park that vest over a period of three years at a
rate of one-third (1/3) of the total granted RSUs vesting on each anniversary of the date of the grant.

Option Exercises and Stock Vested

The following table shows information regarding the vesting of stock awards held by our named executive

officers in 2022. None of our named executive officers exercised stock options during 2022.

Name
Young-Joon Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shin Young Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Theodore Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Woung Moo Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chan Ho Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stock Awards

Number
of Shares
Acquired
on
Vesting
(#)(1)(5)
107,424
17,144(2)
41,041
26,509
13,099(3)

Value
Realized
on
Vesting
($)(4)(5)
1,689,543
230,666
561,644
369,525
204,046

(1)

(2)

(3)

(4)

(5)

Represents the sum of (i) RSUs that vested on December 31, 2022 (ii) Financial PSUs earned based on the Company’s performance in
2021, which vested and were settled on February 18, 2022, and (iii) TSR PSUs earned based on three-year TSR of the Company,
which were granted in 2020 and vested and were settled on February 18, 2022.

Includes RSUs that vested on January 16, 2022 and March 12, 2022.

Includes RSUs that vested on June 1, 2022.

Represents the sum of the value of (i) vested RSUs, (ii) Financial PSUs and (iii) TSR PSUs as of the vesting date, based on our
closing per share price on each vesting date.

The share numbers and values set forth in these two columns do not take into account the shares that were withheld from the named
executive officers to pay applicable withholding taxes. The below table shows the number of shares, with their values calculated as of
the vesting date, that were withheld by the Company in order to pay applicable withholding taxes on behalf of our named executive
officers:

Name
Young-Joon Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shin Young Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Theodore Kim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Woung Moo Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chan Ho Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stock Awards

Number
of Shares
Withheld
(#)
39,750
8,132
15,187
12,861
646

Value
of Shares
Withheld
($)
625,167
109,279
207,829
179,762
12,132

Pension Benefits for the Fiscal Year Ended December 31, 2022

In addition to the severance benefits described above, pursuant to the Employee Retirement Benefit Security

Act of Korea, certain executive officers residing in Korea with one or more years of service are entitled to
severance benefits upon the termination of their employment for any reason. The base statutory severance
accrues at the rate of approximately one month of base salary per year of service and is calculated on a monthly
basis based upon the executive’s salary for the prior three-month period. Accordingly, if the named executive
officer’s employment with the Company terminated on the last day of our fiscal year ended December 31, 2022,
they would have been entitled to the statutory severance payments described below. The accumulated amounts
under the statutory severance scheme are paid in a lump sum upon the executive’s separation. Assuming no
change in the applicable law, each of these executives will continue to accrue additional statutory severance
benefits at the rate described above until his or her service with us terminates.

Name
Young Joon Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory Severance
Shin Young Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory Severance
Theodore Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory Severance
Woung Moo Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory Severance
Chan Ho Park. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory Severance

Plan Name

Number
of Years
of Credited
Service (#)
10
4
10
10
3

Present
Value of
Accumulated
Benefit ($)(1)
481,288
110,226
287,788
213,923
77,296

Payments
During
the Last
Fiscal Year($)
—
—
—
—
—

(1)

The value reported in this column represents the accumulated amount of the benefit for each executive based on the formula described
above of one month of base salary per year of credited service.

Nonqualified Deferred Compensation

We do not maintain any nonqualified deferred compensation plans for our named executive officers.

Potential Payments Upon Termination or Change in Control

Our named executive officers are each party to an employment agreement that provides for

post-employment or change in control benefits. The terms ‘‘cause’’, ‘‘good reason’’, ‘‘disability’’ and ‘‘change in
control’’ used below have the meanings given to them in the applicable CEO Agreement or Other Executive
Agreement (each as defined below).

Employment Agreements

On April 26, 2018, the Company entered into a new employment agreement with Mr. YJ Kim that
superseded his prior severance and employment agreements (the ‘‘CEO Agreement’’). In October of 2018, the
Company entered into similar arrangements with Mr. WM Lee and Mr. T. Kim that replaced their prior severance
agreements and offer letters (the ‘‘Other Executive Agreements’’). In June 2020 and February 2022, the
Company entered into an employment agreement with Mr. CH Park and Ms. SY Park, respectively, in a form
substantially similar to the Other Executive Agreements.

Under the CEO Agreement, Mr. YJ Kim is entitled to severance payments and benefits upon certain

qualifying terminations of his employment with the Company. Upon termination of his employment by the
Company without ‘‘cause’’ or his resignation for ‘‘good reason’’, in each case not in connection with a ‘‘change
in control’’ (each, a ‘‘Non CIC Termination’’), he is entitled to receive (i) 24 months of continued base salary (as
then in effect or in effect prior to any diminution constituting ‘‘good reason’’) (the ‘‘Salary Payment’’), (ii) a pro
rata bonus based on actual performance (if such termination occurs after June 30 of the year of termination),
(iii) a lump-sum payment equal to the cost of 12 months of Company-paid medical, dental and vision insurance
premiums (the ‘‘Insurance Payment’’), (iv) 90 days’ continuation of his expatriate benefits, and (v) to the extent
that he is eligible to receive such payments as part of the expatriate benefits, the repatriation allowance and
expenses. Further, Mr. YJ Kim will vest in all unvested equity awards in accordance with the terms of our equity
plan and the applicable award agreements.

If, during a period of time that (x) the Company is party to a definitive corporate transaction agreement the
consummation of which would result in a ‘‘change in control’’ or (y) is within 18 months following a ‘‘change in
control’’, Mr. YJ Kim’s employment is terminated by the Company without ‘‘cause’’, by Mr. YJ Kim for ‘‘good
reason’’ (each, a ‘‘CIC Termination’’) or by reason of his death or ‘‘disability’’, then he will be entitled to the
severance payments described above, provided that (A) the Salary Payment shall be a lump sum payment equal
to two times the sum of (1) his base salary (as then in effect or in effect prior to any diminution implicating
‘‘good reason’’) and (2) his annual bonus (as then in effect or in effect prior to any diminution implicating ‘‘good
reason’’, but in no event greater than 100% of his base salary) and (B) the Insurance Payment will be in respect
of 18 months rather than 12 months. Further, Mr. YJ Kim will vest in all equity awards in accordance with the
terms of our equity plan and the applicable award agreements.

Mr. YJ Kim’s right to receive any ‘‘change in control’’ or other severance payments provided in the CEO
Agreement is subject to his execution of a release of claims against us and his compliance with certain restrictive
covenants.

The Other Executive Agreements provide that the applicable executive will be entitled to severance
payments and benefits upon certain qualifying terminations of his or her employment with the Company. In the
event that the applicable executive incurs a Non CIC Termination, he or she will be entitled to (i) 12 months of
continued base salary for Mr. T. Kim, Mr. WM Lee and Ms. SY Park and 6 months of continued base salary for
Mr. CH Park (as then in effect or in effect prior to any diminution constituting ‘‘good reason’’) (the ‘‘Other
Executive Salary Payment’’), (ii) a pro rata bonus based on actual performance (if such termination occurs after
June 30 of the year of termination) (together with the Other Executive Salary Payment, the ‘‘Other Executive
Severance Payment’’), (iii) vesting of all equity awards in accordance with the terms of our equity plan and the
applicable award agreements. Further, Mr. T. Kim would receive a lump sum payment equal to the cost of
12 months of Company-paid medical, dental and vision insurance premiums, 90 days’ continuation of his
expatriate benefits, and, to the extent that he is eligible to receive such payments as part of his expatriate
benefits, a repatriation allowance in the amount of one month’s base salary and certain repatriation expenses as
described in his agreement.

In the event that Mr. WM Lee, Mr. T. Kim or Ms. SY Park incurs a CIC Termination, then the applicable

executive will be entitled to the severance payments described above, provided that the Severance Payment
instead will equal one and one-half times the executive’s base salary (as then in effect or in effect prior to any
diminution implicating ‘‘good reason’’), while Mr. CH Park will be entitled to 12 months of base salary as
described above; and provided further, that if the date of termination occurs after June 30 of the calendar year in
which the date of termination occurs, Mr. T. Kim will also receive an amount equal to an additional month of
base salary for each month that has passed since July 1 through the date of termination (rounding up for any
partial months), which will be payable in a lump sum on the sixtieth (60th) day following the date of
termination. Further, the applicable executive will vest in all equity grants in accordance with the terms of our
equity plan and the applicable award agreements.

The applicable executive’s rights to receive any ‘‘change in control’’ or other severance payments under the

Other Executive Agreements is subject to the applicable executive’s execution of a release of claims against us
and his or her compliance with certain restrictive covenants.

The following tables present our estimate of the dollar value of the payments and benefits payable to our

named executive officers upon the occurrence of certain terminations of their employment and upon a change in
control, assuming that each such event occurred on December 31, 2022, and assuming a closing per share price
of $9.39 on December 30, 2022, the last trading day of 2022. In addition, the disclosure in the following table
does not include:

•

any accrued benefits that were earned and payable as of December 31, 2022; or

payments and benefits to the extent they are provided generally to all salaried employees and do not
discriminate in scope, terms or operation in favor of the named executive officers.

Young-Joon Kim

Termination By the Company Without Cause / By Executive
for Good Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination By the Company Without Cause / By Executive

for Good Reason, In Connection With a Change in
Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Termination By the Company for Cause / By Executive

Cash
Severance
Payment
($)(1)

Value of
Equity
Award
Acceleration
($)

Continuation
of Benefits
and
Perquisites
($)(2)

Total
($)

1,120,200

1,399,035(4)

504,200(7) 3,023,435

2,240,400(3) 2,647,811(5)

542,687(8) 5,430,898

without Good Reason. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in Control (without termination of employment) . . . .

—
—

—
2,647,811(6)

—
—

—
2,647,811

(1)

(2)

Represents cash severance payments payable pursuant to the CEO Agreement (including a pro rata bonus based on actual performance).
See ‘‘Potential Payments Upon Termination or Change in Control’’ for additional information.

Represents continuation of benefits and perquisites pursuant to the CEO Agreement and our expatriate benefit policy. See ‘‘Potential
Payments Upon Termination or Change in Control’’ and ‘‘—Compensation Discussion and Analysis—Perquisites and Other Benefits’’
for additional information. Calculated assuming benefits for the applicable period will have the same dollar value as corresponding
2022 benefits.

(3) Mr. YJ Kim would also receive such benefits upon a termination as a result of his death or disability that occurs in connection with a

change in control.

(4)

(5)

Represents the value of Mr. YJ Kim’s 2020, 2021 and 2022 TSR PSUs and 2022 Financial PSUs that remain eligible to vest, based on
the Continued Service Condition and the assumed termination date. More specifically, he would remain eligible to vest in the full
number of his 2020 TSR PSUs, two-thirds of his 2021 TSR PSUs, one-third of his 2022 TSR PSUs and sixty percent of his 2022
Financial PSUs (such percentage including the vesting of the Make-Whole Financial PSUs). This column assumes vesting at the target
performance level. On February 24, 2023, the vested quantity of 2022 Financial PSUs and 2020 TSR PSUs granted to Mr. YJ Kim has
been confirmed as 0% of the granted quantity. Had this been taken into account, the value would have been $286,883, which is
$1,112,152 lower than what is indicated in the table.

Represents the value of immediate vesting of all RSUs granted after January 1, 2021. Mr. YJ Kim would also vest in his outstanding
Financial PSUs and TSR PSUs at the time of the change of control. This column assumes vesting at the target performance level.
Mr. YJ Kim would also receive accelerated vesting of his RSUs upon his death or disability that occurs in connection with a change in
control. On February 24, 2023, the vested quantity of 2022 Financial PSUs and 2020 TSR PSUs granted to Mr. YJ Kim has been
confirmed as 0% of the granted quantity. Had this been taken into account, the value would have been $976,015, which is $1,671,796
lower than what is indicated in the table.

(6) Assumes that the Compensation Committee exercised its discretion to fully accelerate all equity awards in connection with the

transaction under the 2011 Plan and the 2020 Plan. Represents the value of accelerated vesting of unvested RSUs, Financial PSUs and
TSR PSUs (assuming Financial PSUs and TSR PSUs vest at target performance level). On February 24, 2023, the vested quantity of
2022 Financial PSUs and 2020 TSR PSUs granted to Mr. YJ Kim has been confirmed as 0% of the granted quantity. Had this been
taken into account, the value would have been $976,015, which is $1,671,796 lower than what is indicated in the table.

(7)

(8)

Includes the following continuation of benefits and perquisites for Mr. YJ Kim: (a) $48,128, which is housing expenses for Mr. YJ
Kim’s housing lease; (b) $76,975 for health insurance premiums; (c) $46,675 for repatriation allowance; (d) $28,005 for repatriation
expense; (e) $12,684 for living expense, tax consulting fee and car service provided by the Company; (f) $21,228 of reimbursement for
the difference between the actual tax and the hypothetical tax he will pay for the applicable fiscal year; and (g) $270,505 for estimated
reimbursement of Korean tax.

Same as the total amount of Note (7) except this amount includes an additional $38,487 representing the employer cost of insurance
premiums for an additional 6 months of insurance coverage. Mr. YJ Kim would also receive such benefits upon a termination as a
result of his death or disability that occurs in connection with a change in control.

Shin Young Park

Cash
Severance
Payment
($)(1)

Value of
Equity
Award
Acceleration
($)

Continuation
of Benefits
and
Perquisites
($)

Termination By the Company Without Cause / By Executive
for Good Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination By the Company Without Cause / By Executive

for Good Reason, In Connection With a Change in
Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Termination By the Company for Cause / By Executive

310,000

139,366(2)

465,000

354,482(3)

without Good Reason / Disability / Death . . . . . . . . . . . . . .
Change in Control (without termination of employment) . . . .

—
—

—
385,779(4)

—

—
—

Total
($)

449,366

819,482

—
385,779

(1)

(2)

(3)

Represents cash severance payments payable pursuant to the Executive Service Agreement. See ‘‘Potential Payments Upon Termination
or Change in Control’’ for additional information.

Represents the value of Ms. SY Park’s 2020, 2021 and 2022 TSR PSUs and 2022 Financial PSUs that remain eligible to vest, based on
the Continued Service Condition and the assumed termination date. More specifically, she would remain eligible to vest in the full
number of her 2020 TSR PSUs, two-thirds of her 2021 TSR PSUs, one-third of her 2022 TSR PSUs and sixty percent of her 2022
Financial PSUs (such percentage including the vesting of the Make-Whole Financial PSUs). This column assumes vesting at the target
performance level. On February 24, 2023, the vested quantity of 2022 Financial PSUs and 2020 TSR PSUs granted to Ms. SY Park has
been confirmed as 0% of the granted quantity. Had this been taken into account, the value would have been $26,686, which is
$112,680 lower than what is indicated in the table.

Represents the value of immediate vesting of all RSUs granted on or after January 1, 2021. Ms. SY Park would also vest in her outstanding
Financial PSUs and TSR PSUs at the time of the change of control. This column assumes vesting at the target performance level. On
February 24, 2023, the vested quantity of 2022 Financial PSUs and 2020 TSR PSUs granted to Ms. SY Park has been confirmed as 0% of
the granted quantity. Had this been taken into account, the value would have been $176,072, which is $178,410 lower than what is indicated
in the table.

(4) Assumes that the Compensation Committee exercised its discretion to fully accelerate all equity awards in connection with the

transaction under the 2011 Plan and the 2020 Plan. Represents the value of accelerated vesting of unvested RSUs , Financial PSUs and
TSR PSUs (assuming Financial PSUs and TSR PSUs vest at target performance level). On February 24, 2023, the vested quantity of
2022 Financial PSUs and 2020 TSR PSUs granted to Ms. SY Park has been confirmed as 0% of the granted quantity. Had this been
taken into account, the value would have been $207,369, which is $178,410 lower than what is indicated in the table.

Theodore Kim

Termination By the Company Without Cause / By Executive
for Good Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination By the Company Without Cause / By Executive

for Good Reason, In Connection With a Change in
Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Termination By the Company for Cause / By Executive

Cash
Severance
Payment
($)(1)

Value of
Equity
Award
Acceleration
($)

Continuation
of Benefits
and
Perquisites
($)(2)

Total
($)

350,000

285,278(3)

277,391(6)

912,669

700,000

687,132(4)

277,391(6)

1,664,523

without Good Reason / Disability / Death . . . . . . . . . . . . . .
Change in Control (without termination of employment) . . . .

—
—

—
687,132(5)

—
—

—
687,132

(1)

(2)

(3)

(4)

Represents cash severance payments payable pursuant to the applicable Other Executive Agreement. See ‘‘Potential Payments Upon
Termination or Change in Control’’ for additional information.

Represents continuation of benefits and perquisites pursuant to the applicable Other Executive Agreements and our expatriate benefit
policy. See ‘‘Potential Payments Upon Termination or Change in Control’’ and ‘‘Compensation Discussion and Analysis—Perquisites
and Other Benefits’’ for additional information. Calculated assuming benefits for the applicable period will have the same dollar value
as corresponding 2022 benefits.

Represents the value of Mr. T. Kim’s 2020, 2021 and 2022 TSR PSUs and 2022 Financial PSUs that remain eligible to vest, based on
the Continued Service Condition and the assumed termination date. More specifically, he would remain eligible to vest in the full
number of his 2020 TSR PSUs, two-thirds of his 2021 TSR PSUs, one-third of his 2022 TSR PSUs and sixty percent of his 2022
Financial PSUs (such percentage including the vesting of the Make-Whole Financial PSUs). This column assumes vesting at the target
performance level. On February 24, 2023, the vested quantity of 2022 Financial PSUs and 2020 TSR PSUs granted to Mr. T. Kim has
been confirmed as 0% of the granted quantity. Had this been taken into account, the value would have been $64,425, which is
$220,853 lower than what is indicated in the table.

Represents the value of immediate vesting of all RSUs granted after January 1, 2021. Mr. T. Kim would also vest in his outstanding
Financial PSUs and TSR PSUs at the time of the change of control. This column assumes vesting at the target performance level. On
February 24, 2023, the vested quantity of 2022 Financial PSUs and 2020 TSR PSUs granted to Mr. T. Kim has been confirmed as 0%
of the granted quantity. Had this been taken into account, the value would have been $356,604, which is $330,528 lower than what is
indicated in the table.

(5) Assumes that the Compensation Committee exercised its discretion to fully accelerate all equity awards in connection with the

transaction under the 2011 Plan and the 2020 Plan. Represents the value of accelerated vesting of unvested RSUs, Financial PSUs and
PSUs (assuming Financial PSUs and TSR PSUs vest at target performance level). On February 24, 2023, the vested quantity of 2022
Financial PSUs and 2020 TSR PSUs granted to Mr. T. Kim has been confirmed as 0% of the granted quantity. Had this been taken into
account, the value would have been $356,604, which is $330,528 lower than what is indicated in the table.

(6)

Includes the following continuation of benefits and perquisites for Mr. T. Kim: (a) $13,568 for housing expenses for Mr. T. Kim’s
housing lease; (b) $5,688 for Mr. T. Kim’s home leave flights; (c) $54,559 for health insurance premiums; (d) $29,167 for repatriation
allowance; (e) $50,000 for repatriation expense; (f) $5,335 for other personal benefits (including personal use of a car service provided
by the Company, living expenses and tax consulting fee); (g) $11,428 of estimated reimbursement for the difference between the actual
tax and the hypothetical tax he will pay for the applicable fiscal year; and (h) $107,646 for estimated reimbursement of Korean tax.

Woung Moo Lee

Cash
Severance
Payment
($)(1)

Value of
Equity
Award
Acceleration
($)

Continuation
of Benefits
and
Perquisites
($)

Termination By the Company Without Cause / By Executive
for Good Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination By the Company Without Cause / By Executive

for Good Reason, In Connection With a Change in
Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Termination By the Company for Cause / By Executive

275,633

159,611(2)

413,449

354,482(3)

without Good Reason / Disability / Death . . . . . . . . . . . . . .
Change in Control (without termination of employment) . . . .

—
—

—
354,482(4)

—

—
—

Total
($)

435,244

767,931

—
354,482

(1)

Represents cash severance payments payable pursuant to the applicable Other Executive Agreement. See ‘‘Potential Payments Upon
Termination or Change in Control’’ for additional information.

(2)

(3)

Represents the value of Mr. WM Lee’s 2020, 2021 and 2022 TSR PSUs and 2022 Financial PSUs that remain eligible to vest, based on
the Continued Service Condition and the assumed termination date. More specifically, he would remain eligible to vest in the full
number of his 2020 TSR PSUs, two-thirds of his 2021 TSR PSUs, one-third of his 2022 TSR PSUs and sixty percent of his 2022
Financial PSUs (such percentage including the vesting of the Make-Whole Financial PSUs). This column assumes vesting at the target
performance level. On February 24, 2023, the vested quantity of 2022 Financial PSUs and 2020 TSR PSUs granted to Mr. WM Lee
has been confirmed as 0% of the granted quantity. Had this been taken into account, the value would have been $33,100, which is
$126,511 lower than what is indicated in the table.

Represents the value of all RSUs granted after January 1, 2021. Mr. WM Lee would also vest in his outstanding Financial PSUs and
TSR PSUs at the time of the change of control. This column assumes vesting at the target performance level. On February 24, 2023,
the vested quantity of 2022 Financial PSUs and 2020 TSR PSUs granted to Mr. WM Lee has been confirmed as 0% of the granted
quantity. Had this been taken into account, the value would have been $176,494, which is $177,988 lower than what is indicated in the
table.

(4) Assumes that the Compensation Committee exercised its discretion to fully accelerate all equity awards in connection with the

transaction under the 2011 Plan and the 2020 Plan. Represents the value of accelerated vesting of unvested RSUs, Financial PSUs and
TSR PSUs (assuming Financial PSUs and TSR PSUs vest at target performance level). On February 24, 2023, the vested quantity of
2022 Financial PSUs and 2020 TSR PSUs granted to Mr. WM Lee has been confirmed as 0% of the granted quantity. Had this been
taken into account, the value would have been $176,494, which is $177,988 lower than what is indicated in the table.

Chan Ho Park

Cash
Severance
Payment
($)(1)

Value of
Equity
Award
Acceleration
($)

Continuation
of Benefits
and
Perquisites
($)

Termination By the Company Without Cause / By Executive
for Good Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination By the Company Without Cause / By Executive

for Good Reason, In Connection With a Change in
Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Termination By the Company for Cause / By Executive

168,300

111,976(2)

336,600

277,221(3)

without Good Reason / Disability / Death . . . . . . . . . . . . . .
Change in Control (without termination of employment) . . . .

—
—

—
277,221(4)

—

—
—

Total
($)

280,276

613,821

—
277,221

(1)

(2)

(3)

Represents cash severance payments payable pursuant to the Executive Service Agreement. See ‘‘Potential Payments Upon Termination
or Change in Control’’ for additional information.

Represents the value of Mr. CH Park’s RSUs granted on June 1, 2020 (‘‘June RSUs’’), 2021 TSR PSUs, 2022 TSR PSUs and 2022
Financial PSUs that remain eligible to vest, based on the Continued Service Condition and the assumed termination date. More
specifically, he would remain eligible to vest in 58.33% of the third tranche of his June RSUs, two-thirds of his 2021 TSR PSUs,
one-third of his 2022 TSR PSUs and sixty percent of his 2022 Financial PSUs (such percentage including the vesting of the
Make-Whole Financial PSUs). This column assumes vesting at the target performance level. On February 24, 2023, the vested quantity
of 2022 Financial PSUs granted to Mr. CH Park has been confirmed as 0% of the granted quantity. Had this been taken into account,
the value would have been $46,236, which is $65,740 lower than what is indicated in the table.

Represents the value of immediate vesting of all RSUs granted on or after June 1, 2020. Mr. CH Park would also vest in his
outstanding Financial PSUs and TSR PSUs at the time of the change of control. This column assumes vesting at the target performance
level. On February 24, 2023, the vested quantity of 2022 Financial PSUs granted to Mr. CH Park has been confirmed as 0% of the
granted quantity. Had this been taken into account, the value would have been $167,668, which is $109,553 lower than what is
indicated in the table.

(4) Assumes that the Compensation Committee exercised its discretion to fully accelerate all equity awards in connection with the

transaction under the 2011 Plan and the 2020 Plan. Represents the value of accelerated vesting of unvested RSUs, Financial PSUs and
TSR PSUs (assuming Financial PSUs and TSR PSUs at vest target performance level). On February 24, 2023, the vested quantity of
2022 Financial PSUs granted to Mr. CH Park has been confirmed as 0% of the granted quantity. Had this been taken into account, the
value would have been $167,668, which is $109,553 lower than what is indicated in the table.

CEO Pay Ratio

For the 2022 fiscal year, the ratio of the annual total compensation of Mr. YJ Kim, our Chief Executive

Officer (‘‘CEO Compensation’’), to the median of the annual total compensation of all of our employees other
than our Chief Executive Officer (‘‘Median Annual Compensation’’) was 79.55 to 1. This ratio is a reasonable
estimate calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions
summarized below. In this summary, we refer to the employee who received such Median Annual Compensation
as the ‘‘Median Employee.’’ For purposes of this disclosure, the date used to identify the Median Employee was
December 31, 2022 (the ‘‘Determination Date’’).

CEO Compensation for purposes of this disclosure represents the total compensation reported for Mr. YJ
Kim under ‘‘Summary Compensation Table’’, which was $7,043,045 for the 2022 fiscal year. For purposes of

this disclosure, Median Annual Compensation was $88,532, and was calculated by totaling for our Median
Employee all applicable elements of compensation for the 2022 fiscal year in accordance with
Item 402(c)(2)(x) of Regulation S-K.

To identify the Median Employee, we first determined our employee population as of the Determination

Date. We had 897 employees, representing all full-time, part-time, seasonal and temporary employees of
Magnachip and its consolidated subsidiaries as of the Determination Date, but excluding Mr. YJ Kim, and, as
permitted by applicable SEC rules, excluding (i) any independent contractors or ‘‘leased’’ workers and (ii) all of
our employees located in China (21), Taiwan (3), Japan (2) and Germany (1). We then measured compensation
for the period beginning on January 1, 2022 and ending on December 31, 2022 for these employees. This
compensation measurement was calculated by totaling, for each employee, total cash compensation paid
(including salary, wages, tips, cash bonuses and other cash compensation paid in 2022) as shown in our payroll
and human resources records for 2022. A portion of our employee workforce (full-time and part-time) worked for
less than the full fiscal year due to commencing employment after the beginning of the fiscal year. In
determining the Median Employee, we annualized the compensation for such individuals.

Equity Compensation Plan Information

The following table provides information as of December 31, 2022, regarding securities authorized for
issuance under the Company’s compensation plans. The Company’s compensation plans include the 2020 Plan,
the 2011 Plan, and the Purchase Plan.

Plan Category

Equity compensation plans approved by security holders . . . . . .
Equity compensation plans not approved by security holders . . .
Total: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a)
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants or
rights
2,605,028(1)
—
2,605,028

(b)
Weighted-
average
exercise
price of
outstanding
options,
warrants or
rights
$10.64(1)
—

(c)
Number of securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities reflected in
column (a))
1,351,913(2)
—
1,351,913

(1)

Comprised of (i) stock options to purchase 1,137,558 shares of Common Stock under the 2011 Plan, at a weighted average exercise
price of $10.64 per share, (ii) 1,467,470 shares of Common Stock subject to RSUs and performance restricted awards under the 2011
Plan and 2020 Plan, which are calculated at maximum performance levels. There are no outstanding securities under the suspended
Purchase Plan.

(2)

Excludes 1,163,880 shares of Common Stock that remain available as of December 31, 2022, for future issuance under the suspended
Purchase Plan.

Equity Compensation Plan Summary

MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan

In March 2011, our Board and our stockholders approved the MagnaChip Semiconductor Corporation

2011 Equity Incentive Plan (the ‘‘2011 Plan’’). Following the approval of our 2020 Equity and Incentive
Compensation Plan by stockholders at the 2020 Annual Meeting of Stockholders, no further awards are to be
issued under the 2011 Plan. Shares subject to awards granted under our 2011 Plan which expire, are repurchased,
or are cancelled or forfeited will again become available for issuance under the 2020 Plan. As of December 31,
2022, there were 1,137,558 outstanding options and 274,675 outstanding RSUs and PSUs under our 2011 Plan,
and no shares remained available for issuance. Awards granted under the 2011 Plan are subject to recoupment or
clawback in accordance with our clawback policy. The 2011 Plan allows for withholding of shares of our
Common Stock to cover tax withholding obligations up to an amount determined by the maximum applicable
statutory rates, subject to certain limitations.

In the event of a change in control as described in the 2011 Plan, the acquiring or successor entity may
assume or continue all or any awards outstanding under the 2011 Plan or substitute substantially equivalent
awards. Any awards which are not assumed or continued in connection with a change in control or are not
exercised or settled prior to the change in control will terminate effective as of the time of the change in control.
The Compensation Committee may provide for the acceleration of vesting of any or all outstanding awards upon

such terms, and to such extent as it determines, except that the vesting of all awards held by members of our
Board who are not employees will automatically be accelerated in full. The 2011 Plan also authorizes the
Compensation Committee, in its discretion, and without the consent of any participant, to cancel each or any
outstanding award denominated in shares upon a change in control in exchange for a payment to the participant
with respect to each share subject to the cancelled award of an amount equal to the excess of the consideration
to be paid per share of Common Stock in the change in control transaction over the exercise price per share, if
any, under the award.

MagnaChip Semiconductor Corporation 2020 Equity and Incentive Compensation Plan

On June 11, 2020, at the Annual Meeting of Stockholders, the MagnaChip Semiconductor Corporation
2020 Equity and Incentive Compensation Plan (the ‘‘2020 Plan’’), was approved and adopted to succeed the
2011 Plan, which was otherwise set to expire in March 2021 (after which no further grants could be made
thereunder). The 2011 Plan, together with the 2009 Plan, are referred to as the ‘‘Predecessor Plans.’’ As the
2020 Plan was approved, it made available for awards under the 2020 Plan 1,309,000 new shares of Common
Stock. The 2020 Plan also includes the 1,149,921 shares of Common Stock that remained available for awards
under the 2011 Plan as of the approval date for the 2020 Plan.

Generally, awards under the 2020 Plan are limited to 1,309,000 shares of Common Stock plus, as of the
effective date of the 2020 Plan, the total number of shares of Common Stock remaining available for awards
under the 2011 Plan, plus Common Stock subject to any forfeitures (or similar events) that occur under the
Predecessor Plans or the 2020 Plan after the effective date of the 2020 Plan. This design means that we
essentially ‘‘rolled’’ into the new 2020 Plan the shares that we had remaining under the 2011 Plan as of the
effective date of the 2020 Plan. These shares may be shares of original issuance or treasury shares, or a
combination of the two.

Awards may be granted under the 2020 Plan to the Company’s employees, officers, directors, or certain

consultants or those of any subsidiary of the Company. While the Company may grant incentive stock options only to
employees, the Company may grant non-statutory stock options, SARs, restricted stock, RSUs, performance shares,
performance units, dividend equivalents and cash-based awards or other stock-based awards to any eligible participant,
subject to terms and conditions determined by the Compensation Committee. The term of any options granted under
the 2020 Plan shall not exceed ten years from the date of grant.

The 2020 Plan includes a definition of ‘‘change in control.’’ In general, a change in control shall be deemed to

have occurred upon the occurrence of any of the following events (subject to certain exceptions and limitations and as
further described in the 2020 Plan): (1) any individual, entity or group is or becomes the beneficial owner of 50% or
more of the combined voting power of the then-outstanding Common Stock or voting shares of the Company
(subject to certain exceptions); (2) a transaction in which the stockholders immediately before the transaction do not
retain ownership of more than 50% of the combined voting power of the outstanding voting securities of the Company
(or the entity to which the assets of the Company were transferred); or (3) consummation of a complete liquidation or
dissolution of the Company after approval of the same by the stockholders of the Company; provided, however, the
transactions described in (1) or (2) above shall not constitute a change in control if a majority of the members of the
board of directors of the continuing, surviving or successor entity (or parent thereof) immediately after such transaction
is comprised of incumbent directors.

The Board generally may amend the 2020 Plan from time to time in whole or in part. If any amendment,
however, for purposes of applicable stock exchange rules (and except as permitted under the adjustment provisions of
the 2020 Plan) (1) would materially increase the benefits accruing to participants under the 2020 Plan, (2) would
materially increase the number of securities which may be issued under the 2020 Plan, (3) would materially modify
the requirements for participation in the 2020 Plan, or (4) must otherwise be approved by our stockholders in order to
comply with applicable law or the rules of the NYSE, or if the Common Stock is not traded on the NYSE, the
principal national securities exchange upon which the Common Stock is traded or quoted, all as determined by the
Board, then such amendment will be subject to stockholder approval and will not be effective unless and until such
approval has been obtained. The Board may, in its discretion, terminate the 2020 Plan at any time. Termination of the
2020 Plan will not affect the rights of participants or their successors under any awards outstanding and not exercised
in full on the date of termination. No grant will be made under the 2020 Plan on or after the tenth anniversary of the
effective date of the 2020 Plan, but all grants made prior to such date will continue in effect thereafter subject to their
terms and the terms of the 2020 Plan.

MagnaChip Semiconductor Corporation 2011 Employee Stock Purchase Plan

In March 2010, our Board approved the MagnaChip Semiconductor Corporation 2011 Employee Stock
Purchase Plan (the ‘‘Purchase Plan’’). Our Board amended and restated the Purchase Plan in February 2011 to
reflect that the Purchase Plan would become effective in 2011 upon the commencement of our initial
publicoffering in March 2011. The Purchase Plan was approved by our stockholders in March 2011 and became
effective upon the commencement of our initial public offering in March 2011. We initially authorized and
reserved 789,890 shares for sale under the Purchase Plan. However, in August 2012, the Compensation
Committee suspended the Purchase Plan. The following summary describes the terms of the Purchase Plan that
would be in effect if the Purchase Plan were to be removed from suspension and reinstated.

The Purchase Plan provides for an automatic annual increase in the number of shares available for issuance

under the plan on January 1 of each year beginning in 2012 and continuing through and including January 1,
2021, equal to the lesser of (i) 1% of our then issued and outstanding shares of Common Stock on the
immediately preceding December 31, (ii) 789,980 shares, or (iii) a number of shares as our Board may
determine. Appropriate adjustments will be made in the number of authorized shares and in outstanding purchase
rights to prevent dilution or enlargement of participants’ rights in the event of a stock split or other change in our
capital structure. Shares subject to purchase rights which expire or are canceled will again become available for
issuance under the Purchase Plan. Because the Purchase Plan was suspended in August 2012, no annual increase
in the number of shares authorized under such plan occurred on January 1, 2013 or in subsequent years.

The terms of the Purchase Plan provide that our employees and employees of any parent or subsidiary
corporation designated by the Compensation Committee are eligible to participate in the Purchase Plan if they
are customarily employed by us for more than 20 hours per week and more than five months in any calendar
year. However, an employee may not be granted a right to purchase stock under the Purchase Plan if: (i) the
employee immediately after such grant would own stock possessing 5% or more of the total combined voting
power or value of all classes of our capital stock or of any parent or subsidiary corporation, or (ii) the
employee’s rights to purchase stock under all of our employee stock purchase plans would accrue at a rate that
exceeds $25,000 in value for each calendar year of participation in such plans.

The terms of the Purchase Plan provide that it is to be implemented through a series of sequential offering

periods, generally three months in duration beginning on the first trading days of February, May, August, and
November each year. The Compensation Committee is authorized to establish additional or alternative concurrent,
sequential or overlapping offering periods and offering periods having a different duration or different starting or
ending dates, provided that no offering period may have a duration exceeding 27 months.

Amounts accumulated for each participant, generally through payroll deductions, are credited toward the
purchase of shares of our Common Stock at the end of each offering period at a price generally equal to 95% of
the fair market value of our Common Stock on the purchase date. Prior to commencement of an offering period,
the Compensation Committee is authorized to change the purchase price discount for that offering period, but the
purchase price may not be less than 85% of the lower of the fair market value of our Common Stock at the
beginning of the offering period or on the purchase date.

No participant may purchase under the Purchase Plan in any calendar year shares having a value of more than

$25,000 measured by the fair market value per share of our Common Stock on the first day of the applicable offering
period. Prior to the beginning of any offering period, the Compensation Committee may alter the maximum number of
shares that may be purchased by any participant during the offering period or specify a maximum aggregate number of
shares that may be purchased by all participants in the offering period. If insufficient shares remain available under the
plan to permit all participants to purchase the number of shares to which they would otherwise be entitled, the
Compensation Committee will make a pro rata allocation of the available shares. Any amounts withheld from
participants’ compensation in excess of the amounts used to purchase shares will be refunded, without interest.

In the event of a change in control, an acquiring or successor corporation may assume our rights and obligations

under the Purchase Plan. If the acquiring or successor corporation does not assume such rights and obligations, then
the purchase date of the offering periods then in progress will be accelerated to a date prior to the change in control as
specified by the Compensation Committee, but the number of shares subject to outstanding purchase rights shall not be
adjusted.

Pay Versus Performance

As required by Section 953(a) of the Dodd-Frank Act and Item 402(v) of Regulation S-K, we are providing

information about the relationship between executive ‘‘Compensation Actually Paid’’ to our principal executive
officer (‘‘PEO’’) and our other named executive officers (‘‘NEOs’’), as calculated in accordance with
Item 402(v) of Regulation S-K, and certain financial performance measures. For a discussion of our
compensation philosophy, how our Compensation Committee assessed ‘‘pay-for-performance,’’ and how our
executive compensation program is designed to link executive compensation with the achievement of our
financial and strategic objectives, as well as stockholder value creation each year, see the section titled
‘‘Compensation Discussion and Analysis’’ on page 18.

Pay Versus Performance Table

Value of Initial Fixed $100
Investment Based On:

Summary
Compensation
Table Total
for PEO

Compensation
Actually Paid
for PEO(2)(3)

Year(1)

Average
Summary
Compensation
Table Total
for Non-
PEO NEOs

Average
Compensation
Actually Paid
for Non-PEO
NEOs(4)(5)

Total
Shareholder
Return(6)

Peer Group
Total
Shareholder
Return(7)

Net
Income(8)

Gross
Profit
Margin(9)

2022 . . . $7,043,045
2021 . . . $5,572,785
2020 . . . $2,951,667

$2,131,915
$6,004,697
$2,943,599

$1,575,706
$1,260,484
$ 746,414

$ 778,297
$1,379,361
$ 780,349

$ 81
$181
$116

$137
$213
$151

$ (8,036,000)
$ 56,708,000
$344,965,000

30.0%
32.4%
25.3%

(1) Young-Joon Kim served as the Company’s PEO for the entirety of 2020, 2021, and 2022. The Company’s other NEOs for the

applicable years were as follows:

– 2022: Theodore Kim, Woung Moo Lee, Chan Ho Park, Shin Young Park

– 2021: Theodore Kim, Woung Moo Lee, Chan Ho Park, Young Soo Woo

– 2020: Jonathan Kim, Theodore Kim, Woung Moo Lee, Chan Ho Park, Young Soo Woo

Jonathan Kim, Chan Ho Park and Young Soo Woo each served partial years in 2020. Jonathan Kim resigned on March 27 2020,
Chan Ho Park’s date of hire was June 1, 2020, and Young Soo Woo’s date of hire was May 25, 2020.

(2)

(3)

The amounts reported represent the ‘‘Compensation Actually Paid’’ to our PEO, computed in accordance with Item 402(v) of
Regulation S-K, but do not reflect the actual amount of compensation earned by or paid to our PEO in the applicable year. The
valuation assumptions used to calculate fair values were updated for the applicable fiscal year, and the assumptions for the applicable
fiscal year are set forth in the notes to the financial statements in our annual on Form 10-K for the applicable fiscal year.

In accordance with Item 402(v) of Regulation S-K, the table below describes the adjustments that were made to the amounts reported
for our PEO in the ‘‘Total’’ column of the Summary Compensation Table for each year to calculate the ‘‘Compensation Actually Paid’’.
No dividends or other earnings were paid on stock or option awards in the covered fiscal year.

PEO

Summary Compensation Table - Total Compensation . . . . . . . . . . . . . . . . . .
Grant Date Fair Value of Stock Awards and Option Awards Granted in Fiscal
Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value at Fiscal Year End of Outstanding and Unvested Stock Awards and
Option Awards Granted in Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in Fair Value of Outstanding and Unvested Stock Awards and Option
Awards Granted in Prior Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value at Vesting of Stock Awards and Option Awards Granted in Fiscal
Year That Vested During Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in Fair Value as of Vesting Date of Stock Awards and Option Awards
Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were
Satisfied During Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value as of Prior Fiscal Year End of Stock Awards and Option Awards
Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting
Conditions During Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2021

2022

$2,951,667

$5,572,785

$7,043,045

$1,486,335

$2,335,967

$4,211,480

$ 560,754

$ 961,177

$ 415,751

$ (74,744)

$ 232,027

$ (592,567)

$1,071,771

$1,324,256

$ 134,587

46,222

$ 250,419

$ (238,374)

$ 125,736

$ 419,047

Compensation Actually Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,943,599

$6,004,697

$2,131,915

(4)

The amounts reported represent the average ‘‘Compensation Actually Paid’’ to the NEOs other than our PEO as a group, computed in
accordance with Item 402(v) of Regulation S-K. The amounts do not reflect the actual average amount of compensation earned by or
paid to such NEOs as a group in the applicable year. The valuation assumptions used to calculate fair values were updated for the
applicable fiscal year and the assumptions for the applicable fiscal year are set forth in the notes to the financial statements in our
annual on Form 10-K for the applicable fiscal year.

(5)

In accordance with Item 402(v) of Regulation S-K, the table below describes the adjustments that were made were made to the
average of the amounts reported in the ‘‘Total’’ column of the Summary Compensation Table for the NEOs as a group (excluding our
PEO) for each year to determine the ‘‘Compensation Actually Paid’’. No dividends or other earnings were paid on stock or option
awards in the covered fiscal year.

NEO Average

2020

2021

2022

$746,414

$1,260,484

$1,575,706

$261,010

$ 454,812

$ 693,161

$196,508

$ 196,048

$ 113,865

$ (2,781)

56,561

$ (130,216)

$105,488

$ 228,300

48,314

$ 13,306

$ 121,510

$ (90,215)

$ 17,576

28,730

45,996

Compensation Actually Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$780,349

$1,379,361

$ 778,297

(6)

Cumulative total shareholder return (‘‘TSR’’) is calculated by dividing the sum of the cumulative amount of dividends for the
performance period, assuming dividend reinvestment, and the difference between our company’s share price at the end and the
beginning of the performance period by our company’s share price at the beginning of the performance period. No dividends were paid
on stock or option awards in 2022, 2021, or 2020.

(7)

The TSR Peer Group consists of the Philadelphia Semiconductor Index, an independently prepared index composed of the 30 largest
U.S. companies primarily involved in the design, distribution, manufacture, and sale of semiconductors.

(8) Among various factors that can affect the Company’s net income year-over-year, a substantial portion of non-cash translation gain or

loss recorded in the Company’s net income is associated with the intercompany long-term loans, which is denominated in U.S. dollars,
to the Company’s Korean subsidiary (using Korean Won as its functional currency) by the Dutch Subsidiary. As of December 31, 2022,
2021 and 2020, the outstanding intercompany long-term loan balance including accrued interest was $311.0 million, $344.4 million and
$378.9 million, respectively. Due to the foreign currency fluctuations year-over-year, it can be difficult to detect underlying trends in
net income as a result of the Company’s business and results of operations.

In addition, certain non-recurring events that were not expected to represent the Company’s ongoing operating income or expense had
an impact on net income. For the year ended December 31, 2021, total net income of $56.7 million included net gain of $35.5 million
that represented $70.2 million income from the recognition of a reverse termination fee, net of professional service fees and expenses
of $34.7 million incurred in connection with the previously contemplated merger. For the year ended December 31, 2020, total net
income of $345.0 million included income from discontinued operations, net of tax, of $287.9 million, primarily attributable to the
recognition of $287.1 million as gain on sale of the Company’s Foundry Service Group business and its fabrication facility located in
Cheongju known as ‘‘Fab 4’’. It also included income tax benefits of $46.2 million, mainly attributable to the recognition of differences
between GAAP and cash tax expense of $43.9 million.

(9) As noted in the section titled ‘‘Compensation Discussion and Analysis,’’ for 2022, the Compensation Committee determined that gross
profit as a percentage of revenue (‘‘Gross Profit Margin’’) continues to be viewed as a core driver of the Company’s performance and
stockholder value creation and, accordingly, was utilized as a component in the 2022 long term incentive program.

Tabular List of Financial Performance Measures

The following is a list of the financial performance measures, which in the Company’s assessment represent

the most important financial performance measures used by the Company to link the ‘‘Compensation Actually
Paid’’ to the PEO and the other NEOs in 2022:

•

Adjusted EBITDA

Gross Profit Margin

Revenue

Relationship Between Pay and Performance

‘‘Compensation Actually Paid’’, as calculated in accordance with Item 402(v) of Regulation S-K, reflects
adjusted values to unvested and vested equity awards during the years shown in the Pay Versus Performance
Table based on year-end stock prices, various accounting valuation assumptions, and projected performance
modifiers, but does not reflect actual amounts paid out for those awards. ‘‘Compensation Actually Paid’’
generally fluctuates due to stock price achievement and varying levels of projected and actual achievement of
performance goals.

The following graphs show the relationship between ‘‘Compensation Actually Paid’’ to our CEO and other

NEOs in our fiscal years 2020, 2021 and 2022 and (1) TSR of both our Common Stock and the Philadelphia
Semiconductor Index, (2) our net income, and (3) our Gross Profit Margin.

We believe the ‘‘Compensation Actually Paid’’ in each of the years reported above and over the three-year

cumulative period are reflective of the Compensation Committee’s emphasis on ‘‘pay-for-performance’’ as the
‘‘Compensation Actually Paid’’ fluctuated year-over-year, primarily as a result of variable compensation being
tied to the performance of our stock and pre-established performance goals and/or criteria under our short-term
incentive program and our performance-vesting equity awards. For further details on the terms of our short-term
incentive program and our performance-vesting equity awards, see the section titled ‘‘Compensation Discussion
and Analysis’’ on page 18.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Other than the compensation arrangements with directors and executive officers, there have been no

transactions since January 1, 2022 (and there are no currently proposed transactions) in which:

•

we have been or are to be a participant;

the amount involved exceeds $120,000; and

any of our directors, executive officers or holders of more than 5% of our Common Stock, or any
immediate family member of or person sharing the household with any of these individuals (other than
tenants or employees), had or will have a direct or indirect material interest.

Related Person Transactions Policy

Under our Related Person Transactions Policy, transactions involving our directors, executive officers,

significant stockholders and other related persons that involve an amount in excess of $120,000 must be
approved by the Company’s Audit Committee or, in the event it is determined that it is not practicable or
desirable for the Company to wait until the next meeting of the full Audit Committee, the Chair of the Audit
Committee (who possesses delegated authority to act between Audit Committee meetings). The Audit Committee
(or the Chair of the Audit Committee, as applicable) will consider all of the relevant facts and circumstances
available to it, including (if applicable) but not limited to: the benefits to the Company; the impact on a
director’s independence in the event the related person is a director, an immediately family member of a director
or an entity in which a director is a partner, stockholder or executive officer; the availability of other sources for
comparable products or services; the terms of the transaction; and the terms available to unrelated third parties or
to employees generally. The Audit Committee may seek bids, quotes or independent valuations from third parties
in connection with assessing any related person transaction. The Audit Committee (or the Chair of the Audit
Committee, as applicable) will approve only those transactions that are in, or are not inconsistent with, the best
interests of the Company, as the Audit Committee (or the Chair of the Audit Committee, as applicable)
determines in good faith.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of our outstanding Common

Stock for: (1) each person or entity known to us to beneficially own more than five percent (5%) of any class of
our outstanding securities; (2) each member of our Board; (3) each of our named executive officers; and (4) all
of the members of our Board and current executive officers, as a group. The following tables list the number of
shares and percentage of shares beneficially owned on 42,514,556 shares of Common Stock outstanding as of
April 6, 2023. The amounts and percentages of equity interests beneficially owned are reported on the basis of
SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is
deemed to be a ‘‘beneficial owner’’ of a security if that person has or shares ‘‘voting power,’’ which includes the
power to vote or to direct the voting of such security, or ‘‘investment power,’’ which includes the power to
dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any
securities of which that person has the right to acquire beneficial ownership within 60 days. Under these rules,
more than one person may be deemed to be a beneficial owner of the same securities and a person may be
deemed to be a beneficial owner of the securities as to which he or she has no economic interest.Except as
indicated by footnote, the persons named in the table below have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them. Unless otherwise indicated, the address of
each person listed in the table below is Magnachip Semiconductor Corporation c/o Magnachip Semiconductor,
Ltd., 15F, 76 Jikji-daero 436beon-gil, Heungdeok-gu, Cheongju-si, Chungcheongbuk-do, Republic of
Korea 28581.

Name and Address of Beneficial Owner

Principal Stockholders
AllianceBernstein L.P.(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Toronado Partners LLC(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors and Named Executive Officers
Kyo-Hwa (Liz) Chung(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Melvin Keating(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ilbok Lee(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Camillo Martino(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gary Tanner(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Young-Joon Kim(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Theodore Kim(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Woung Moo Lee(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chan Ho Park(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shin Young Park(13). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors and current Executive Officers as a group (10 persons)(14) . . . . . . . . . . . . . . . .

Amount and
Nature of
Beneficial
Ownership(1)

Percent
of
Class(1)

3,190,906
2,692,261

12,946
139,831
269,173
158,338
188,012
668,644
271,232
209,186
24,131
30,674
1,972,167

7.5%
6.3%

*
*
*
*
*
1.6%
*
*
*
*
4.5%

(1)

(2)

(3)

Less than one percent

Includes any outstanding Common Stock held and, to the extent applicable, shares issuable upon the exercise or conversion of any
securities that are exercisable or convertible within 60 days of April 6, 2023.

Based on the information contained in a Schedule 13G filed with the SEC on February 14, 2023 by AllianceBernstein L.P.
(‘‘AllianceBernstein’’). AllianceBernstein beneficially owns and has the sole power to dispose or to direct the disposition of the shares
of Common Stock listed in the table above and has the sole power to vote or to direct the vote over 2,812,555 of such shares. The
shares of Common Stock listed in the table above were acquired solely for investment purposes on behalf of client discretionary
investment advisory accounts. AllianceBernstein is a majority owned subsidiary of Equitable Holdings, Inc. (‘‘EQH’’).
AllianceBernstein operates under independent management and makes independent decisions from EQH and its respective subsidiaries,
and EQH calculates and reports beneficial ownership separately from AllianceBernstein pursuant to guidance provided by the Securities
and Exchange Commission in Release Number 34-39538 (January 12, 1998). The business address for AllianceBernstein is
1345 Avenue of the Americas, New York, NY 10105.

Based on the information contained in an Amendment No. 3 to Schedule 13G filed with the SEC on February 14, 2023 by Toronado
Fund, L.P., Toronado Partners LLC, Toronado Capital Management LLC, and John Stephen Perkins. Toronado Fund, L.P. directly holds
2,410,910 shares of our Common Stock. Toronado Partners LLC acts as investment manager for the Toronado Fund, L.P., Toronado
Capital Management LLC acts as general partner for Toronado Fund, L.P., and John Stephen Perkins acts as Managing Member of
Toronado Partners LLC. Toronado Partners LLC, Toronado Capital Management LLC, and John Stephen Perkins directly or indirectly
control an additional 281,351 shares of our Common Stock for a cumulative total of 2,692,261 shares. Each of Toronado Fund, L.P.,

Toronado Partners LLC, Toronado Capital Management LLC, and John Stephen Perkins may be deemed to be the beneficial owner of
2,692,261 shares of our Common Stock. Each of Toronado Fund, L.P., Toronado Partners LLC, Toronado Capital Management LLC,
and John Stephen Perkins disclaims beneficial ownership of our shares of Common Stock not held directly by such reporting person.
Toronado Fund, L.P. has sole voting power and sole dispositive power over 2,410,910 shares of our Common Stock. Each of Toronado
Partners LLC, Toronado Capital Management LLC, and John Stephen Perkins has sole voting power over 2,692,261 shares of our
Common Stock, sole dispositive power over 2,410,910 shares of our Common Stock and shared dispositive power over 281,351 shares
of our Common Stock. The business address of each of Toronado Fund, L.P., Toronado Partners LLC, Toronado Capital Management
LLC, and John Stephen Perkins is 44 Montgomery Street, Suite 1200, San Francisco, CA 94104.

Represents 12,946 shares of Common Stock subject to RSUs that will be vested and may be settled as of June 5, 2023.

Represents 10,100 shares of Common Stock, options to purchase 49,737 shares of Common Stock and 79,994 shares of Common Stock
subject to RSUs that will be vested and may be exercised or settled, as applicable, as of June 5, 2023.

Represents 33,272 shares of Common Stock, options to purchase 149,593 shares of Common Stock and 86,308 shares of Common
Stock subject to RSUs that will be vested and may be exercised or settled, as applicable, as of June 5, 2023.

Represents 28,000 shares of Common Stock, options to purchase 49,737 shares of Common Stock and 80,601 shares of Common Stock
subject to RSUs that will be vested and may be exercised or settled, as applicable, as of June 5, 2023.

Represents 5,408 shares of Common Stock, options to purchase 93,117 shares of Common Stock and 89,487 shares of Common Stock
subject to RSUs that will be vested and may be exercised or settled, as applicable, as of June 5, 2023.

Represents 332,729 shares of Common Stock and options to purchase 335,915 shares of Common Stock that will be vested and may be
exercised as of June 5, 2023.

(4)

(5)

(6)

(7)

(8)

(9)

(10) Represents 143,622 shares of Common Stock and options to purchase 127,610 shares of Common Stock that will be vested and may be

exercised as of June 5, 2023.

(11) Represents 89,376 shares of Common Stock and options to purchase 119,810 shares of Common Stock that will be vested and may be

exercised as of June 5, 2023.

(12) Represents 19,131 shares of Common Stock and 5,000 shares of Common Stock subject to RSUs that will be vested and may be

settled as of June 5, 2023.

(13) Represents 28,174 shares of Common Stock and options to purchase 2,500 shares of Common Stock that will be vested and may be

exercised as of June 5, 2023.

(14) Our directors and executive officers as of April 6, 2023 as a group beneficially own 1,972,167 shares of Common Stock or 4.5%,
which represents 689,812 shares of Common Stock, options to purchase 928,019 shares of Common Stock and 354,336 shares of
Common Stock subject to RSUs that will be vested and may be exercised or settled, as applicable, as of June 5, 2023.

PROPOSAL TWO

ADVISORY VOTE ON
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

In accordance with the Dodd-Frank Act, and Section 14A of the Exchange Act, the Board is asking

stockholders to approve an advisory (non-binding) resolution on the compensation of our named executive
officers. The vote is not intended to address any specific item of compensation, but rather the overall
compensation of our named executive officers and the philosophy, policies and practices described in this Proxy
Statement. The text of the resolution is as follows:

RESOLVED, that the stockholders of Magnachip Semiconductor Corporation approve, on an advisory
basis, the compensation of the Company’s named executive officers as disclosed in the proxy statement for
the Company’s 2023 annual meeting of stockholders pursuant to the compensation disclosure rules of the
Securities Exchange Act of 1934, as amended (which disclosure includes the Compensation Discussion and
Analysis section, the Summary Compensation Table for 2022 and the related compensation tables and
narrative disclosure within the executive compensation sections of the proxy statement).

The Company urges you to read the disclosure under ‘‘Compensation Discussion and Analysis,’’ in this

Proxy Statement, which discusses how our compensation policies and procedures implement our
pay-for-performance compensation philosophy. You should also read the Summary Compensation Table and other
related compensation tables and narrative disclosure which provide additional details about the compensation of
our named executive officers for fiscal year 2022. We have designed our executive compensation structure to
attract, motivate, and retain executives with the skills required to formulate and implement the Company’s
strategic objectives and create stockholder value. We believe that our executive compensation program is
reasonable, competitive and strongly focused on pay for performance principles, and provides an appropriate
balance between risk and incentives.

The vote regarding the compensation of the named executive officers described above, referred to as a

‘‘say-on-pay advisory vote,’’ is advisory, and is therefore not binding on the Company, the Compensation
Committee or the Board. Although non-binding, the Board and the Compensation Committee value the opinions
that stockholders express in their votes and will review the voting results and take them into consideration when
making future decisions regarding our executive compensation programs as they deem appropriate.

If no voting specification is made on a properly returned or voted proxy card, the proxies named on the

proxy card will vote ‘‘FOR’’ the approval of the compensation of the named executive officers as disclosed in
this Proxy Statement and described above.

The Board recommends that you vote ‘‘FOR’’ the approval of our named executive officer compensation.

PROPOSAL THREE

RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2023

Samil PricewaterhouseCoopers has been selected by the Audit Committee as the principal independent
registered public accounting firm for the fiscal year ending December 31, 2023 for us and our subsidiaries. Our
Board recommends a vote for ratification of the appointment of Samil PricewaterhouseCoopers as the
independent registered public accounting firm to audit the books and accounts for us and our subsidiaries for the
fiscal year ending December 31, 2023. It is expected that representatives of Samil PricewaterhouseCoopers will
attend the Annual Meeting, with the opportunity to make a statement if they so desire, and, if a representative is
in attendance, the representative will be available to answer appropriate questions.

The appointment of Samil PricewaterhouseCoopers as our independent registered public accounting firm is

not required to be submitted to a vote of our stockholders for ratification. However, our Board believes that
obtaining stockholder ratification is a sound governance practice. If our stockholders fail to vote on an advisory
basis in favor of the appointment of Samil PricewaterhouseCoopers, the Audit Committee will take such actions
as it deems necessary as a result of such stockholder vote.

Fees Paid to Independent Registered Public Accounting Firm

The following table presents fees billed for professional services rendered by Samil PricewaterhouseCoopers

and its affiliates for the years ended December 31, 2022 and 2021.

Year Ended December 31

2022

2021

(in millions)

Audit fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Related fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1.5
—
—
—

$1.5

$1.4
—
—
$ 0

$1.4

Policy and Procedure for Approval of Audit and Permitted Non-Audit Services

All audit fees were pre-approved by the Company’s Audit Committee, which concluded that the provision of

such services by Samil PricewaterhouseCoopers and its affiliates was compatible with the maintenance of that
firm’s independence in the conduct of its auditing functions. With respect to outside auditor independence, the
Audit Committee Charter provides for pre-approval of audit services and non-audit services, based on
independence, qualifications and, if applicable, performance, and approve the fees and other terms of any such
engagement. The Audit Committee Charter authorizes the Audit Committee to delegate to one or more of its
members the authority to grant pre-approvals for such services, provided that the decisions of such member(s) to
grant any such pre-approval shall be presented to the Audit Committee at its next scheduled meeting. The Audit
Committee followed these guidelines in approving all services rendered by Samil PricewaterhouseCoopers and its
affiliates.

The Board recommends that you vote ‘‘FOR’’ the ratification of the appointment of Samil

PricewaterhouseCoopers as our independent registered public accounting firm for the fiscal year ending
December 31, 2023.

PROPOSAL FOUR

APPROVAL OF OUR AMENDED AND RESTATED 2020 EQUITY AND INCENTIVE COMPENSATION
PLAN

General

On April 14, 2023, upon the recommendation of the Compensation Committee, the Board amended and

restated our 2020 Equity and Incentive Compensation Plan (the ‘‘Plan’’), subject to the approval of the
Company’s stockholders at the Annual Meeting, in order to increase the aggregate number of shares of the
Company’s Common Stock, available for issuance thereunder by 1,990,000 shares (as amended, the ‘‘Amended
Plan’’). As of April 6, 2023, 601,536 shares remained available for future grants under the Plan.

The Board recommends that you vote to approve the Amended Plan, so that the Company has a sufficient
reserve of Common Stock to incentivize, attract and retain talent in the highly competitive market and industry in
which we operate, and to align the interests of our employees and non-employee directors essential to the
Company’s long-term growth and success with those of our stockholders. We expect that the total number of
shares available under the Amended Plan, if approved, would meet our equity compensation needs for
approximately the next two to three years.

If the Amended Plan is approved by stockholders at the Annual Meeting, the share reserve increase will be

effective as of the day of the Annual Meeting. If the Amended Plan is not approved by our stockholders, the
Amended Plan will not become effective and the Plan, as in effect prior to the amendment and restatement, will
continue in effect without giving effect to the proposed share increase.

The Amended Plan is attached to this Proxy Statement as Appendix A. The following description of the
Amended Plan is only a summary of its principal terms and provisions and is qualified by reference to the actual
text as set forth in Appendix A.

Rationale for the Proposed Share Increase

The Plan authorizes the Board and the Compensation Committee to provide cash awards and equity-based

compensation for the purpose of providing incentives and rewards for service and/or performance to our
non-employee directors, officers and other employees of the Company and its subsidiaries, and certain
consultants to the Company and its subsidiaries.

We believe our future success depends in part on our ability to attract, motivate and retain high quality
employees and directors and that the ability to provide equity-based and incentive-based awards under the Plan is
critical to achieving this success. We would be at a severe competitive disadvantage if we could not use
stock-based awards to recruit and compensate our employees and directors. The use of Common Stock as part of
our compensation program is important because equity-based awards are an essential component of our
compensation program for key employees, as they help link compensation with long-term stockholder value
creation and reward participants based on service and/or performance.

As of April 6, 2023, 601,536 shares of Common Stock remained available for new awards under the Plan.

This amount does not reflect the additional 1,990,000 shares reserved under the Amended Plan, as set forth in
this proposal. If the Amended Plan is not approved, we may be compelled to significantly increase the cash
component of our employee and director compensation. This approach may not necessarily align employee and
director compensation interests with the investment interests of our stockholders. Replacing equity awards with
cash also would increase cash compensation expense and use cash that could be better utilized in other ways.

The following includes information regarding our view of the overhang and dilution associated with the
Amended Plan. This information is as of April 6, 2023. As of that date, there were approximately 42,514,556
shares of Common Stock outstanding.

Proposed shares of Common Stock available for awards under the Amended Plan:
•

1,990,000 new shares (approximately 4.68% of our outstanding Common Stock, which percentage
reflects the simple dilution of our stockholders that would occur if the Amended Plan is approved) plus
601,536 shares that were available as of April 6, 2023 under the Plan, or an aggregate of
2,591,536 shares (approximately 6.1% of our outstanding Common Stock) all subject to adjustment,
including under the share counting rules of the Amended Plan.

•

The total number of shares of Common Stock subject to outstanding awards under the Plan as of
April 6, 2023 (3,347,638 shares), plus the 2,591,536 of shares of Common Stock available for future
awards under the Amended Plan, represent a total overhang of 5,939,174 shares (13.97%) under the
Amended Plan. The 1,990,000 new shares represent an increase in the overhang percentage from
approximately 9.29% to approximately 13.97%.

Based on the closing price on the New York Stock Exchange for our Common Stock on April 6, 2023 of

$9.08 per share, the aggregate market value as of April 6, 2023 of the new 1,990,000 shares of Common Stock
requested under the Amended Plan was $18,069,200.

In fiscal years 2020, 2021 and 2022, we granted awards (including stock options, RSUs and PSUs) under
the Plan covering 118,608 shares, 429,556 shares, and 725,910 shares, respectively. Based on our basic weighted
average shares of Common Stock outstanding for those three fiscal years of 35,213,525, 44,879,412, and
44,850,791, respectively, for the three-fiscal-year period 2020-2022, our average burn rate, not taking into
account forfeitures, was 1.0%. (Our individual years’ burn rates were 0.3% for fiscal 2020, 1.0% for fiscal 2021
and 1.6% for fiscal 2022.)

In determining the size of the requested share increase under the Amended Plan, our Board and
Compensation Committee worked with management and the Compensation Committee’s independent
compensation consultant to evaluate a number of factors, including our corporate strategy and compensation
needs, our recent and projected share usage, share usage at companies in our compensation peer group, the total
potential dilution level, and criteria expected to be utilized by institutional proxy advisory firms in evaluating our
proposal for the Amended Plan. The Board and Compensation Committee believe that approving an additional
1,990,000 shares for issuance under the Amended Plan is appropriate and in the best interests of stockholders
given the current expectations on hiring, the highly competitive environment in which we recruit and retain
employees, the Company’s current stock price and our projected share usage.

If the Amended Plan is approved, we intend to utilize the additional shares authorized under the Amended
Plan to continue our practice of incentivizing key individuals through equity grants. We currently anticipate that
the shares requested in connection with the approval of the Amended Plan will last for about two to three years,
including based on our historic grant rates, new hiring and the approximate current share price, but could last for
a different period of time if actual practice does not match recent rates or our share price changes materially.

Future benefits that may be received by our non-employee directors in 2023 under the Amended Plan are set

forth below in the New Plan Benefits table. Any other benefits to be granted in the future under the Amended
Plan cannot be determined at this time, as the actual awards will be made at the discretion of the Compensation
Committee.

We believe that we have demonstrated a commitment to sound equity compensation practices in recent
years. We recognize that equity compensation awards dilute stockholders’ equity, so we have carefully managed
our equity incentive compensation program. Our equity compensation practices are intended to be competitive
and consistent with market practices, and we believe our historical share usage has been responsible and mindful
of stockholder interests, as described above.

As Approved by the Stockholders in 2020, the Plan Already Contains Good Compensation and Governance
Practices

No evergreen; reasonable award limits

Neither the Plan nor the Amended Plan contains an evergreen provision that automatically adds additional

shares of Common Stock to the available pool of stock available for grant under the plan every year without
additional stockholder approval.

The Amended Plan provides that, subject as applicable to adjustment and the applicable Common Stock

counting provisions as described in the Amended Plan:

•

The aggregate number of shares of Common Stock actually issued or transferred upon the exercise of
incentive stock options (as defined below) will not exceed 1,309,000 shares of Common Stock. This
number is unchanged from the number in the Plan.

No non-employee director will be granted, in any one calendar year, compensation for such service
having an aggregate maximum value (measured at the date of grant as applicable, and calculating the
value of any awards based on the grant date fair value for financial reporting purposes) in excess of
$650,000. This number is unchanged from the maximum value number in the Plan.

Limited share recycling provisions

Subject to certain exceptions described in the Amended Plan, if any award granted under the Amended Plan

(in whole or in part) is canceled or forfeited, expires, is settled for cash or is unearned, the Common Stock
subject to such award, to the extent of such cancellation, forfeiture, expiration, cash settlement or unearned
amount, will again be available under the Amended Plan. Additionally, if after the effective date of the Amended
Plan, any Common Stock subject to an award granted under the ‘‘Predecessor Plans’’ (the Company’s 2011
Equity Incentive Plan and 2009 Common Unit Plan) is forfeited, or an award granted under the Predecessor
Plans (in whole or in part) is cancelled or forfeited, expires, is settled for cash or is unearned, the Common
Stock subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement or
unearned amount, be available for awards under the Amended Plan. The following Common Stock will not be
added (or added back, as applicable) to the aggregate share limit under the Amended Plan: (1) Common Stock
withheld by us, tendered or otherwise used in payment of the exercise price of a stock option granted under the
Amended Plan; and (2) Common Stock reacquired by the Company on the open market or otherwise using cash
proceeds from the exercise of stock options granted under the Amended Plan. Further, Common Stock covered
by share-settled SARs that is exercised and settled in shares, but that is not actually issued to the participant
upon exercise, will not be added back to the aggregate number of shares available under the Amended Plan. In
addition, Common Stock withheld by us, tendered or otherwise used to satisfy tax withholding will not be added
(or added back, as applicable) to the aggregate share limit under the Amended Plan. If a participant elects to give
up the right to receive compensation in exchange for Common Stock based on fair market value, such Common
Stock will not count against the aggregate number of shares available under the Amended Plan. The share
recycling provisions in the Amended Plan are unchanged from the provisions in the Plan.

No repricing without stockholder approval

Outside of certain corporate transactions or adjustment events described in the Amended Plan or in

connection with a ‘‘change in control,’’ the exercise or base price of outstanding stock options and SARs cannot
be reduced, and outstanding ‘‘underwater’’ stock options or SARs cannot be cancelled in exchange for cash or
replaced with other awards, stock options or SARs with a lower exercise or base price, as applicable, without
stockholder approval under the Amended Plan. The repricing provision in the Amended Plan is unchanged from
the provision in the Plan.

Non-liberal change in control definition

The Amended Plan and the Plan both include the same non-liberal definition of ‘‘change in control,’’ which

is described below.

Exercise or base price limitation

The Amended Plan and the Plan both provide that, except with respect to certain converted, assumed or
substituted awards as described in the Amended Plan or the Plan, as the case may be, no stock options or SARs
will be granted with an exercise or base price less than the fair market value of a share of Common Stock on the
date of grant.

No dividends paid on unvested awards

The Amended Plan and the Plan both provide that any dividends or dividend equivalent rights on restricted

stock, RSUs, performance shares and performance units will be deferred until, and paid contingent upon, the
vesting of the underlying award.

Summary of Other Material Terms of the Amended Plan

The Amended Plan authorizes the Board and the Compensation Committee to provide cash awards and
equity-based compensation in the form of stock options, SARs, restricted stock, RSUs, performance shares,
performance units, dividend equivalents and certain other awards, including those denominated or payable in, or
otherwise based on, Common Stock, for the purpose of providing incentives and rewards for service and/or
performance to our non-employee directors, officers and other employees of the Company and its subsidiaries,
and certain consultants to the Company and its subsidiaries.

Administration

The Amended Plan is generally administered by the Compensation Committee (or its successor), or any
other committee of the Board designated by the Board to administer the Amended Plan; provided, however, that
notwithstanding anything in the Amended Plan to the contrary, the Board may grant awards under the Amended
Plan to non-employee directors and administer the Amended Plan with respect to such awards. References to the
‘‘Committee’’ in this proposal generally refer to the Compensation Committee or such other committee
designated by the Board, or the Board, as applicable. The Committee may from time to time delegate all or any
part of its authority under the Amended Plan to a subcommittee. Any interpretation, construction and
determination by the Committee of any provision of the Amended Plan, or of any agreement, notification or
document evidencing the grant of awards under the Amended Plan, will be final and conclusive. To the extent
permitted by applicable law, the Committee may delegate to one or more of its members or to one or more
officers, or to one or more agents or advisors, such administrative duties or powers as it deems advisable, and
the Committee, the subcommittee or any other such person to whom duties or powers have been delegated may
employ persons to render advice with respect to a responsibility of the Committee, subcommittee or other such
person. In addition, the Committee may by resolution, subject to certain restrictions set forth in the Amended
Plan, authorize one or more officers of the Company to (1) designate employees to be recipients of awards under
the Amended Plan and (2) determine the size of such awards. The Committee may not, however, delegate such
responsibilities to officers for awards granted to non-employee directors or certain officers who are subject to the
reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’).
The Committee is authorized to take any other action it determines to be appropriate subject to the express
limitations contained in the Amended Plan.

Eligibility

Any person who is selected by the Committee to receive benefits under the Amended Plan and who is at

that time an officer or other employee of the Company or any of its subsidiaries is eligible to participate in the
Amended Plan. In addition, non-employee directors of the Company and certain consultants who provide services
to the Company or any of its subsidiaries that are equivalent to those typically provided by an employee
(provided that such persons satisfy the Form S-8 definition of ‘‘employee’’) may also be selected by the
Committee to participate in the Amended Plan. As of March 31, 2023, there were approximately 903 employees
of the Company and its subsidiaries, 4 consultants to the Company and its subsidiaries and 5 non-employee
directors of the Company eligible to participate in the Amended Plan. The basis for participation in the Amended
Plan by eligible persons is the selection of such persons for participation by the Committee (or its proper
delegate) in its discretion.

Shares available for awards under the Amended Plan

Subject to adjustment as described in the Amended Plan share counting rules, the number of shares of

Common Stock available under the Amended Plan for awards of:

•

stock options or SARs;

restricted stock;

RSUs;

performance shares or performance units;

other stock-based awards under the Amended Plan; or

dividend equivalents paid with respect to awards under the Amended Plan;

will not exceed, in the aggregate, 1,990,000 shares of Common Stock plus Common Stock that becomes
available under the Amended Plan as a result of cancellation, forfeiture, expiration, cash settlement or
less-than-maximum earning of Amended Plan awards (or, as described, awards under the Predecessor Plans),
after the effective date of the Amended Plan.

Share counting

Generally, the aggregate number of shares of Common Stock available under the Amended Plan will be
reduced by one share of Common Stock for every one share of Common Stock subject to an award granted
under the Amended Plan.

Types of awards under the Amended Plan

Pursuant to the Amended Plan, the Company may grant cash incentive awards and stock options

(including stock options intended to be ‘‘incentive stock options’’ as defined in Section 422 of the Code or any
successor provision), SARs, restricted stock, RSUs, performance shares, performance units and certain other
awards based on or related to our Common Stock.

Generally, each grant of an award under the Amended Plan will be evidenced by an award agreement,

certificate, resolution or other type or form of writing or other evidence approved by the Committee
(an ‘‘Evidence of Award’’), which will contain such terms and provisions as the Committee may determine,
consistent with the Amended Plan. A brief description of the types of awards which may be granted under the
Amended Plan is set forth below.

Stock options

A stock option is a right to purchase Common Stock upon exercise of the stock option. Stock options
granted to an employee under the Amended Plan may consist of either an incentive stock option, a non-qualified
stock option that is not intended to be an ‘‘incentive stock option’’ under Section 422 of the Code, or a
combination of both. Incentive stock options may only be granted to employees of the Company or certain of our
related corporations. Except with respect to awards issued in substitution for, in conversion of, or in connection
with an assumption of stock options held by awardees of an entity engaging in a corporate acquisition or merger
with us or any of our subsidiaries, stock options must have an exercise price per share of Common Stock that is
not less than the fair market value of a share of Common Stock on the date of grant. The term of a stock option
may not extend more than 10 years from the date of grant. The Committee may provide in an Evidence of Award
for the automatic exercise of a stock option upon such terms and conditions as established by the Committee.

Each grant of a stock option will specify the applicable terms of the stock option, including the number of

shares of Common Stock subject to the stock option and the required period or periods of the participant’s
continuous service, if any, before any stock option or portion of a stock option will become exercisable. Stock
options may provide for continued vesting or the earlier vesting of the stock options, including in the event of
retirement, death, disability or termination of employment or service of the participant or in the event of a
change in control.

Any grant of stock options may specify management objectives regarding the vesting of the stock options.

Each grant will specify whether the consideration to be paid in satisfaction of the exercise price will be payable:
(1) in cash, by check acceptable to the Company, or by wire transfer of immediately available funds; (2) by the
actual or constructive transfer to the Company of Common Stock owned by the participant with a value at the
time of exercise that is equal to the total exercise price; (3) subject to any conditions or limitations established
by the Committee, by a net exercise arrangement pursuant to which the Company will withhold Common Stock
otherwise issuable upon exercise of a stock option; (4) by a combination of the foregoing methods; or (5) by
such other methods as may be approved by the Committee. To the extent permitted by law, any grant may
provide for deferred payment of the exercise price from the proceeds of a sale through a bank or broker of some
or all of the shares to which the exercise relates. Stock options granted under the Amended Plan may not provide
for dividends or dividend equivalents.

SARs

The Committee may, from time to time and upon such terms and conditions as it may determine, authorize
the granting of SARs. A SAR is a right to receive from us an amount equal to 100%, or such lesser percentage
as the Committee may determine, of the spread between the base price and the fair market value of a share of
Common Stock on the date of exercise.

Each grant of SARs will specify the period or periods of continuous service, if any, by the participant with
the Company or any subsidiary that is necessary before the SARs or installments of such SARs will vest. SARs
may provide for continued vesting or earlier vesting, including in the case of retirement, death, disability or
termination of employment or service of the participant or in the event of a change in control. Any grant of
SARs may specify management objectives regarding the vesting of such SARs. A SAR may be paid in cash,
Common Stock or any combination of the two.

Except with respect to awards issued in substitution for, in conversion of, or in connection with an

assumption of SARs held by awardees of an entity engaging in a corporate acquisition or merger with us or any
of our subsidiaries, the base price of a SAR may not be less than the fair market value of a share of Common
Stock on the date of grant. The term of a SAR may not extend more than 10 years from the date of grant. The
Committee may provide in an Evidence of Award for the automatic exercise of a SAR upon such terms and
conditions as established by the Committee. SARs granted under the Amended Plan may not provide for
dividends or dividend equivalents.

Restricted stock

Each grant or sale of restricted stock constitutes an immediate transfer of the ownership of Common Stock

to the participant in consideration of the performance of services, entitling such participant to voting, dividend
and other ownership rights (subject in particular to certain dividend provisions in the Amended Plan, as described
below), but subject to the substantial risk of forfeiture and restrictions on transfer determined by the Committee
for a period of time determined by the Committee or until certain management objectives specified by the
Committee are achieved. Each such grant or sale of restricted stock may be made without additional
consideration or in consideration of a payment by the participant that is less than the fair market value per share
of Common Stock on the date of grant.

Any grant of restricted stock may specify management objectives regarding the vesting of the restricted

stock. Any grant of restricted stock may require that any and all dividends or other distributions paid on
restricted stock that remains subject to a substantial risk of forfeiture be automatically deferred and/or reinvested
in additional restricted stock, which will be subject to the same restrictions as the underlying restricted stock, but
any such dividends or other distributions on restricted stock must be deferred until, and paid contingent upon, the
vesting of such restricted stock. Restricted shares may provide for continued vesting or the earlier vesting of such
restricted stock, including in the event of retirement, death, disability or termination of employment or service of
the participant or in the event of a change in control. Each grant of restricted stock will be evidenced by an
Evidence of Award. Each Evidence of Award will be subject to the Amended Plan and will contain such terms
and provisions, consistent with the Amended Plan, as the Committee may approve.

RSUs

Each grant or sale of RSUs awarded under the Amended Plan will be evidenced by an Evidence of Award

and constitutes an agreement by the Company to deliver Common Stock, cash or a combination of the two to the
participant in the future in consideration of the performance of services, but subject to the fulfillment of such
conditions (which may include achievement regarding management objectives) during the restriction period as
the Committee may specify in the Evidence of Award. Each grant or sale of RSUs may be made without
additional consideration or in consideration of a payment by the participant that is less than the fair market value
per share of Common Stock on the date of grant.

RSUs may provide for continued vesting or the earlier lapse or other modification of the restriction period,
including in the event of retirement, death, disability or termination of employment or service of the participant
or in the event of a change in control. During the restriction period applicable to RSUs, the participant will have
no right to transfer any rights under the award and will have no rights of ownership in the Common Stock
deliverable upon payment of the RSUs and no right to vote them. Rights to dividend equivalents may be

extended to and made part of any RSU award at the discretion of the Committee, on a deferred and contingent
basis, based upon the vesting of such RSUs. Each grant or sale of RSUs will specify the time and manner of
payment of the RSUs that have been earned and that the amount payable with respect thereto will be paid in
cash, Common Stock or any combination of the two.

Performance shares, performance units and cash incentive awards

Performance shares, performance units and cash incentive awards may also be granted to participants under
the Amended Plan, and will be evidenced by an Evidence of Award. A performance share is a bookkeeping entry
that records the equivalent of one share of Common Stock, and a performance unit is a bookkeeping entry that
records a unit equivalent to $1.00 or such other value as determined by the Committee. Each grant will specify
the number or amount of performance shares or performance units, or the amount payable with respect to a cash
incentive award being awarded, which number or amount may be subject to adjustment to reflect changes in
compensation or other factors.

Each grant of a cash incentive award, performance shares or performance units will specify management

objectives regarding the earning of the award. Each grant will specify the time and manner of payment of
performance shares, performance units or a cash incentive award that have been earned.

At the discretion of the Committee, any grant of performance shares or performance units may provide for
the payment of dividend equivalents in cash or in additional Common Stock, which dividend equivalents will be
subject to deferral and payment on a contingent basis based on the participant’s earning and vesting of the
performance shares or performance units, as applicable, with respect to which such dividend equivalents are paid.

The performance period with respect to each grant of performance shares or performance units or cash

incentive award will be a period of time determined by the Committee and within which the management
objectives relating to such award are to be achieved. The performance period may be subject to continued
vesting or earlier lapse or other modification, including in the event of retirement, death, disability or termination
of employment or service of the participant or in the event of a change in control.

Other awards

Subject to applicable law and applicable share limits under the Amended Plan, the Committee may grant to
any participant Common Stock or such other awards (‘‘Other Awards’’) that may be denominated or payable in,
valued in whole or in part by reference to, or otherwise based on, or related to, Common Stock or factors that
may influence the value of such Common Stock, including, without limitation: convertible or exchangeable debt
securities; other rights convertible or exchangeable into Common Stock; purchase rights for Common Stock;
awards with value and payment contingent upon performance of the Company or specified subsidiaries or
affiliates or other business units or any other factors designated by the Committee; and awards valued by
reference to the book value of the Common Stock or the value of securities of, or the performance of, the
Company or specified subsidiaries or affiliates or other business units of the Company. The terms and conditions
of any such awards will be determined by the Committee. Common Stock delivered under such an award in the
nature of a purchase right granted under the Amended Plan will be purchased for such consideration, paid for at
such time, by such methods, and in such forms, including, without limitation, Common Stock, other awards,
notes or other property, as the Committee determines.

In addition, the Committee may grant cash awards, as an element of or supplement to any other awards
granted under the Amended Plan. The Committee may also authorize the grant of Common Stock as a bonus or
may authorize the grant of Other Awards in lieu of obligations of the Company or a subsidiary to pay cash or
deliver other property under the Amended Plan or under other plans or compensatory arrangements, subject to
terms determined by the Committee in a manner that complies with Section 409A of the Code.

Other Awards may provide for the earning or vesting of, or earlier elimination of restrictions applicable to,

such award, including in the event of the retirement, death, disability or termination of employment or service of
the participant or in the event of a change in control. The Committee may provide for the payment of dividends
or dividend equivalents on Other Awards on a deferred and contingent basis, in cash or in additional Common
Stock, based upon the earning and vesting of such awards.

Change in control

The Amended Plan includes a definition of ‘‘change in control.’’ In general, except as may be otherwise
prescribed by the Committee in an Evidence of Award, a change in control shall be deemed to have occurred
upon the occurrence of any one or a combination of the following events (subject to certain exceptions and
limitations and as further described in the Amended Plan): (1) any individual, entity or group is or becomes the
beneficial owner, directly or indirectly, of 50% or more of the total fair market value or the total combined
voting power of the then-outstanding Common Stock or voting shares of the Company (subject to certain
exceptions); (2) a transaction in which the stockholders immediately before the transaction do not retain
ownership of more than 50% of the total combined voting power of the outstanding voting securities of the
Company (or the entity to which the assets of the Company were transferred); or (3) consummation of a
complete liquidation or dissolution of the Company after approval of the same by the stockholders of the
Company; provided, however, the transactions described in (1) or (2) above shall not constitute a change in
control if a majority of the members of the board of directors of the continuing, surviving or successor entity
(or parent thereof) immediately after such transaction is comprised of incumbent directors.

Management objectives

The Amended Plan generally provides that any of the awards set forth above may be granted subject to the

achievement of specified management objectives. Management objectives are defined as the measurable
performance objective or objectives established pursuant to the Amended Plan for participants who have received
grants of performance shares, performance units or cash incentive awards or, when so determined by the
Committee, stock options, SARs, restricted stock, RSUs, dividend equivalents or Other Awards.

Additionally, if the Committee determines that a change in the business, operations, corporate structure or

capital structure of the Company, or the manner in which it conducts its business, or other events or
circumstances render the management objectives unsuitable, the Committee may in its discretion modify such
management objectives or the goals or actual levels of achievement, in whole or in part, as the Committee deems
appropriate and equitable.

Transferability of awards

Except as otherwise provided by the Committee, and subject to the terms of the Amended Plan with respect
to Section 409A of the Code, no stock option, SAR, restricted stock, RSU, performance share, performance unit,
cash incentive award, Other Award or dividend equivalents paid with respect to awards made under the Amended
Plan will be transferable by a participant except by will or the laws of descent and distribution. In no event will
any such award granted under the Amended Plan be transferred for value. Except as otherwise determined by the
Committee, stock options and SARs will be exercisable during the participant’s lifetime only by him or her or, in
the event of the participant’s legal incapacity to do so, by his or her guardian or legal representative acting on
behalf of the participant in a fiduciary capacity under state law or court supervision.

The Committee may specify on the grant date that all or part of certain types of the Common Stock that is
subject to awards under the Amended Plan will be subject to further restrictions on transfer, including minimum
holding periods.

Adjustments

The Committee will make or provide for such adjustments in: (1) the number and kind of shares of Common
Stock covered by outstanding stock options, SARs, restricted stock, RSUs, performance shares and performance units
granted under the Amended Plan; (2) if applicable, the number and kind of shares of Common Stock covered by Other
Awards granted pursuant to the Amended Plan; (3) the exercise price or base price provided in outstanding stock
options and SARs, respectively; (4) cash incentive awards; and (5) other award terms, as the Committee in its sole
discretion, exercised in good faith determines to be equitably required in order to prevent dilution or enlargement of
the rights of participants that otherwise would result from (a) any extraordinary cash dividend, stock dividend, stock
split, combination of shares, recapitalization or other change in the capital structure of the Company; (b) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial or complete liquidation or other distribution
of assets, issuance of rights or warrants to purchase securities; or (c) any other corporate transaction or event having an
effect similar to any of the foregoing.

In the event of any such transaction or event, or in the event of a change in control of the Company, the

Committee may provide in substitution for any or all outstanding awards under the Amended Plan such
alternative consideration (including cash), if any, as it may in good faith determine to be equitable under the
circumstances and will require in connection therewith the surrender of all awards so replaced in a manner that
complies with Section 409A of the Code. In addition, for each stock option or SAR with an exercise price or
base price, respectively, greater than the consideration offered in connection with any such transaction or event or
change in control of the Company, the Committee may in its discretion elect to cancel such stock option or SAR
without any payment to the person holding such stock option or SAR. The Committee will make or provide for
such adjustments to the numbers of shares of Common Stock available under the Amended Plan and the share
limits of the Amended Plan as the Committee in its sole discretion may in good faith determine to be appropriate
to reflect such transaction or event. Any adjustment to the limit on the number of shares of Common Stock that
may be issued upon exercise of incentive stock options, however, will be made only if and to the extent such
adjustment would not cause any stock option intended to qualify as an incentive stock option to fail to so qualify.

Prohibition on repricing

Except in connection with certain corporate transactions or changes in the capital structure of the Company

or in connection with a change in control, the terms of outstanding awards may not be amended to (1) reduce the
exercise price or base price of outstanding stock options or SARs, respectively, or (2) cancel outstanding
‘‘underwater’’ stock options or SARs in exchange for cash, Other Awards or stock options or SARs with an
exercise price or base price, as applicable, that is less than the exercise price or base price of the original stock
options or SARs, as applicable, without stockholder approval. The Amended Plan specifically provides that this
provision is intended to prohibit the repricing of ‘‘underwater’’ stock options and SARs and that it may not be
amended without approval by our stockholders.

Detrimental activity and recapture

Any Evidence of Award may reference a clawback policy of the Company or provide for the cancellation or

forfeiture of an award or forfeiture and repayment to us of any gain related to an award, or other provisions
intended to have a similar effect, upon such terms and conditions as may be determined by the Committee from
time to time, if any participant, either during employment or other service with us or a subsidiary or within a
specified period after such employment or service, engages in any detrimental activity, as described in the
applicable Evidence of Award or such clawback policy. In addition, any Evidence of Award or such clawback
policy may provide for cancellation or forfeiture of an award or the forfeiture and repayment of any Common
Stock issued under and/or any other benefit related to an award, or other provisions intended to have a similar
effect, including upon such terms and conditions as may be required by the Committee or under Section 10D of
the Exchange Act and any applicable rules and regulations promulgated by the Securities and Exchange
Commission or any national securities exchange or national securities association on which the Common Stock
may be traded.

Accommodations for participants of different nationalities

In order to facilitate the making of any grant or combination of grants under the Amended Plan, the
Committee may provide for such special terms for awards to participants as the Committee may consider
necessary or appropriate to accommodate differences in local law, tax policy or custom given that participants are
expected to be nationals of the United States and other countries, or to be employed by us or one of our
subsidiaries within and outside of the United States. The Committee may approve such supplements to, or
amendments, restatements or alternative versions of, the Amended Plan (including sub-plans) (to be considered
part of the Amended Plan) as it may consider necessary or appropriate for such purposes, without thereby
affecting the terms of the Amended Plan as in effect for any other purpose, provided that no such special terms,
supplements, amendments or restatements will include any provisions that are inconsistent with the terms of the
Amended Plan as then in effect unless the Amended Plan could have been amended to eliminate such
inconsistency without further approval by our stockholders.

Withholding

To the extent the Company is required to withhold federal, state, local or foreign taxes or other amounts in
connection with any payment made or benefit realized by a participant or other person under the Amended Plan,
and the amounts available to us for such withholding are insufficient, it will be a condition to the receipt of such

payment or the realization of such benefit that the participant or such other person make arrangements
satisfactory to the Company for payment of the balance of such taxes or other amounts required to be withheld,
which arrangements may include relinquishment of a portion of such benefit. If a participant’s benefit is to be
received in the form of Common Stock, then, (i) for participants who are ‘‘officers’’ subject to Section 16 of the
Exchange Act, unless otherwise determined by the Committee, we will withhold Common Stock having a value
equal to the amount required to be withheld under applicable income and employment tax laws and (ii) for
participants who are not ‘‘officers’’ subject to Section 16 of the Exchange Act, we may withhold Common Stock
having a value equal to the amount required to be withheld under applicable income and employment tax laws.
The Common Stock used for tax or other withholding will be valued at an amount equal to the fair market value
of such Common Stock on the date the benefit is to be included in the participant’s income. In no event will the
fair market value of the Common Stock to be withheld and delivered pursuant to the Amended Plan exceed the
minimum amount required to be withheld, unless (1) an additional amount can be withheld and not result in
adverse accounting consequences, (2) such additional withholding amount is authorized by the Committee, and
(3) the total amount withheld does not exceed the participant’s estimated tax obligations attributable to the
applicable transaction. Participants will also make such arrangements as the Company may require for the
payment of any withholding tax or other obligation that may arise in connection with the disposition of Common
Stock acquired upon the exercise of stock options.

No right to continued employment

The Amended Plan does not confer upon any participant any right with respect to continuance of

employment or service with the Company or any of its subsidiaries.

Effective date of the Amended Plan

The Amended Plan will become effective on the date it is approved by the Company’s stockholders.

Amendment and termination of the Amended Plan

The Board generally may amend the Amended Plan from time to time in whole or in part. If any
amendment, however, for purposes of applicable stock exchange rules (and except as permitted under the
adjustment provisions of the Amended Plan) (1) would materially increase the benefits accruing to participants
under the Amended Plan, (2) would materially increase the number of securities which may be issued under the
Amended Plan, (3) would materially modify the requirements for participation in the Amended Plan, or (4) must
otherwise be approved by our stockholders in order to comply with applicable law or the rules of the New York
Stock Exchange, or, if the Common Stock is not traded on the New York Stock Exchange, the principal national
securities exchange upon which the Common Stock is traded or quoted, all as determined by the Board, then
such amendment will be subject to stockholder approval and will not be effective unless and until such approval
has been obtained.

Further, subject to the Amended Plan’s prohibition on repricing, the Committee generally may amend the

terms of any award prospectively or retroactively. Except in the case of certain adjustments permitted under the
Amended Plan, no such amendment may be made that would materially impair the rights of any participant
without his or her consent. If permitted by Section 409A of the Code and subject to certain other limitations set
forth in the Amended Plan, including in the case of termination of employment or service, or in the case of
unforeseeable emergency or other circumstances or in the event of a change in control, the Committee may
provide for continued vesting or accelerate the vesting of certain awards granted under the Amended Plan or
waive any other limitation or requirement under any such award.

The Board may, in its discretion, terminate the Amended Plan at any time. Termination of the Amended
Plan will not affect the rights of participants or their successors under any awards outstanding and not exercised
in full on the date of termination. No grant will be made under the Amended Plan on or after the tenth
(10th) anniversary of the effective date of the Amended Plan, but all grants made prior to such date will continue
in effect thereafter subject to their terms and the terms of the Amended Plan.

Allowances for conversion awards and assumed plans

Common Stock issued or transferred under awards granted under the Amended Plan in substitution for or
conversion of, or in connection with an assumption of, stock options, SARs, restricted stock, RSUs or other share
or share-based awards held by awardees of an entity engaging in a corporate acquisition or merger transaction

with us or any of our subsidiaries will not count against (or be added to) the aggregate share limit or other
Amended Plan limits described above. Additionally, shares available under certain plans that we or our
subsidiaries may assume in connection with corporate transactions from another entity may be available for
certain awards under the Amended Plan, under circumstances further described in the Amended Plan, but will not
count against the aggregate share limit or other Amended Plan limits described above.

New Plan Benefits

Other than the annual grant of RSUs to our non-employee directors under our director compensation policy
(the amounts of which are set forth in the table below for 2023), any equity- or cash-based compensation awards to be
granted in the future under the Amended Plan to eligible individuals, including employees, officers and non-employee
directors, cannot be determined at this time because the grants are made in the discretion of the Committee.

Name and Position

Young-Joon Kim, Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shin Young Park, Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Theodore Kim, Chief Compliance Officer, Executive Vice President, General Counsel

and Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Woung Moo Lee, Executive Vice President and General Manager of Display Solutions
and Worldwide Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chan Ho Park, General Manager of Power Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Executive Director Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Executive Officer Employee Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dollar Value
of RSUs
($)(1)

Number
of RSUs
(#)(1)

—
—

—

—
—

—

—
—
—
975,000(2)
—

—
—
—
107,382(3)
—

(1)

Please see ‘‘Compensation Philosophy and Objectives’’ and ‘‘Timing of Compensation Decisions’’ in the section titled ‘‘Compensation
Discussion and Analysis’’ of this Proxy Statement for a detailed description of our named executive officers.

(2) Under our director compensation policy, in 2023, each of our non-employee directors is expected to receive an RSU grant with a value

of $165,000; the chairpersons of the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee
and Risk Committee are expected to receive additional RSU grants of $20,000 each; non-chair members of the Audit Committee,
Compensation Committee, Nominating and Corporate Governance Committee and Risk Committee are expected to receive additional
RSU grants of $10,000 each.

(3)

This is the estimated total number of 2023 RSUs to be granted to our non-employee directors (assuming our current non-employee
directors continue serving their directorship) under the director compensation policy. Equity compensation for our non-employee
directors is based on dollar value, which is already determined by the Company’s director compensation policy, and we used the
closing price of the Company’s Common Stock on April 6, 2023, or $9.08, to estimate the number of RSUs to be granted.

U.S. Federal Income Tax Consequences

The following is a brief summary of certain of the federal income tax consequences of certain transactions
under the Amended Plan based on federal income tax laws in effect. This summary, which is presented for the
information of stockholders considering how to vote on this proposal and not for Amended Plan participants, is
not intended to be complete and does not describe federal taxes other than income taxes (such as Medicare and
social security taxes), or state, local or foreign tax consequences.

Tax consequences to participants

Restricted shares: The recipient of restricted stock generally will be subject to tax at ordinary income rates on the
fair market value of the restricted stock (reduced by any amount paid by the recipient for such restricted stock) at such
time as the restricted stock are no longer subject to forfeiture or restrictions on transfer for purposes of Section 83 of
the Code (‘‘Restrictions’’). However, a recipient who so elects under Section 83(b) of the Code within 30 days of the
date of transfer of the shares will have taxable ordinary income on the date of transfer of the restricted shares equal to
the excess (if any) of the fair market value of such shares (determined without regard to the Restrictions) over the
purchase price, if any, of such restricted stock. If a Section 83(b) election has not been made, any dividends received
with respect to restricted stock that are subject to the Restrictions generally will be treated as compensation that is
taxable as ordinary income to the recipient.

Performance shares, performance units and cash incentive awards: No taxable income generally will be
recognized upon the grant of performance shares, performance units or cash incentive awards. Upon payment in
respect of the earn-out of performance shares, performance units or cash incentive awards, the recipient generally
will be required to include as taxable ordinary income in the year of receipt an amount equal to the amount of
cash received and the fair market value of any unrestricted Common Stock received.

Nonqualified stock options: In general:

•

no taxable income will be recognized by an optionee at the time a non-qualified stock option is granted;

at the time of exercise of a non-qualified stock option, ordinary income will be recognized by the
optionee in an amount equal to the difference between the option price paid for the shares and the fair
market value of the shares, if unrestricted, on the date of exercise; and

at the time of sale of shares acquired pursuant to the exercise of a non-qualified stock option,
appreciation (or depreciation) in value of the shares after the date of exercise will be treated as either
short-term or long-term capital gain (or loss) depending on how long the shares have been held.

Incentive stock options: No taxable income generally will be recognized by an optionee upon the grant or

exercise of an ‘‘incentive stock option’’ as defined in Section 422 of the Code, except for purpose of the
alternative minimum tax. If Common Stock is issued to the optionee pursuant to the exercise of an incentive
stock option, and if no disqualifying disposition of such shares is made by such optionee within two years after
the date of grant or within one year after the transfer of such shares to the optionee, then upon sale of such
shares, any amount realized in excess of the option price will be taxed to the optionee as a long-term capital gain
and any loss sustained will be a long-term capital loss.

If Common Stock acquired upon the exercise of an incentive stock option is disposed of prior to the

expiration of either holding period described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at the time
of exercise (or, if less, the amount realized on the disposition of such shares if a sale or exchange) over the
exercise price paid for such shares. Any further gain (or loss) recognized by the participant generally will be
taxed as short-term or long-term capital gain (or loss) depending on the holding period.

SARs: No taxable income will be recognized by a participant in connection with the grant of a SAR. When
the SAR is exercised, the participant normally will be required to include as taxable ordinary income in the year
of exercise an amount equal to the amount of cash received and the fair market value of any unrestricted shares
of Common Stock received on the exercise. Any further gain (or loss) recognized by the participant upon any
later disposition will be taxed as short-term or long-term capital gain (or loss) depending on the holding period.

RSUs: No taxable income generally will be recognized upon the award of RSUs. The recipient of an RSU award

generally will be subject to tax at ordinary income rates on the fair market value of unrestricted shares of Common
Stock on the date that such shares are transferred to the participant under the award (reduced by any amount paid by
the participant for such RSUs), and the capital gains/loss holding period for such shares will also commence on such
date. In addition, Federal Insurance Contributions Act (‘‘FICA’’) taxes are imposed in the year of vesting.

Tax consequences to the Company or its subsidiaries

To the extent that a participant recognizes ordinary income in the circumstances described above, the
Company or the subsidiary for which the participant performs services will be entitled to a corresponding
deduction from any applicable federal income tax; provided that, among other things, the income meets the test
of reasonableness, is an ordinary and necessary business expense, is not an ‘‘excess parachute payment’’ within
the meaning of Section 280G of the Code and is not disallowed by the $1.0 million limitation on certain
executive compensation under Section 162(m) of the Code.

Registration with the SEC

We intend to file a Registration Statement on Form S-8 relating to the issuance of shares of Common Stock

under the Amended Plan with the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended, as soon as practicable after approval of the Amended Plan by our stockholders.

The Board recommends that you vote ‘‘FOR’’ the approval of the Amended Plan.

Please see ‘‘Equity Compensation Plan Information’’ table above for information as of December 31, 2022

regarding securities authorized for issuance under the Company’s equity compensation plans.

STOCKHOLDER PROPOSALS FOR 2024 ANNUAL MEETING

A stockholder who would like a proposal considered for inclusion in our proxy statement relating to our
2024 annual meeting pursuant to Rule 14a-8 (‘‘Rule 14a-8’’) under the Exchange Act must be received by the
Corporate Secretary of the Company no later than December 19, 2023 and must otherwise comply with Rule 14a-8.

Any stockholder proposals received outside of the Rule 14a-8 procedure for consideration at our

2024 annual meeting must be received by the Corporate Secretary of the Company between January 19, 2024
and February 18, 2024. If, however, the date of the 2024 annual meeting is changed by more than 30 days from
the anniversary date of this year’s Annual Meeting, the stockholder notice described above will be deemed timely
if it is received not later than the close of business on the later of the 90th calendar day prior to such annual
meeting and the 10th calendar day after public announcement of the date of such meeting. Such proposals must
be addressed to Magnachip Semiconductor Corporation, c/o Magnachip Semiconductor, Ltd., 15F, 76 Jikji-daero
436beon-gil, Heungdeok-gu, Cheongju-si, Chungcheongbuk-do, Republic of Korea 28581, Attention: Secretary.
We also encourage you to also submit any such proposal via email to investors@magnachip.com. If we do not
receive such notice within the timeframe described above, the notice will be considered untimely and the
proposal may not be brought.

In addition to the timely notice requirements, a stockholder’s proposal for nominees for directors must

comply with Section 2.15 of the Company’s bylaws and other applicable procedures described therein or
established by our Nominating and Corporate Governance Committee. See ‘‘The Board of Directors and
Corporate Governance—Nominating and Corporate Governance Committee.’’ Stockholder proposals related to
other business must also comply with Section 1.10 of the Company’s bylaws. Furthermore, any stockholder
proposal must comply with all applicable requirements of the Exchange Act and the rules and regulations
thereunder.

Our proxy for the 2024 annual meeting will grant authority to the persons named therein to exercise their
voting discretion with respect to any matter of which we did not receive notice between January 19, 2024 and
February 18, 2024. Notices should be submitted to the address set forth above.

To comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director

nominees other than the Company’s nominees must provide notice that sets forth the information required by
Rule 14a-19 under the Exchange Act no later than March 19, 2024.

SOLICITATION OF PROXIES

We will bear the costs of soliciting proxies from our stockholders. In addition to the use of the mails,
proxies may be solicited by our directors, officers and employees by personal interview, telephone or telegram.
Such directors, officers and employees will not be additionally compensated for such solicitation, but may be
reimbursed for out-of-pocket expenses incurred in connection therewith. Arrangements will also be made with
brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation materials to
the beneficial owners of our Common Stock held of record by such persons, and we will reimburse such
brokerage houses, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred in
connection therewith.

The directors know of no other matters which are likely to be brought before the Annual Meeting. The
enclosed proxy card grants to the persons named in the proxy card the authority to vote in their best judgment
regarding all other matters properly raised at the Annual Meeting.

OTHER MATTERS

By Order of the Board of Directors

/s/ Theodore Kim

Theodore Kim
Chief Compliance Officer, Executive Vice President,
General Counsel and Secretary

April 17, 2023

Appendix A

MAGNACHIP SEMICONDUCTOR CORPORATION

2020 EQUITY AND INCENTIVE COMPENSATION PLAN

As Amended and Restated as of May 18, 2023

Purpose. The purpose of this Plan is to permit award grants to non-employee Directors, Officers, other
Employees, and Consultants of the Participating Company Group, and to provide to such persons incentives
and rewards for Service and/or performance.

2. Definitions. As used in this Plan:

(a)

‘‘Appreciation Right’’ means a right granted pursuant to Section 5 of this Plan.

(b)

(c)

‘‘Award’’ means any Option, Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance
Share, Performance Unit, Cash Incentive Award or other award granted under this Plan.

‘‘Base Price’’ means the price to be used as the basis for determining the Spread upon the exercise of
an Appreciation Right.

(d)

‘‘Board’’ means the Board of Directors of the Company.

(e)

‘‘Cash Incentive Award’’ means a cash award granted pursuant to Section 8 of this Plan.

(f)

‘‘Cause’’ means, unless such term or an equivalent term is otherwise defined by the applicable
Evidence of Award or other written agreement between a Participant and a Participating Company
applicable to an Award, any of the following: (i) the Participant’s failure to substantially perform the
Participant’s customary duties with a Participating Company in the ordinary course (other than such
failure resulting from the Participant’s incapacity due to physical or mental illness) that, if susceptible
to cure, has not been cured as determined by the Participating Company within 30 days after a written
demand for substantial performance is delivered to the Participant by the Participating Company, which
demand specifically identifies the manner in which such entity believes that the Participant has not
substantially performed the Participant’s duties; (ii) the Participant’s gross negligence, intentional
misconduct or fraud in the performance of his or her Service; (iii) the Participant’s indictment (or
equivalent) for a felony or to a crime involving fraud or dishonesty; (iv) a judicial determination that
the Participant committed fraud or dishonesty against any natural person, firm, partnership, limited
liability company, association, corporation, company, trust, business trust, governmental authority or
other entity; (v) the Participant’s material violation of one or more of the Participating Company
Group’s policies applicable to the Participant’s Service as may be in effect from time to time; or
(vi) the Participant’s conduct that brings or could reasonably be expected to bring the Participating
Company Group into public disgrace or disrepute and that has a material adverse effect on the business
of the Participating Company Group.

(g)

‘‘Change in Control’’ has the meaning set forth in Section 12 of this Plan.

(h)

(i)

‘‘Code’’ means the Internal Revenue Code of 1986 and the regulations thereunder, as such law and
regulations may be amended from time to time.

‘‘Committee’’ means the Compensation Committee of the Board (or its successor(s)), or any other
committee of the Board designated by the Board to administer this Plan pursuant to Section 10 of this
Plan.

(j)

‘‘Company’’ means MagnaChip Semiconductor Corporation, a Delaware corporation, and its successors.

(k)

‘‘Consultant’’ means a person engaged to provide consulting or advisory services (other than as an
Employee or a member of the Board) to a Participating Company, provided that the identity of such
person, the nature of such services or the entity to which such services are provided would not preclude
the Company from offering or selling securities to such person pursuant to this Plan in reliance on
registration on Form S-8 under the Securities Act.

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(l)

‘‘Date of Grant’’ means the date provided for by the Committee on which a grant of Options,
Appreciation Rights, Performance Shares, Performance Units, Cash Incentive Awards, or other awards
contemplated by Section 9 of this Plan, or a grant or sale of Restricted Stock, Restricted Stock Units,
or other awards contemplated by Section 9 of this Plan, will become effective (which date will not be
earlier than the date on which the Committee takes action with respect thereto).

(m) ‘‘Director’’ means a member of the Board.

(n)

(o)

‘‘Disability’’ means, unless such term or an equivalent term is otherwise defined by the applicable
Evidence of Award or other written agreement between a Participant and a Participating Company
applicable to an Award, the permanent and total disability of the Participant, within the meaning of
Section 22(e)(3) of the Code.

‘‘Dividend Equivalent Right’’ means the right of a Participant, granted at the discretion of the
Committee or as otherwise provided by this Plan, to receive a credit for the account of such Participant
in an amount equal to the cash dividends paid on one share of Stock for each share of Stock
represented by an Award held by such Participant.

(p)

‘‘Effective Date’’ means the date this Plan is approved by the Stockholders, which is June 11, 2020.

(q)

‘‘Employee’’ means any person treated as an employee (including an Officer or a member of the Board
who is also treated as an employee) in the records of a Participating Company and, with respect to any
Incentive Stock Option granted to such person, who is an ‘‘employee’’ as defined under Section
3401(c) of the Code; provided, however, that neither service as a member of the Board nor payment of
a Director’s fee shall be sufficient to constitute employment for purposes of this Plan. The Company
shall determine in good faith and in the exercise of its discretion whether an individual has become or
has ceased to be an Employee and the effective date of such individual’s employment or termination of
employment, as the case may be.

(r)

‘‘Evidence of Award’’ means an agreement, certificate, resolution or other type or form of writing or
other evidence approved by the Committee that sets forth the terms and conditions of the Awards
granted under this Plan. An Evidence of Award may be in an electronic medium, may be limited to
notation on the books and records of the Company and, unless otherwise determined by the Committee,
need not be signed by a representative of the Company or a Participant.

(s)

‘‘Exchange Act’’ means the Securities Exchange Act of 1934, as amended from time to time, and the
rules and regulations thereunder, as such law, rules and regulations may be amended from time to time.

(t)

‘‘Exercise Price’’ means the purchase price payable on exercise of an Option.

(u)

‘‘Fair Market Value’’ means, as of any particular date, the closing price of a share of Stock as reported
for that date on the New York Stock Exchange or, if the Stock is not then listed on the New York
Stock Exchange, on any other national securities exchange on which the Stock is listed, or if there are
no sales on such date, on the next preceding trading day during which a sale occurred. If there is no
regular public trading market for the Stock, then the Fair Market Value shall be the fair market value as
determined in good faith by the Committee. The Committee is authorized to adopt another fair market
value pricing method, provided such method is stated in the applicable Evidence of Award and is in
compliance with the fair market value pricing rules set forth in Section 409A.

(v)

‘‘Incentive Stock Option’’ means an Option that is intended to qualify as an ‘‘incentive stock option’’
under Section 422 of the Code or any successor provision.

(w) ‘‘Incumbent Director’’ means a Director who either (i) is a member of the Board as of the Effective
Date or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination (but excluding a
Director who was elected or nominated in connection with an actual or threatened proxy contest
relating to the election of Directors of the Company).

(x)

‘‘Management Objectives’’ means the measurable performance objective or objectives established
pursuant to this Plan for Participants who have received grants of Performance Shares, Performance
Units or Cash Incentive Awards or, when so determined by the Committee, Options, Appreciation

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Rights, Restricted Stock, Restricted Stock Units, Dividend Equivalent Rights or other awards pursuant
to this Plan. If the Committee determines that a change in the business, operations, corporate structure
or capital structure of the Company, or the manner in which it conducts its business, or other events or
circumstances render the Management Objectives unsuitable, the Committee may in its discretion
modify such Management Objectives or the goals or actual levels of achievement regarding the
Management Objectives, in whole or in part, as the Committee deems appropriate and equitable, to the
extent permitted by applicable law.

(y)

‘‘Nonstatutory Stock Option’’ means an Option not intended to be (as set forth in the Evidence of
Award) or which does not qualify as an incentive stock option within the meaning of Section 422(b) of
the Code.

(z)

‘‘Officer’’ means any person designated by the Board as an officer of the Company.

(aa) ‘‘Optionee’’ means the optionee named in an Evidence of Award evidencing an outstanding Option.

(bb) ‘‘Option’’ means the right to purchase Stock upon exercise of an Award granted pursuant to Section 4

of this Plan.

(cc) ‘‘Ownership Change Event’’ means the occurrence of any of the following with respect to the

Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the
Stockholders of securities of the Company representing more than fifty percent (50%) of the total
combined voting power of the Company’s then outstanding securities entitled to vote generally in the
election of Directors; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale,
exchange, or transfer of all or substantially all of the assets of the Company (other than a sale,
exchange or transfer to one or more subsidiaries of the Company).

(dd) ‘‘Participant’’ means a person who is selected by the Committee to receive benefits under this Plan and
who is at the time (i) a non-employee Director, (ii) an Officer or other Employee, or (iii) a Consultant.

(ee) ‘‘Participating Company’’ means the Company or any Subsidiary.

(ff)

‘‘Participating Company Group’’ means, at any point in time, the Company and all other entities
collectively which are then Participating Companies.

(gg) ‘‘Performance Period’’ means, in respect of any Award with Management Objectives, a period of time
established within which the Management Objectives relating to such Award are to be achieved.

(hh) ‘‘Performance Share’’ means a bookkeeping entry that records the equivalent of one share of Stock

awarded pursuant to Section 8 of this Plan.

(ii)

(jj)

‘‘Performance Unit’’ means a bookkeeping entry awarded pursuant to Section 8 of this Plan that
records a unit equivalent to $1.00 or such other value as is determined by the Committee.

‘‘Plan’’ means this MagnaChip Semiconductor Corporation 2020 Equity and Incentive Compensation
Plan, as may be amended or amended and restated from time to time.

(kk) ‘‘Predecessor Plans’’ means the MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan, as
amended or amended and restated from time to time, and the MagnaChip Semiconductor LLC 2009
Common Unit Plan, as amended or amended and restated from time to time.

(ll)

‘‘Restricted Stock’’ means Stock granted or sold pursuant to Section 6 of this Plan as to which neither
the substantial risk of forfeiture nor the prohibition on transfers has expired.

(mm)‘‘Restricted Stock Units’’ means an Award made pursuant to Section 7 of this Plan of the right to
receive Stock, cash or a combination thereof at the end of the applicable Restriction Period.

(nn) ‘‘Restriction Period’’ means the period of time during which Restricted Stock Units are subject to

restrictions, as provided in Section 7 of this Plan.

(oo) ‘‘Section 409A’’ means Section 409A of the Code.

(pp) ‘‘Section 409A Deferred Compensation’’ means compensation provided pursuant to an Award that

constitutes nonqualified deferred compensation within the meaning of Section 409A.

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(qq) ‘‘Securities Act’’ means the Securities Act of 1933, as amended.

(rr)

‘‘Service’’ means, unless such term or an equivalent term is otherwise defined by the applicable
Evidence of Award or other written agreement between a Participant and a Participating Company
applicable to an Award, Participant’s employment or service with the Participating Company Group,
whether as an Employee, a Director or a Consultant. Unless otherwise provided by the Committee, a
Participant’s Service shall not be deemed to have terminated merely because of a change in the
capacity in which the Participant renders such Service or a change in the Participating Company for
which the Participant renders such Service, provided that there is no interruption or termination of the
Participant’s Service. Furthermore, a Participant’s Service shall not be deemed to have been interrupted
or terminated if the Participant takes any military leave, sick leave or other bona fide leave of absence
approved by the Company, provided that the Company shall have discretion to determine the length of
any such leave for the purposes of this definition. A Participant’s Service shall be deemed to have
terminated either upon an actual termination of Service or upon the business entity for which the
Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its discretion, shall determine whether the Participant’s Service has terminated and the
effective date of such termination.

(ss) ‘‘Spread’’ means the excess of the Fair Market Value on the date when an Appreciation Right is

exercised over the Base Price provided for with respect to the Appreciation Right.

(tt)

‘‘Stock’’ means the common stock, par value $0.01 per share, of the Company or any security into
which such common stock may be changed by reason of any transaction or event of the type referred
to in Section 11 of this Plan.

(uu) ‘‘Stockholder’’ means an individual or entity that owns one or more shares of Stock.

(vv) ‘‘Subsidiary’’ means a corporation, company or other entity (i) more than 50% of whose outstanding
shares or securities (representing the right to vote for the election of directors or other managing
authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a
partnership, joint venture, limited liability company, unincorporated association or other similar entity),
but more than 50% of whose ownership interest representing the right generally to make decisions for
such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company;
provided, however, that for purposes of determining whether any person may be a Participant for
purposes of any grant of Incentive Stock Options, ‘‘Subsidiary’’ means any corporation in which the
Company at the time owns or controls, directly or indirectly, more than 50% of the total combined
voting power of the then outstanding securities entitled to vote generally in the election of Directors in
the case of the Company or members of the board of directors or similar body in the case of another
entity represented by all classes of stock issued by such corporation.

Shares Available Under this Plan.

(a) Maximum Shares Available Under this Plan.

(i) Subject to adjustment as provided in Section 11 of this Plan and the share counting rules set forth
in Section 3(b) of this Plan, the number of shares of Stock available under this Plan for Awards of
(A) Options or Appreciation Rights, (B) Restricted Stock, (C) Restricted Stock Units, (D)
Performance Shares or Performance Units, (E) Awards contemplated by Section 9 of this Plan, or
(F) Dividend Equivalent Rights with respect to Awards made under this Plan will not exceed in
the aggregate (x) 3,299,000 shares of Stock, which is inclusive of shares previously authorized for
issuance under this Plan, plus (y) the total number of shares remaining available for Awards under
the MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan, as amended or amended
and restated from time to time, as of the Effective Date, plus (z) the Stock that is subject to
Awards granted under this Plan or the Predecessor Plans that is added (or added back, as
applicable) to the aggregate number of shares of Stock available under this Section 3(a)(i)
pursuant to the share counting rules of this Plan. Such shares may be shares of original issuance or
treasury shares or a combination of the foregoing.

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(ii) Subject to the share counting rules set forth in Section 3(b) of this Plan, the aggregate number of
shares of Stock available under Section 3(a)(i) of this Plan will be reduced by one share of Stock
for every one share of Stock subject to an Award granted under this Plan.

(b) Share Counting Rules.

(i) Except as provided in Section 22 of this Plan, if any Award granted under this Plan (in whole or
in part) is cancelled or forfeited, expires, is settled for cash, or is unearned, the Stock subject to
such Award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or
unearned amount, again be available under Section 3(a)(i) above.

(ii)

If, after the Effective Date, any Stock subject to an award granted under the Predecessor Plans is
forfeited, or an award granted under the Predecessor Plans (in whole or in part) is cancelled or
forfeited, expires, is settled for cash, or is unearned, the Stock subject to such award will, to the
extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, be
available for Awards under this Plan.

(iii) Notwithstanding anything to the contrary contained in this Plan: (A) Stock withheld by the

Company, tendered or otherwise used in payment of the Exercise Price of an Option will not be
added (or added back, as applicable) to the aggregate number of shares of Stock available under
Section 3(a)(i) of this Plan; (B) Stock withheld by the Company, tendered or otherwise used to
satisfy tax withholding will not be added (or added back, as applicable) to the aggregate number
of shares of Stock available under Section 3(a)(i) of this Plan; (C) Stock subject to a share-settled
Appreciation Right that is not actually issued in connection with the settlement of such
Appreciation Right on the exercise thereof will not be added back to the aggregate number of
shares of Stock available under Section 3(a)(i) of this Plan; and (D) Stock reacquired by the
Company on the open market or otherwise using cash proceeds from the exercise of Options will
not be added (or added back, as applicable) to the aggregate number of shares of Stock available
under Section 3(a)(i) of this Plan.

(iv) If, under this Plan, a Participant has elected to give up the right to receive compensation in

exchange for Stock based on Fair Market Value, such Stock will not count against the aggregate
limit under Section 3(a)(i) of this Plan.

subject to adjustment as provided in Section 11 of this Plan, the aggregate number of shares of Stock
actually issued or transferred by the Company upon the exercise of Incentive Stock Options will not
exceed 1,309,000 shares of Stock.

(d) Non-Employee Director Compensation Limit. Notwithstanding anything to the contrary contained in

this Plan, in no event will any non-employee Director in any one calendar year be granted
compensation for such Service having an aggregate maximum value (measured at the Date of Grant as
applicable, and calculating the value of any Awards based on the grant date fair value for financial
reporting purposes) in excess of $650,000.

4. Options. The Committee may, from time to time and upon such terms and conditions as it may determine,

authorize the granting to Participants of Options. Each such grant may utilize any or all of the
authorizations, and will be subject to all of the requirements, contained in the following provisions:

(a) Each grant will specify the number of shares of Stock to which it pertains subject to the limitations set

forth in Section 3 of this Plan.

(b) Each grant will specify an Exercise Price per share of Stock, which Exercise Price (except with respect
to Awards under Section 22 of this Plan) may not be less than the Fair Market Value on the Date of
Grant.

(c) Each grant will specify whether the Exercise Price will be payable (i) in cash, by check acceptable to
the Company or by wire transfer of immediately available funds, (ii) by the actual or constructive
transfer to the Company of Stock owned by the Optionee having a value at the time of exercise equal
to the total Exercise Price, (iii) subject to any conditions or limitations established by the Committee,
by the withholding of Stock otherwise issuable upon exercise of an Option pursuant to a ‘‘net exercise’’

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arrangement (it being understood that, solely for purposes of determining the number of treasury shares
held by the Company, the Stock so withheld will not be treated as issued and acquired by the Company
upon such exercise), (iv) by a combination of such methods of payment, or (v) by such other methods
as may be approved by the Committee.

(d) To the extent permitted by law, any grant may provide for deferred payment of the Exercise Price from

the proceeds of sale through a bank or broker on a date satisfactory to the Company of some or all of
the Stock to which such exercise relates.

(e) Each grant will specify the period or periods of continuous Service by the Optionee with the

Participating Company Group, if any, that is necessary before any Options or installments thereof will
vest. Options may provide for continued vesting or the earlier vesting of such Options, including in the
event of the retirement, death, Disability or termination of Service of a Participant or in the event of a
Change in Control.

(f) Any grant of Options may specify Management Objectives regarding the vesting of such rights.

(g) Options granted under this Plan may be (i) Incentive Stock Options (ii) Nonstatutory Stock Options or

(iii) combinations of the foregoing.

(h) No Option will be exercisable more than 10 years from the Date of Grant. The Committee may provide
in any Evidence of Award for the automatic exercise of an Option upon such terms and conditions as
established by the Committee.

(i) Options granted under this Plan may not provide for any dividends or Dividend Equivalent Rights

thereon.

(j) Each grant of Options will be evidenced by an Evidence of Award. Each Evidence of Award will be
subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the
Committee may approve.

5. Appreciation Rights.

(a) The Committee may, from time to time and upon such terms and conditions as it may determine,

authorize the granting to any Participant of Appreciation Rights. An Appreciation Right will be the
right of the Participant to receive from the Company an amount determined by the Committee, which
will be expressed as a percentage of the Spread (not exceeding 100%) at the time of exercise.

(b) Each grant of Appreciation Rights may utilize any or all of the authorizations, and will be subject to all

of the requirements, contained in the following provisions:

(i) Each grant may specify that the amount payable on exercise of an Appreciation Right will be paid

by the Company in cash, Stock or any combination thereof.

(ii) Each grant will specify the period or periods of continuous Service by the Participant with the
Participating Company Group, if any, that is necessary before the Appreciation Rights or
installments thereof will vest. Appreciation Rights may provide for continued vesting or the earlier
vesting of such Appreciation Rights, including in the event of the retirement, death, Disability or
termination of Service of a Participant or in the event of a Change in Control.

(iii) Any grant of Appreciation Rights may specify Management Objectives regarding the vesting of

such Appreciation Rights.

(iv) Appreciation Rights granted under this Plan may not provide for any dividends or Dividend

Equivalent Rights thereon.

(v) Each grant of Appreciation Rights will specify in respect of each Appreciation Right a Base Price,
which (except with respect to Awards under Section 22 of this Plan) may not be less than the Fair
Market Value on the Date of Grant.

(vi) No Appreciation Right granted under this Plan may be exercised more than 10 years from the

Date of Grant. The Committee may provide in any Evidence of Award for the automatic exercise
of an Appreciation Right upon such terms and conditions as established by the Committee.

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6. Restricted Stock. The Committee may, from time to time and upon such terms and conditions as it may

determine, authorize the grant or sale of Restricted Stock to Participants. Each such grant or sale may utilize
any or all of the authorizations, and will be subject to all of the requirements, contained in the following
provisions:

(a) Each such grant or sale will constitute an immediate transfer of the ownership of Stock to the
Participant in consideration of the performance of services, entitling such Participant to voting,
dividend and other ownership rights (subject in particular to Section 6(g) of this Plan), but subject to
the substantial risk of forfeiture and restrictions on transfer hereinafter described.

(b) Each such grant or sale may be made without additional consideration or in consideration of a payment

by such Participant that is less than the Fair Market Value on the Date of Grant.

subject to a ‘‘substantial risk of forfeiture’’ within the meaning of Section 83 of the Code for a period
to be determined by the Committee on the Date of Grant or until achievement of Management
Objectives referred to in Section 6(e) of this Plan.

(d) Each such grant or sale will provide that during or after the period for which such substantial risk of

forfeiture is to continue, the transferability of the Restricted Stock will be prohibited or restricted in the
manner and to the extent prescribed by the Committee on the Date of Grant (which restrictions may
include rights of repurchase or first refusal of the Company or provisions subjecting the Restricted
Stock to a continuing substantial risk of forfeiture while held by any transferee).

(e) Any grant of Restricted Stock may specify Management Objectives regarding the vesting of such

Restricted Stock.

(f) Notwithstanding anything to the contrary contained in this Plan, Restricted Stock may provide for
continued vesting or the earlier vesting of such Restricted Stock, including in the event of the
retirement, death, Disability or termination of Service of a Participant or in the event of a Change in
Control.

(g) Any such grant or sale of Restricted Stock may require that any and all dividends or other distributions
paid thereon during the period of such restrictions be automatically deferred and/or reinvested in
additional Restricted Stock, which will be subject to the same restrictions as the underlying Award. For
the avoidance of doubt, any such dividends or other distributions on Restricted Stock will be deferred
until, and paid contingent upon, the vesting of such Restricted Stock.

(h) Each grant or sale of Restricted Stock will be evidenced by an Evidence of Award. Each Evidence of

Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan,
as the Committee may approve. Unless otherwise directed by the Committee, (i) all certificates
representing Restricted Stock will be held in custody by the Company until all restrictions thereon will
have lapsed, together with a stock power or powers executed by the Participant in whose name such
certificates are registered, endorsed in blank and covering such shares or (ii) all Restricted Stock will
be held at the Company’s transfer agent in book entry form with appropriate restrictions relating to the
transfer of such Restricted Stock.

7. Restricted Stock Units. The Committee may, from time to time and upon such terms and conditions as it
may determine, authorize the granting or sale of Restricted Stock Units to Participants. Each such grant or
sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in
the following provisions:

(a) Each such grant or sale will constitute the agreement by the Company to deliver Stock or cash, or a

combination thereof, to the Participant in the future in consideration of the performance of services, but
subject to the fulfillment of such conditions (which may include achievement regarding Management
Objectives) during the Restriction Period as the Committee may specify.

(b) Each such grant or sale may be made without additional consideration or in consideration of a payment

by such Participant that is less than the Fair Market Value on the Date of Grant.

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(c) Notwithstanding anything to the contrary contained in this Plan, Restricted Stock Units may provide for
continued vesting or the earlier lapse or other modification of the Restriction Period, including in the
event of the retirement, death, Disability or termination of Service of a Participant or in the event of a
Change in Control.

(d) During the Restriction Period, the Participant will have no right to transfer any rights under his or her

Award and will have no rights of ownership in the Stock deliverable upon payment of the Restricted
Stock Units and will have no right to vote them, but the Committee may, at or after the Date of Grant,
authorize the payment of Dividend Equivalent Rights on such Restricted Stock Units on a deferred and
contingent basis, either in cash or in additional Stock; provided, however, that Dividend Equivalent
Rights or other distributions on Stock underlying Restricted Stock Units shall be deferred until and paid
contingent upon the vesting of such Restricted Stock Units.

(e) Each grant or sale of Restricted Stock Units will specify the time and manner of payment of the

Restricted Stock Units that have been earned. Each grant or sale will specify that the amount payable
with respect thereto will be paid by the Company in Stock or cash, or a combination thereof.

(f) Each grant or sale of Restricted Stock Units will be evidenced by an Evidence of Award. Each

Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent
with this Plan, as the Committee may approve.

8. Cash Incentive Awards, Performance Shares and Performance Units. The Committee may, from time to
time and upon such terms and conditions as it may determine, authorize the granting of Cash Incentive
Awards, Performance Shares and Performance Units. Each such grant may utilize any or all of the
authorizations, and will be subject to all of the requirements, contained in the following provisions:

(a) Each grant will specify the number or amount of Performance Shares or Performance Units, or amount
payable with respect to a Cash Incentive Award, to which it pertains, which number or amount may be
subject to adjustment to reflect changes in compensation or other factors.

(b) Each grant of a Cash Incentive Award, Performance Shares or Performance Units will specify

Management Objectives regarding the earning of the Award.

(c) The Performance Period with respect to each Cash Incentive Award or grant of Performance Shares or
Performance Units will be such period of time as will be determined by the Committee, which may be
subject to continued vesting or earlier lapse or other modification, including in the event of the
retirement, death, Disability or termination of Service of a Participant or in the event of a Change in
Control.

(d) Each grant will specify the time and manner of payment of a Cash Incentive Award, Performance

Shares or Performance Units that have been earned.

(e) The Committee may, on the Date of Grant of Performance Shares or Performance Units, provide for

the payment of Dividend Equivalent Rights to the holder thereof either in cash or in additional Stock,
which Dividend Equivalent Rights will be subject to deferral and payment on a contingent basis based
on the Participant’s earning and vesting of the Performance Shares or Performance Units, as applicable,
with respect to which such Dividend Equivalent Rights are paid.

(f) Each grant of a Cash Incentive Award, Performance Shares or Performance Units will be evidenced by
an Evidence of Award. Each Evidence of Award will be subject to this Plan and will contain such terms
and provisions, consistent with this Plan, as the Committee may approve.

9. Other Awards.

(a) Subject to applicable law and the applicable limits set forth in Section 3 of this Plan, the Committee
may authorize the grant to any Participant of Stock or such other awards that may be denominated or
payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock or
factors that may influence the value of such shares, including, without limitation, convertible or
exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for
Stock, awards with value and payment contingent upon performance of any specified Participating
Company, affiliates or business units thereof or any other factors designated by the Committee, and

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awards valued by reference to the book value of the Stock or the value of securities of, or the
performance of specified Participating Companies, affiliates or business units of Participating
Companies. The Committee will determine the terms and conditions of such awards. Stock delivered
pursuant to an award in the nature of a purchase right granted under this Section 9 will be purchased
for such consideration, paid for at such time, by such methods, and in such forms, including, without
limitation, Stock, other awards, notes or other property, as the Committee determines.

(b) Cash awards, as an element of or supplement to any other award granted under this Plan, may also be

granted pursuant to this Section 9.

awards in lieu of obligations of the Participating Company to pay cash or deliver other property under
this Plan or under other plans or compensatory arrangements, subject to such terms as will be
determined by the Committee in a manner that complies with Section 409A.

(d) The Committee may, at or after the Date of Grant, authorize the payment of dividends or Dividend

Equivalent Rights on awards granted under this Section 9 on a deferred and contingent basis, either in
cash or in additional Stock, based upon the earning and vesting of such awards.

(e) Each grant of an award under this Section 9 will be evidenced by an Evidence of Award. Each such
Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent
with this Plan, as the Committee may approve, and will specify the time and terms of delivery of the
applicable award.

(f) Notwithstanding anything to the contrary contained in this Plan, awards under this Section 9 may

provide for the earning or vesting of, or earlier elimination of restrictions applicable to, such award,
including in the event of the retirement, death, Disability or termination of Service of a Participant or
in the event of a Change in Control.

10. Administration of this Plan.

(a) This Plan will be administered by the Committee; provided, however, that notwithstanding anything in

this Plan to the contrary, the Board may grant Awards under this Plan to non-employee Directors and
administer this Plan with respect to such Awards. The Committee may from time to time delegate all or
any part of its authority under this Plan to a subcommittee thereof. To the extent of any such
delegation, references in this Plan to the Committee will be deemed to be references to such
subcommittee.

(b) The interpretation and construction by the Committee of any provision of this Plan or of any Evidence
of Award (or related documents) and any determination by the Committee pursuant to any provision of
this Plan or of any such agreement, notification or document will be final and conclusive. No member
of the Committee shall be liable for any such action or determination made in good faith. In addition,
the Committee is authorized to take any action it determines in its sole discretion to be appropriate
subject only to the express limitations contained in this Plan, and no authorization in any Plan section
or other provision of this Plan is intended or may be deemed to constitute a limitation on the authority
of the Committee.

(c) To the extent permitted by law, the Committee may delegate to one or more of its members, to one or
more Officers of the Company, or to one or more agents or advisors, such administrative duties or
powers as it may deem advisable, and the Committee, the subcommittee, or any person to whom duties
or powers have been delegated as aforesaid, may employ one or more persons to render advice with
respect to any responsibility the Committee, the subcommittee or such person may have under this
Plan. The Committee may, by resolution, authorize one or more Officers of the Company to do one or
both of the following on the same basis as the Committee: (i) designate Employees to be recipients of
Awards under this Plan; and (ii) determine the size of any such Awards; provided, however, that (A)
the Committee will not delegate such responsibilities to any such Officer for Awards granted to an
Employee who is an ‘‘officer’’ (for purposes of Section 16 of the Exchange Act), Director, or more
than 10% ‘‘beneficial owner’’ (as such term is defined in Rule 13d-3 promulgated under the Exchange
Act) of any class of the Company’s equity securities that is registered pursuant to Section 12 of the
Exchange Act, as determined by the Committee in accordance with Section 16 of the Exchange Act;

A-9

(B) the resolution providing for such authorization shall set forth the total number of shares of Stock
such Officer(s) may grant; and (C) the Officer(s) will report periodically to the Committee regarding
the nature and scope of the Awards granted pursuant to the authority delegated.

11. Adjustments. The Committee shall make or provide for such adjustments in the number of and kind of
shares of Stock covered by outstanding Options, Appreciation Rights, Restricted Stock, Restricted Stock
Units, Performance Shares and Performance Units granted hereunder and, if applicable, in the number of
and kind of shares of Stock covered by other awards granted pursuant to Section 9 of this Plan, in the
Exercise Price and Base Price provided in outstanding Options and Appreciation Rights, respectively, in
Cash Incentive Awards, and in other Award terms, as the Committee, in its sole discretion, exercised in good
faith, determines is equitably required to prevent dilution or enlargement of the rights of Participants that
otherwise would result from (a) any extraordinary cash dividend, stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of the Company, (b) any merger,
consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other
distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate
transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such
transaction or event or in the event of a Change in Control, the Committee may provide in substitution for
any or all outstanding Awards under this Plan such alternative consideration (including cash), if any, as it, in
good faith, may determine to be equitable in the circumstances and shall require in connection therewith the
surrender of all Awards so replaced in a manner that complies with Section 409A. In addition, for each
Option or Appreciation Right with an Exercise Price or Base Price, respectively, greater than the
consideration offered in connection with any such transaction or event or Change in Control, the Committee
may in its discretion elect to cancel such Option or Appreciation Right without any payment to the person
holding such Option or Appreciation Right. The Committee shall also make or provide for such adjustments
in the number of shares of Stock specified in Section 3 of this Plan as the Committee in its sole discretion,
exercised in good faith, determines is appropriate to reflect any transaction or event described in this
Section 11; provided, however, that any such adjustment to the number specified in Section 3(c) of this
Plan will be made only if and to the extent that such adjustment would not cause any Option intended to
qualify as an Incentive Stock Option to fail to so qualify.

12. Change in Control. For purposes of this Plan, except as may be otherwise prescribed by the Committee in
an Evidence of Award made under this Plan, a ‘‘Change in Control’’ will be deemed to have occurred upon
the occurrence (after the Effective Date) of any one or a combination of the following events:

(a)

any ‘‘person’’ (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the
‘‘beneficial owner’’ (as such term is defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the
total Fair Market Value or total combined voting power of the Company’s then-outstanding securities
entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall
not be deemed to have occurred if such degree of beneficial ownership results from any of the
following: (i) an acquisition by any person who on the Effective Date is the beneficial owner of more
than fifty percent (50%) of such voting power, (ii) any acquisition directly from the Company,
including, without limitation, pursuant to or in connection with a public offering of securities, (iii) any
acquisition by the Company, (iv) any acquisition by a trustee or other fiduciary under an employee
benefit plan of the Participating Company Group or (v) any acquisition by an entity owned directly or
indirectly by the Stockholders in substantially the same proportions as their ownership of the voting
securities of the Company; or

(b) an Ownership Change Event or series of related Ownership Change Events (collectively, a
‘‘Transaction’’) in which the Stockholders immediately before the Transaction do not retain
immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding securities entitled to vote generally in the
election of Directors or, in the case of an Ownership Change Event described in Section 2(cc)(iii), the
entity to which the assets of the Company were transferred (the ‘‘Transferee’’), as the case may be; or

(c)

consummation of a complete liquidation or dissolution of the Company after approval of the same by
the stockholders of the Company; provided, however, that a Change in Control shall be deemed not to

A-10

include a transaction described in subsections (a) or (b) of this Section 12 in which a majority of the
members of the board of directors of the continuing, surviving or successor entity, or parent thereof,
immediately after such transaction is comprised of Incumbent Directors.

For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an
interest resulting from ownership of the voting securities of one or more corporations or other business
entities which own the Company or the Transferee, as the case may be, either directly or through one or
more Subsidiary Corporations or other business entities. The Committee shall determine whether multiple
acquisitions of the voting securities of the Company and/or multiple Ownership Change Events are related
and to be treated in the aggregate as a single Change in Control, and its determination shall be final,
binding and conclusive.

13. Detrimental Activity and Recapture Provisions. Any Evidence of Award may reference a clawback policy
of the Company or provide for the cancellation or forfeiture of an Award or the forfeiture and repayment to
the Company of any gain related to an Award, or other provisions intended to have a similar effect, upon
such terms and conditions as may be determined by the Committee from time to time, if a Participant, either
(a) during the Participant’s Service with the Participating Company Group, or (b) within a specified period
after termination of such Service, engages in any detrimental activity, as described in the applicable
Evidence of Award or such clawback policy. In addition, notwithstanding anything in this Plan to the
contrary, any Evidence of Award or such clawback policy may also provide for the cancellation or forfeiture
of an Award or the forfeiture and repayment to the Company of any Stock issued under and/or any other
benefit related to an Award, or other provisions intended to have a similar effect, including upon such terms
and conditions as may be required by the Committee or under Section 10D of the Exchange Act and any
applicable rules or regulations promulgated by the Securities and Exchange Commission or any national
securities exchange or national securities association on which the Stock may be traded.

14. Accommodations for Participants of Different Nationalities. In order to facilitate the making of any grant

or combination of grants under this Plan, the Committee may provide for such special terms for Awards to
Participants as the Committee may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom given that Participants are expected to be nationals of the United States of
America and other countries, or to provide Services to the Participating Company Group both within and
outside of the United States of America. Moreover, the Committee may approve such supplements to or
amendments, restatements or alternative versions of this Plan (including sub-plans) (to be considered part of
this Plan) as it may consider necessary or appropriate for such purposes, without thereby affecting the terms
of this Plan as in effect for any other purpose, and the secretary or other appropriate Officer of the
Company may certify any such document as having been approved and adopted in the same manner as this
Plan. No such special terms, supplements, amendments or restatements, however, will include any
provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been
amended to eliminate such inconsistency without further approval by the Stockholders.

15. Transferability.

(a) Except as otherwise determined by the Committee, and subject to compliance with Section 17(b) of
this Plan and Section 409A, no Option, Appreciation Right, Restricted Stock, Restricted Stock Unit,
Performance Share, Performance Unit, Cash Incentive Award, award contemplated by Section 9 of this
Plan or Dividend Equivalent Rights paid with respect to Awards made under this Plan will be
transferable by the Participant except by will or the laws of descent and distribution. In no event will
any such Award granted under this Plan be transferred for value. Where transfer is permitted, references
to ‘‘Participant’’ shall be construed, as the Committee deems appropriate, to include any permitted
transferee to whom such Award is transferred. Except as otherwise determined by the Committee,
Options and Appreciation Rights will be exercisable during the Participant’s lifetime only by him or her
or, in the event of the Participant’s legal incapacity to do so, by his or her guardian or legal
representative acting on behalf of the Participant in a fiduciary capacity under state law or court
supervision.

(b) The Committee may specify on the Date of Grant that part or all of the Stock that is (i) to be issued or
transferred by the Company upon the exercise of Options or Appreciation Rights, upon the termination

A-11

of the Restriction Period applicable to Restricted Stock Units or upon payment under any grant of
Performance Shares or Performance Units or (ii) no longer subject to the substantial risk of forfeiture
and restrictions on transfer referred to in Section 6 of this Plan, will be subject to further restrictions
on transfer, including minimum holding periods.

16. Withholding Taxes. To the extent that the Company is required to withhold federal, state, local or foreign
taxes or other amounts in connection with any payment made or benefit realized by a Participant or other
person under this Plan, and the amounts available to the Company for such withholding are insufficient, it
will be a condition to the receipt of such payment or the realization of such benefit that the Participant or
such other person make arrangements satisfactory to the Company for payment of the balance of such taxes
or other amounts required to be withheld, which arrangements may include relinquishment of a portion of
such benefit. With respect to Participants who are ‘‘officers’’ subject to Section 16 of the Exchange Act, if
the Participant’s benefit is to be received in the form of Stock, then, unless otherwise determined by the
Committee, the Company will withhold from the Stock required to be delivered to the Participant, shares of
Stock having a value equal to the amount required to be withheld under applicable income and employment
tax laws. With respect to Participants who are not ‘‘officers’’ subject to Section 16 of the Exchange Act, if
the Participant’s benefit is to be received in the form of Stock, then, the Company may withhold from the
Stock required to be delivered to the Participant, shares of Stock having a value equal to the amount
required to be withheld under applicable income and employment tax laws. The Stock used for tax or other
withholding will be valued at an amount equal to the Fair Market Value of such Stock on the date the
benefit is to be included in Participant’s income. In no event will the Fair Market Value of the Stock to be
withheld and delivered pursuant to this Section 16 exceed the minimum amount required to be withheld,
unless (i) an additional amount can be withheld and not result in adverse accounting consequences, (ii) such
additional withholding amount is authorized by the Committee, and (iii) the total amount withheld does not
exceed the Participant’s estimated tax obligations attributable to the applicable transaction. Participants will
also make such arrangements as the Company may require for the payment of any withholding tax or other
obligation that may arise in connection with the disposition of Stock acquired upon the exercise of Options.

17. Compliance with Section 409A.

(a) To the extent applicable, it is intended that this Plan and any grants made hereunder comply with the

provisions of Section 409A, so that the income inclusion provisions of Section 409A(a)(1) of the Code
do not apply to the Participants. This Plan and any grants made hereunder will be administered in a
manner consistent with this intent. Any reference in this Plan to Section 409A will also include any
regulations or any other formal guidance promulgated with respect to such section by the U.S.
Department of the Treasury or the Internal Revenue Service.

(b) Neither a Participant nor any of a Participant’s creditors or beneficiaries will have the right to subject
any Section 409A Deferred Compensation payable under this Plan and grants hereunder to any
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment.
Except as permitted under Section 409A, any Section 409A Deferred Compensation payable to a
Participant or for a Participant’s benefit under this Plan and grants hereunder may not be reduced by, or
offset against, any amount owed by a Participant to the Company or any of its Subsidiaries.

(c)

If, at the time of a Participant’s separation from service (within the meaning of Section 409A), (i) the
Participant will be a specified employee (within the meaning of Section 409A and using the
identification methodology selected by the Company from time to time) and (ii) the Company makes a
good faith determination that an amount payable hereunder constitutes Section 409A Deferred
Compensation the payment of which is required to be delayed pursuant to the six-month delay rule set
forth in Section 409A in order to avoid taxes or penalties under Section 409A, then the Company will
not pay such amount on the otherwise scheduled payment date but will instead pay it, without interest,
on the tenth business day of the seventh month after such separation from service.

(d) Solely with respect to any Award that constitutes Section 409A Deferred Compensation and that is

payable on account of a Change in Control (including any installments or stream of payments that are
accelerated on account of a Change in Control), a Change in Control shall occur only if such event also
constitutes a ‘‘change in the ownership,’’ ‘‘change in effective control,’’ and/or a ‘‘change in the

A-12

ownership of a substantial portion of assets’’ of the Company as those terms are defined under Treasury
Regulation §1.409A-3(i)(5), but only to the extent necessary to establish a time and form of payment
that complies with Section 409A, without altering the definition of Change in Control for any purpose
in respect of such Award.

(e) Notwithstanding any provision of this Plan and grants hereunder to the contrary, in light of the

uncertainty with respect to the proper application of Section 409A, the Company reserves the right to
make amendments to this Plan and grants hereunder as the Company deems necessary or desirable to
avoid the imposition of taxes or penalties under Section 409A. In any case, a Participant will be solely
responsible and liable for the satisfaction of all taxes and penalties that may be imposed on a
Participant or for a Participant’s account in connection with this Plan and grants hereunder (including
any taxes and penalties under Section 409A), and neither the Company nor any of its affiliates will
have any obligation to indemnify or otherwise hold a Participant harmless from any or all of such taxes
or penalties.

18. Amendments.

(a) The Board may at any time and from time to time amend this Plan in whole or in part; provided,

however, that if an amendment to this Plan, for purposes of applicable stock exchange rules and except
as permitted under Section 11 of this Plan, (i) would materially increase the benefits accruing to
Participants under this Plan, (ii) would materially increase the number of securities which may be
issued under this Plan, (iii) would materially modify the requirements for participation in this Plan, or
(iv) must otherwise be approved by the Stockholders in order to comply with applicable law or the
rules of the New York Stock Exchange or, if the Stock is not traded on the New York Stock Exchange,
the principal national securities exchange upon which the Stock is traded or quoted, all as determined
by the Board, then, such amendment will be subject to Stockholder approval and will not be effective
unless and until such approval has been obtained.

(b) Except in connection with a corporate transaction or event described in Section 11 of this Plan or in

connection with a Change in Control, the terms of outstanding Awards may not be amended to reduce
the Exercise Price of outstanding Options or the Base Price of outstanding Appreciation Rights, or
cancel outstanding ‘‘underwater’’ Options or Appreciation Rights (including following a Participant’s
voluntary surrender of ‘‘underwater’’ Options or Appreciation Rights) in exchange for cash, other
awards or Options or Appreciation Rights with an Exercise Price or Base Price, as applicable, that is
less than the Exercise Price of the original Options or Base Price of the original Appreciation Rights, as
applicable, without Stockholder approval. This Section 18(b) is intended to prohibit the repricing of
‘‘underwater’’ Options and Appreciation Rights and will not be construed to prohibit the adjustments
provided for in Section 11 of this Plan. Notwithstanding any provision of this Plan to the contrary, this
Section 18(b) may not be amended without approval by the Stockholders.

(c)

If permitted by Section 409A, but subject to the paragraph that follows, including in the case of
termination of employment or service, or in the case of unforeseeable emergency or other
circumstances or in the event of a Change in Control, to the extent a Participant holds an Option or
Appreciation Right not immediately exercisable in full, or any Restricted Stock as to which the
substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any
Restricted Stock Units as to which the Restriction Period has not been completed, or any Cash
Incentive Awards, Performance Shares or Performance Units which have not been fully earned, or any
Dividend Equivalent Rights or other awards made pursuant to Section 9 of this Plan subject to any
vesting schedule or transfer restriction, or who holds Stock subject to any transfer restriction imposed
pursuant to Section 15(b) of this Plan, the Committee may, in its sole discretion, provide for continued
vesting or accelerate the time at which such Option, Appreciation Right or other award may vest or be
exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on transfer
will lapse or the time when such Restriction Period will end or the time at which such Cash Incentive
Awards, Performance Shares or Performance Units will be deemed to have been earned or the time
when such transfer restriction will terminate or may waive any other limitation or requirement under
any such Award.

A-13

(d) Subject to Section 18(b) of this Plan, the Committee may amend the terms of any Award theretofore
granted under this Plan prospectively or retroactively. Except for adjustments made pursuant to
Section 11 of this Plan, no such amendment will materially impair the rights of any Participant without
his or her consent. The Board may, in its discretion, terminate this Plan at any time. Termination of this
Plan will not affect the rights of Participants or their successors under any Awards outstanding
hereunder and not exercised in full on the date of termination.

19. Choice of Law. Except to the extent governed by applicable federal law, the validity, interpretation,

construction and performance of the Plan and each Evidence of Award shall be governed by the laws of the
State of Delaware, without regard to its conflict of law rules.

20. Effective Date/Termination. This Plan became effective as of the Effective Date. No grants will be made
on or after the Effective Date under the Predecessor Plans, provided that outstanding awards granted under
the Predecessor Plans will continue unaffected following the Effective Date. No grant will be made under
this Plan on or after the tenth anniversary of the Effective Date, but all grants made prior to such date will
continue in effect thereafter subject to the terms thereof and of this Plan. For clarification purposes, the
terms and conditions of this Plan shall not apply to or otherwise impact previously granted and outstanding
awards under the Predecessor Plans, as applicable. The Plan was amended and restated effective as of
May 31, 2023 in order to increase the number of shares available for issuance under the Plan by 1,990,000
shares.

21. Miscellaneous Provisions.

(a) The Company will not be required to issue any fractional Stock pursuant to this Plan. The Committee

may provide for the elimination of fractions or for the settlement of fractions in cash.

(b) This Plan will not confer upon any Participant any right with respect to continuance of employment or
other service with Participating Company Group, nor will it interfere in any way with any right any
Participating Company would otherwise have to terminate such Participant’s employment or other
service at any time.

prevent any Option that was intended to qualify as an Incentive Stock Option from qualifying as such,
that provision will be null and void with respect to such Option. Such provision, however, will remain
in effect for other Options and there will be no further effect on any provision of this Plan.

(d) No Award under this Plan may be exercised by the holder thereof if such exercise, and the receipt of
cash or shares thereunder, would be, in the opinion of counsel selected by the Company, contrary to
law or the regulations of any duly constituted authority having jurisdiction over this Plan.

(e) Absence on leave approved by a duly constituted Officer of the Company or any of its Subsidiaries

will not be considered interruption or termination of service of any Employee for any purposes of this
Plan or Awards granted hereunder.

(f) No Participant will have any rights as a Stockholder with respect to any Stock subject to Awards

granted to him or her under this Plan prior to the date as of which he or she is actually recorded as the
holder of such Stock upon the share records of the Company.

(g) The Committee may condition the grant of any Award or combination of Awards authorized under this
Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other
compensation otherwise payable by the Participating Company Group to the Participant.

(h) Except with respect to Options and Appreciation Rights, the Committee may permit Participants to

elect to defer the issuance of Stock under this Plan pursuant to such rules, procedures or programs as it
may establish for purposes of this Plan and which are intended to comply with the requirements of
Section 409A. The Committee also may provide that deferred issuances and settlements include the
crediting of Dividend Equivalent Rights or interest on the deferral amounts.

(i)

If any provision of this Plan is or becomes invalid or unenforceable in any jurisdiction, or would
disqualify this Plan or any Award under any law deemed applicable by the Committee, such
provision will be construed or deemed amended or limited in scope to conform to applicable laws

A-14

or, in the discretion of the Committee, it will be stricken and the remainder of this Plan will
remain in full force and effect. Notwithstanding anything in this Plan or an Evidence of Award to
the contrary, nothing in this Plan or in an Evidence of Award prevents a Participant from
providing, without prior notice to the Company, information to governmental authorities regarding
possible legal violations or otherwise testifying or participating in any investigation or proceeding
by any governmental authorities regarding possible legal violations, and for purpose of clarity a
Participant is not prohibited from providing information voluntarily to the Securities and Exchange
Commission pursuant to Section 21F of the Exchange Act.

22. Share-Based Awards in Substitution for Awards Granted by Another Company. Notwithstanding

anything in this Plan to the contrary:

(a) Awards may be granted under this Plan in substitution for or in conversion of, or in connection with an
assumption of, stock options, SARs, restricted stock, restricted stock units or other share or share-based
awards held by awardees of an entity engaging in a corporate acquisition or merger transaction with the
Participating Company Group. Any conversion, substitution or assumption will be effective as of the
close of the merger or acquisition, and, to the extent applicable, will be conducted in a manner that
complies with Section 409A. The Awards so granted may reflect the original terms of the awards being
assumed or substituted or converted for and need not comply with other specific terms of this Plan, and
may account for Stock substituted for the securities covered by the original awards and the number of
shares subject to the original awards, as well as any exercise or purchase prices applicable to the
original awards, adjusted to account for differences in stock prices in connection with the transaction.

(b)

In the event that a company acquired by the any Participating Company or with which any
Participating Company merges has shares available under a pre-existing plan previously approved by
stockholders and not adopted in contemplation of such acquisition or merger, the shares available for
grant pursuant to the terms of such plan (as adjusted, to the extent appropriate, to reflect such
acquisition or merger) may be used for awards made after such acquisition or merger under this Plan;
provided, however, that awards using such available shares may not be made after the date awards or
grants could have been made under the terms of the pre-existing plan absent the acquisition or merger,
and may only be made to individuals who were not Employees or Directors of the Participating
Company Group prior to such acquisition or merger.

(c) Any Stock that is issued or transferred by, or that are subject to any awards that are granted by, or
become obligations of, the Company under Sections 22(a) or 22(b) of this Plan will not reduce the
Stock available for issuance or transfer under this Plan or otherwise count against the limits contained
in Section 3 of this Plan. In addition, no Stock subject to an award that is granted by, or becomes an
obligation of, the Company under Sections 22(a) or 22(b) of this Plan, will be added to the aggregate
limit contained in Section 3(a)(i) of this Plan.

A-15

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022
or

□ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number 001-34791

Magnachip Semiconductor Corporation
(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

83-0406195
(I.R.S. Employer
Identification No.)

c/o Magnachip Semiconductor, Ltd.
15F, 76 Jikji-daero 436beon-gil, Heungdeok-gu
Cheongju-si, Chungcheongbuk-do, Republic of Korea 28581
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: +82 (2) 6903-3000
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, par value $0.01 per share

Trading Symbol
MX
Securities registered pursuant to Section 12(g) of the Act: None

Name of each exchange on which registered
New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. □ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. □ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. ☒ Yes □ No
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files. ☒ Yes □ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging
growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in
Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Non-Accelerated Filer

☒ Accelerated Filer
□

Smaller Reporting Company
Emerging growth company

□
□
□

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. □
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). □
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). □ Yes ☒ No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently
completed second fiscal quarter. $643,221,377.
As of February 10, 2023, the registrant had 43,536,977 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement relating to its 2023 annual meeting of stockholders will be incorporated by reference into Part III
of this Annual Report on Form 10-K or included by amendment to this report within 120 days after the end of the fiscal year to which this report
relates.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2022
TABLE OF CONTENTS

PART I

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Item 6.
Item 7.

Item 7A.
Item 8.
Item 9.

Item 9A.
Item 9B.
Item 9C.

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . .

PART III

Item 10.
Item 11.
Item 12.

Item 13.
Item 14.

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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PART IV

Item 15.
Item 16.

Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

98
103

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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PART I

INDUSTRY AND MARKET DATA

We have made statements in this Annual Report on Form 10-K for the year ended December 31, 2022 (this

‘‘Report’’) regarding our industry and our position in the industry based on our experience in the industry and
our own views of market conditions, but we have not independently verified those statements. We do not have
any obligation to announce or otherwise make publicly available updates or revisions to forecasts contained in
these documents.

Statements made in this Report, unless the context otherwise requires, include the use of the terms ‘‘us,’’

‘‘we,’’ ‘‘our,’’ the ‘‘Company’’ and ‘‘Magnachip’’ to refer to Magnachip Semiconductor Corporation and its
consolidated subsidiaries. The term ‘‘Korea’’ refers to the Republic of Korea or South Korea. On September 1,
2020, we completed the sale of our Foundry Services Group business and our fabrication facility located in
Cheongju, Korea to Key Foundry Co., Ltd. Unless otherwise noted herein, historical operational metrics
presented herein do not include those of the Foundry Services Group.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made certain ‘‘forward-looking’’ statements in this Report within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), and Section 27A of the Securities Act
of 1933, as amended (the ‘‘Securities Act’’), that involve risks and uncertainties. Forward-looking statements give
our current expectations and projections relating to our financial condition, results of operations, plans,
objectives, future performance and business. You can identify these statements by the fact that they do not relate
strictly to historical or current facts. These statements may include words such as ‘‘anticipate,’’ ‘‘estimate,’’
‘‘expect,’’ ‘‘project,’’ ‘‘intend,’’ ‘‘plan,’’ ‘‘believe’’ and other words and terms of similar meaning in connection
with any discussion of the timing or nature of future operating or financial performance or other events. All
statements other than statements of historical facts included in this Report that address activities, events or
developments that we expect, believe or anticipate will or may occur in the future are forward-looking
statements.

These forward-looking statements are largely based on our expectations and beliefs concerning future

events, which reflect estimates and assumptions made by our management. These estimates and assumptions
reflect our best judgment based on currently known market conditions and other factors relating to our operations
and business environment, all of which are difficult to predict and many of which are beyond our control.
Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a
number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about
future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements
contained in this Report are not guarantees of future performance, and we cannot assure any reader that those
statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ
materially from those anticipated or implied in the forward-looking statements due to the factors listed in the
‘‘Risk Factors,’’ ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and
‘‘Business’’ sections and elsewhere in this Report.

All forward-looking statements speak only as of the date of this Report. We do not intend to publicly update

or revise any forward-looking statements as a result of new information or future events or otherwise, except as
required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons
acting on our behalf.

‘‘Magnachip’’ is a registered trademark of us and our subsidiaries and ‘‘Magnachip Everywhere’’ is our
registered trademark and service mark. All other product, service and company names mentioned in this Report
are the service marks or trademarks of their respective owners.

Item 1.

Business

General

We are a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for
communications, Internet of Things (‘‘IoT’’) applications, consumer, computing, industrial and automotive
applications. We have a proven record with more than 40 years of operating history, a portfolio of approximately

1,100 registered patents and pending applications and extensive engineering and manufacturing process expertise.
Our standard products business includes our Display Solutions and Power Solutions business lines. Our Display
Solutions products provide panel display solutions to major suppliers of large and small rigid and flexible panel
displays, and a wide range of applications including smartphones, TVs, automotive and IT applications such as
monitors, notebook PCs, tablet PCs as well as AR/VRs. Our Power Solutions products include discrete and
integrated circuit solutions for power management in communications, consumer, computing, servers, automotive,
and industrial applications.

Our wide variety of analog and mixed-signal semiconductor products allow us to address multiple

high-growth end markets and rapidly develop and introduce new products in response to market demands. Our
design center and substantial manufacturing operations in Korea place us at the core of the global electronics
device supply chain. We believe this enables us to quickly and efficiently respond to our customers’ needs, and
allows us to better serve and capture additional demand from existing and new customers. Certain of our OLED
products are produced using external 12-inch foundries. Through a strategic cooperation with external 12-inch
foundries, we strive to outsource wafers at competitive prices and produce quality products.

We have a long history of supplying and collaborating on product and technology development with leading

innovators in the consumer electronics market. As a result, we have been able to strengthen our technology and
develop products that are in high demand by our customers and end consumers. We sold approximately 400
distinct products in the year ended December 31, 2022 with a substantial portion of our revenues derived from a
concentrated number of customers.

Our business is largely driven by innovation in the consumer electronics markets and the growing adoption
by consumers of worldwide of electronic devices for use in their daily lives. The consumer electronics market is
large and growing rapidly, largely due to consumers increasingly accessing a wide variety of rich media content,
such as high definition audio and video, mobile devices, televisions and games on advanced consumer electronic
devices. Electronics manufacturers are continuously implementing advanced technologies in new generations of
electronic devices using analog and mixed-signal semiconductor components, such as display drivers that enable
display of high resolution images, encoding and decoding devices that allow playback of high definition audio
and video, and power semiconductors that increase power efficiency, thereby improving heat dissipation and
extending battery life.

For the year ended December 31, 2022, we generated total revenues of $337.7 million, net loss of

$8.0 million, operating loss of $5.2 million, Adjusted EBITDA of $19.5 million, Adjusted Operating Income of
$4.1 million and Adjusted Net Income of $8.8 million. See ‘‘Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations’’ elsewhere in this Report for an explanation of our use of
Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income and a reconciliation to net income
(loss) and operating income (loss) prepared in accordance with United States Generally Accepted Accounting
Principles (‘‘U.S. GAAP’’).

Our History

Our business was named ‘‘MagnaChip Semiconductor’’ when it was acquired from SK hynix Inc., formerly

known as Hynix Semiconductor, Inc. (‘‘SK hynix’’), in October 2004.

On March 10, 2011, we completed our initial public offering. In connection with our initial public offering,

we converted from a Delaware limited liability company to a Delaware corporation.

On December 30, 2020, we changed our name from ‘‘MagnaChip Semiconductor Corporation’’ to

‘‘Magnachip Semiconductor Corporation.’’

Legacy Foundry Services Group Business

On September 1, 2020, we completed the sale of our Foundry Services Group business and our fabrication

facility located in Cheongju, Korea (known as ‘‘Fab 4’’) to Key Foundry Co., Ltd. This sale was part of a
strategic shift in our operational focus to our standard products business. The Foundry Services Group business
provided specialty analog and mixed signal foundry services mainly for fabless and Integrated Device
Manufacturer semiconductor companies.

Our Products

Our Display Solutions line of products provide flat panel display solutions to major suppliers of large and

small flat panel displays. These products include source and gate drivers and timing controllers that cover a wide
range of flat panel displays used in mobile communications, automotives, entertainment devices, notebook PCs,
monitors and liquid crystal display (LCD), organic light emitting diodes (OLED) and Micro light emitting diode
(Micro LED) televisions. Our Display Solutions products support the industry’s most advanced display
technologies, such as OLEDs, and low temperature polysilicon thin film transistor (LTPS TFT), as well as
high-volume display technologies such as amorphous silicon thin film transistors (a-Si TFTs). Since 2007, we
have designed and manufactured OLED display driver integrated circuit (IC) products. Our current portfolio of
OLED solutions address a wide range of resolutions ranging from HD (High Definition) to WQHD (Wide
Quadruple High Definition) for wide range of applications including smartphones, TVs, automotive and IT
applications such as monitors, notebook PCs, tablet PCs as well as AR/VRs. Our Display Solutions products
represented 21.2%, 43.3% and 59.0% of our total revenues for the fiscal years ended December 31, 2022, 2021
and 2020, respectively.

We expanded our business and market opportunity by establishing our Power Solutions product line in late

2007. We have introduced a number of power management semiconductor products, including discrete and
integrated circuit solutions for power management in high-volume consumer applications. These products include
metal oxide semiconductor field effect transistors (MOSFETs), insulated-gate bipolar transistors (IGBTs),
AC-DC/DC-DC converters, LED drivers, regulators and power management integrated circuits (PMICs) for a
range of devices, including televisions, smartphones, mobile phones, wearable devices, desktop PCs, notebooks,
tablet PCs, other consumer electronics, automotive, and industrial applications such as power suppliers, e-bikes,
photovoltaic inverters, LED lighting and motor drives. Our Power Solutions products represented 68.3%, 48.0%
and 32.8% of our total revenues for the fiscal years ended December 31, 2022, 2021 and 2020, respectively.

Market Opportunity

The semiconductor market is large and is expanding its applications. Growth in this market is being driven

by consumers seeking to enjoy a wide variety of rich media content, such as high definition audio and video,
mobile devices, televisions and games. Recently, industrial applications such as power suppliers, e-bikes,
photovoltaic inverters, LED lighting, motor drives, and automotive applications such as on board chargers,
electric motor drives, electric pumps, DC-DC converters and powertrain inverters in hybrid & battery electric
vehicle (HEV & BEV) are also driving growth in the semiconductor market. Electronics device manufacturers
recognize that the consumer entertainment experience plays a critical role in differentiating their products. To
address and further stimulate consumer demand, electronics manufacturers have been driving rapid advances in
the technology, functionality, form factor, cost, quality, reliability and power consumption of their products.
Electronics manufacturers are continuously implementing advanced technologies in new generations of electronic
devices using analog and mixed-signal semiconductor components, such as display drivers that enable display of
high resolution images, encoding and decoding devices that allow playback of high definition audio and video,
and power semiconductors that increase power efficiency, thereby improving heat dissipation and extending
battery life. These advanced generations of consumer devices are growing faster than the overall electronics
device market.

The user experience delivered by a consumer electronic device is substantially driven by the quality of the

display, audio and video processing capabilities and power efficiency of the device. Analog and mixed-signal
semiconductors enable and enhance these capabilities. Examples of these analog and mixed-signal
semiconductors include display drivers, timing controllers, audio encoding and decoding devices, or codecs, and
interface circuits, as well as power semiconductors such as voltage regulators, converters and switches.

Requirements of Leading Electronic Devices Manufacturers

We believe our target customers view the following characteristics and capabilities as key differentiating

factors among available analog and mixed-signal semiconductor suppliers:

•

Broad Offering of Differentiated Products with Advanced System-Level Features and Functions.
Leading electronic devices manufacturers seek to differentiate their products by incorporating
innovative semiconductor products that enable unique system-level functionality and enhance

•

performance. These consumer electronics manufacturers seek to closely collaborate with semiconductor
solutions providers that continuously develop new and advanced products, and technologies that enable
state of the art features and functions, such as bright and thin displays, small form factor and energy
efficiency.

Fast Time-to-Market with New Products. As a result of rapid technological advancements and short
product lifecycles, our target customers typically prefer suppliers who have a compelling pipeline of
new products and capacity to leverage a substantial intellectual property and technology base to
accelerate product design and manufacturing when needed.

Ability to Deliver Cost Competitive Solutions. Electronics manufacturers are under constant pressure to
deliver cost-competitive solutions. To accomplish this objective, they need strategic semiconductor
suppliers that have the ability to provide system-level solutions, highly integrated products and a broad
product offering at a range of price points and have the design and manufacturing infrastructure and
logistical support to deliver cost competitive products.

Focus on Delivering Highly Energy-Efficient Products. Consumers increasingly seek longer run-time,
environmentally friendly and energy-efficient consumer electronic products. In addition, there is an
increasing regulatory focus on reducing energy consumption of consumer electronic products. As a
result of a global focus on more environmentally friendly products, our customers are seeking analog
and mixed-signal semiconductor suppliers that have the technological expertise to deliver solutions that
satisfy these ever increasing regulatory and consumer power efficiency demands.

Our Competitive Strengths

Designing and manufacturing analog and mixed-signal semiconductors capable of meeting the evolving
functionality requirements for electronics devices are challenging. In order to grow and succeed in the industry,
we believe semiconductor suppliers must have a broad, advanced intellectual property portfolio, product design
expertise, comprehensive product offerings and specialized manufacturing process technologies and capabilities.
Our competitive strengths enable us to offer our customers solutions to solve their key challenges. We believe
our strengths include:

•

Advanced Analog and Mixed-Signal Semiconductor Technology. Our long operating history, large
patent portfolio, extensive engineering and manufacturing process expertise and analog and
mixed-signal intellectual property allow us to leverage our technology and develop new products across
multiple end markets. Our product development efforts are supported by a team of over 220 engineers
as of the date of this Annual Report. Our platform allows us to develop and introduce new products
quickly and integrate numerous functions into a single product. For example, we were one of the first
companies to introduce a commercial OLED display driver for mobile phones.

Established Relationships and Close Collaboration with Leading Global Electronics Companies. We
have a long history of supplying and collaborating on product and technology development with
leading innovators in the consumer electronics market. Our close customer relationships have been built
based on many years of close collaborative product development, which provides us with deep
system-level knowledge and key insights into our customers’ needs. As a result, we are able to
continuously strengthen our technology in areas of strategic interest for our customers and focus on
those products that our customers and end consumers demand the most.

Longstanding Presence in Asia and Proximity to Global Electronics Devices Supply Chain. Our
presence in Asia facilitates close contact with our customers and fast response to their needs, and
enhances our visibility into new product opportunities, markets and technology trends. Our design
center and substantial manufacturing operations in Korea place us close to many of our largest
customers and to the core of the global electronics devices supply chain. We have active applications,
engineering, product design and customer support resources, as well as senior management and
marketing resources, in geographic locations close to our customers. This allows us to strengthen our
relationship with customers through better service, faster turnaround time and improved product design
collaboration. We believe this also helps our customers to deliver products faster than their competitors
and to solve problems more efficiently than would be possible with other suppliers.

•

Broad Portfolio of Product Offerings Targeting Large, High-Growth Markets. We continue to develop
a wide variety of analog and mixed-signal semiconductor solutions for multiple high-growth electronics
device end markets. We believe our expanding product offerings allow us to provide additional
products to new and existing customers and to cross-sell our products to our established customers. For
example, we have leveraged our technology expertise and customer relationships to develop and grow
power management solutions to customers. Our power management solutions enable our customers to
increase system stability and improve heat dissipation and energy use, resulting in improved system
efficiency and system cost savings for our customers, as well as environmental benefits. We have been
able to sell these new products to our existing customers as well as expand our customer base.

• Highly Efficient Manufacturing Capabilities. Our manufacturing strategy is focused on optimizing our

asset utilization across our display driver and power management products, which enables us to
maintain the price competitiveness of our products through our low-cost operating structure and
improve our operational efficiency. We believe the location of our primary manufacturing and research
and development facilities in Asia and the relatively low need for ongoing capital expenditures provide
us with a number of cost advantages. Since 2007, we had designed and manufactured OLED display
driver ICs in our internal manufacturing facilities. As we expanded our design capabilities to products
that require lower geometries unavailable at our existing manufacturing facilities, we began outsourcing
manufacturing of certain OLED display driver ICs to external 12-inch foundries starting in the second
half of 2015 and we have started outsourcing 8-inch wafer for OLED TV ICs after the sale of our
fabrication facility located in Cheongju, Korea in 2020. This additional source of manufacturing is an
increasingly important part of our supply chain management. By outsourcing manufacturing of OLED
products to external foundries, we are able to adapt dynamically to changing customer requirements
and address growing markets without substantial capital investments by us.

Our Strategy

Our objective is to grow our business, cash flow and profitability and to continue strengthening our position

in the semiconductor industry as a leading provider of analog and mixed-signal semiconductor products for
high-volume markets. Our business strategy emphasizes the following key elements:

•

Increase Business with Existing Customers. We have a global customer base consisting of leading
consumer electronics OEMs that sell into multiple end markets. We intend to continue to strengthen our
relationships with our customers by collaborating on critical design and product development in order
to improve our design-win rates. We seek to increase our customer penetration by more closely
aligning our product roadmap with those of our key customers and take advantage of our broad product
portfolio, our deep knowledge of customer needs and existing relationships to sell more existing and
new products.

Broaden Our Customer Base. We expect to continue to expand our global customer base, particularly
in China, Hong Kong, and Taiwan, which we collectively refer to as Greater China, and other
high-growth geographies, to penetrate new accounts. In addition, we intend to introduce new products
and variations of existing products to address a broader customer base. In order to broaden our market
penetration, we are complementing our direct customer relationships and sales with an improved base
of distributors, with a particular focus on the growth of our power management business.

Drive Execution Excellence. We intend to improve our execution through a number of management
initiatives, new processes for product development, customer service and personnel development. We
expect these ongoing initiatives will contribute to improvement of our new product development and
customer service as well as enhance our commitment to a culture of quick action and execution by our
workforce. In addition, we have focused on improving our manufacturing efficiency during the past
several years.

Return on Capital Investments and Cash Flow Generation. We manufacture most of our Display
Solutions products at external foundries. Through a strategic cooperation with external foundries, we
are able to adapt dynamically to changing customer requirements and address growing markets without
substantial capital investments. We manufacture our Power Solutions products by utilizing our in-house
manufacturing facility and external foundry to address a broad portfolio of power products while we
seek to maximize return on capital investments and our cash flow generation. We intend to keep our

capital expenditures relatively low by maintaining our focus on specialty process technologies that do
not require substantial investment in frequent upgrades to the latest manufacturing equipment. However,
from time to time, we make special investments to enhance our manufacturing capabilities by investing
in new equipment and expanding our facility, which we expect will have a positive impact on our
future new product development and revenue, particularly during the period of global shortage of
capacity.

Our Technology

We continuously strengthen our advanced analog and mixed-signal semiconductor technology platform by

developing innovative technologies and integrated circuit building blocks that enhance the functionality of
electronics devices through brighter, thinner displays, enhanced image quality, smaller form factor and longer
battery life. Our goal is to leverage our experience and development initiatives across multiple end markets and
utilize our understanding of system-level issues our customers face to introduce new technologies that enable our
customers to develop more advanced, higher performance products.

Our display technology portfolio includes building blocks for display drivers and timing controllers,

processor and interface technologies, as well as sophisticated production techniques, such as chip-on-glass
(COG), chip-on-film (COF) and chip-on-plastic (COP) for rigid and flexible OLED displays. Our advanced
display drivers incorporate Oxide, Low-Temperature Polycrystalline Oxide (LTPO) OLED panel technologies that
enable the highest resolution displays. Furthermore, we are developing a broad intellectual property portfolio to
improve the quality and the power efficiency of displays, including the development of our high speed interface,
high quality image enhancement display data compression and optical compensation technology for OLED
displays.

Expertise in ultra-high voltage (UHV), high voltage and deep trench BCDMOS process technologies, low
power analog and mixed-signal design capabilities and packaging know-how are key requirements in the power
management market. We are currently leveraging our capabilities in these areas with products such as
AC-DC/DC-DC converters, LED drivers, regulators, power management integrated circuits (PMICs), power
MOSFETs and IGBTs. We believe our system-level understanding of applications such as LCD televisions,
smartphones, computing, and servers, automotive, and industrial applications will allow us to more quickly
develop and customize power management solutions for our customers in these markets.

Products by Business Line

Our broad portfolio of products addresses multiple high-growth, consumer-focused end markets. A key
component of our product strategy is to supply multiple related product offerings to each of the end markets that
we serve.

Display Solutions

Display Driver Characteristics. Display drivers deliver defined analog voltages and currents that activate
pixels to exhibit images on displays. The following key characteristics determine display driver performance and
end-market application:

•

Resolution and Number of Channels. Resolution determines the level of detail displayed within an
image and is defined by the number of pixels per line multiplied by the number of lines on a display.
For large displays, higher resolution typically requires more display drivers for each panel. Display
drivers that have a greater number of channels, however, generally require fewer display drivers for
each panel and command a higher selling price per unit. Mobile displays, conversely, are typically
single chip solutions designed to deliver a specific resolution. We cover resolutions ranging from VGA
(640 x 480) to UHD (3840 x 2160).

Color Depth. Color depth is the number of colors that can be displayed on a panel. For example, for
TFT-LCD panels, 262 thousand colors are supported by 6-bit source drivers; 16 million colors are
supported by 8-bit source drivers; and 1 billion colors are supported by 10-bit source drivers.

•

Operational Voltage. Display drivers are characterized by input and output voltages. Source drivers
typically operate at input voltages from 1.62 to 3.6 volts and output voltages between 9 and 18 volts.
Gate drivers typically operate at input voltages from 1.62 to 3.6 volts and output voltages from 30 to
45 volts. Lower input voltage results in lower power consumption and electromagnetic interference
(EMI).

Gamma Curve. The relationship between the light passing through a pixel and the voltage applied to
the pixel by the source driver is referred to as the gamma curve. The gamma curve of the source driver
can correct some imperfections in picture quality in a process generally known as gamma correction.
Some advanced display drivers feature up to three independent gamma curves to facilitate this
correction.

Driver Interface. Driver interface refers to the connection between the timing controller and the display
drivers. Display drivers increasingly require higher bandwidth interface technology to address the larger
data transfer rate necessary for higher definition images. The principal types of interface technologies
are embedded clock point to point interface (EPI), mini-low voltage differential signaling (m-LVDS),
unified standard interface (USI) and mobile industry processor interface (MIPI).

Package Type. The assembly of display drivers typically uses COF, COG and COP package types.

Large Display Solutions. We provide display solutions for a wide range of flat panel display sizes used
in LCD TVs, OLED TVs, Micro LED TVs as well as IT applications such as monitors, notebook PCs,
tablet PCs, automotives and public information displays.

Our large display solutions include source and gate drivers and timing controllers with a variety of

interfaces, voltages, frequencies and packages to meet customers’ needs. These products include advanced
technologies such as high channel count, with products in mass production to provide up to 1,542 channels. Our
large display solutions are designed to allow customers to cost-effectively meet the increasing demand for high
resolution displays. We have focused extensively on reducing the die size of our large display drivers and other
solutions products to reduce costs without having to migrate to smaller geometries. For example, we have
implemented several solutions to reduce die size in large display drivers, such as optimizing design schemes and
design rules and applying specific technologies that we have developed internally. We are currently focusing on
growing display segments such as OLED TVs and automotive. We have recently introduced a number of new
display driver ICs for OLED TV and automotive.

The table below sets forth the features of our products, both in mass production and in customer

qualification, which is the final stage of product development, for large-sized displays:

Product

TFT-LCD Source Drivers

•
•

Key Features

480 to 1,542 output channels
6-bit (262 thousand colors), 8-bit
(16 million colors), 10-bit (1 billion colors)

• Output voltage ranging from 9V to 18V
• Low power consumption and low EMI
• COF package types
• EPI, m-LVDS, USI interface technologies

TFT-LCD Gate Drivers

272 to 960 output channels

•
• Output voltage ranging from 30V to 45V
• COF and COG package types

Timing Controllers

OLED Source Drivers

Micro LED Drivers*

• Wide range of resolutions
• EPI, m-LVDS, MIPI, USI-T interface

technologies
Input voltage ranging from 1.6V to 3.6V

•

960 output channels
10 bit (1 billion colors)

•
•
• Output voltage: 18V
• COF package type
• EPI interface technology

•
552 output channels (3 Mux)
•
10 bit (1 billion colors)
• Output voltage: max 18V
• COF package type
• USI interface technology

Applications

• LCD/LED TVs
• Notebooks
• LCD/LED monitors
• Automotive

• Tablet PCs
• LCD/LED TVs
• Notebooks
• Automotive

• Tablet PCs
• Public information display

• OLED TVs

• Micro LED TVs

In customer qualification stage

Mobile Display Solutions. Our mobile display solutions incorporate the industry’s most advanced display

technologies, such as OLED and LTPS, as well as high-volume technologies such as a-Si TFT. Our mobile
display products offer specialized capabilities, including high speed serial interfaces, such as mobile display
digital interface (MDDI), MIPI, reduced swing differential signaling interface (RSDS) and logic-based OTP
memory. We focus extensively on reducing the die size of our mobile display drivers and other solutions
products to reduce costs. For example, we have implemented several solutions to reduce die size in mobile
display drivers, such as optimizing design schemes and design rules and applying specific technologies that we
have developed internally. Further, we are building a distinctive intellectual property portfolio that allows us to
provide features that reduce power consumption, such as CABC and ACL. This intellectual property portfolio
will also support our power management product development initiatives, as we leverage our system level
understanding of power efficiency. Our OLED driver ICs can support various configurations such as high
resolution from FHD+(2,880x1,284) to QHD+(3,360x1,440), wide aspect ratio from 16:9 to 21:9 and rigid and
flexible OLED displays. In the transition to, and adoption of, 5G, fast responses and high frame rates such as
90Hz, 120Hz and 144Hz are becoming essential product offerings. To meet this new and evolving demand, we
have developed and mass produced our OLED display driver IC, which supports 90Hz/120Hz/144Hz high frame
rates.

The following table summarizes the features of our products, both in mass production and in customer

qualification, which is the final stage of product development, for mobile displays:

Product

OLED

Key Features

• Resolutions of HD720, WXGA,
FHD, FHD+, QHD and QHD+
• Aspect ratio from 16:9 to 21:9
• Color depth of 1 billion
• MIPI, eRVDS interface
• Logic-based OTP
•
Image enhancement IP
• Display data compression IP

LTPS

• Resolutions of VGA, WSVGA,

WVGA and DVGA

• Color depth of 16 million
• MDDI, MIPI interface
• Logic-based OTP
• Separated gamma control

Applications

• Smartphones
• Game consoles
• Digital still cameras
• Tablet PCs
• Virtual reality headsets
• Automotive

• Smartphones
• Digital still cameras

a-Si TFT

Power Solutions

• Resolutions of WQVGA and HVGA
• Color depth of 16 million
• RSDS, MDDI, MIPI interface
• CABC
• Separated gamma control

• Mobile phones
• Digital still cameras
• Automotive

We develop, manufacture and market power management solutions for a wide range of end-market

customers. The products include MOSFETs, IGBTs, AC-DC/DC-DC converters, LED drivers, regulators, power
management integrated circuits (PMICs) for a range of devices, including LCD, LED, and UHD televisions,
digital signage, smartphones, mobile phones, wearable devices, desktop PCs, notebooks, tablet PCs, other
consumer electronics, consumer appliances, automotive, and industrial applications such as power suppliers,
e-bikes, photovoltaic inverters, LED lighting and motor drives.
• MOSFETs. Our MOSFETs include low-voltage from 12V to 30V, medium-voltage from 40V to 200V,

high-voltage planar MOSFETs, 200V through 650V, and super junction MOSFETs, 500V through 900V.

MOSFETs are used in applications to switch, shape or transfer electricity under varying power requirements.
The key application segments are smartphones, mobile phones, wearable devices, LCD, LED, and UHD
televisions, desktop PCs, notebooks, tablet PCs, servers, lighting and power supplies for consumer
electronics automotive (electric vehicles) and industrial equipment. MOSFETs allow electronics
manufacturers to achieve specific design goals of high efficiency and low standby power consumption. For
example, computing solutions focus on delivering efficient controllers and MOSFETs for power
management in VCORE, DDR and chipsets for audio, video and graphics processing systems.

IGBTs. Our IGBTs include 650V to 1200V field stop trench IGBTs. IGBTs are used in automotive and high
power industrial applications, such as UPSs, power supplies, motor drives, solar inverters, welding machines
and consumer appliances.

AC-DC/DC-DC Converters. We offer AC-DC/DC-DC converters targeting mobile applications and high
power applications like LCD, LED, and UHD televisions, notebooks, smartphones, mobile phones, set-top
boxes and display modules. We expect our AC-DC/DC-DC converters will meet customer’s green power
requirements by featuring wide input voltage ranges, high efficiency and small size.

LED Drivers. LED backlighting drivers serve the fast-growing LCD and LED panel backlighting market for
LCD and LED televisions, LCD monitors, digital signage, notebooks, smartphones and tablet PCs. Our

•

products are designed to provide high efficiency and wide input voltage range, as well as pulse width
modulation (PWM) dimming for accurate white LED dimming control. LED lighting drivers have a wide
input voltage range applicable to incandescent bulb and fluorescent lamp replacement.

Regulators. We also provide analog regulators for mobile, computing and consumer applications. Our
products are designed for high efficiency and low power consumption in mobile applications.

SSD PMICs. We also provide solid state drive power management integrated circuits (SSD PMICs) for the
computing segment. Our product is designed for high frequency switching, high efficiency and pulse
frequency modulation (PFM) function to reduce power consumption in low load converters.

Logic PMICs. We also provide logic power management integrated circuits (PMICs) for organic
light-emitting diode (OLED) display panel. Our PMICs provide optimized power to source driver, gate
driver and timing controller (T-CON) of OLED display panel with multi-channel power block (boost
converter, buck converter, Op-Amps and positive/negative LDOs.)

Our power management solutions enable customers to increase system stability and improve heat dissipation

and energy use, resulting in cost savings for our customers and consumers, as well as environmental benefits.
Our in-house process technology capabilities and eight-inch wafer production lines increase efficiency and
contribute to the competitiveness of our products.

The following table summarizes the features of our products, both in mass production and in customer

qualification, which is the final stage of product development:

Key Features

Applications

Product

Low Voltage MOSFET

Medium Voltage
MOSFET

• Voltage options of 12V-30V
• Advanced Trench MOSFET Process
• High cell density
• Advanced packages to enable reduction

of PCB mounting area

• Voltage options of 40V-200V
• Advanced Trench MOSFET Process
• High cell density
• High system efficiency
• Advanced packages to enable reduction

of PCB mounting area

High Voltage
MOSFET

• Voltage options of 200V-650V
• R2FET (rapid recovery) option to

shorten reverse diode recovery time

• Zener diode option for MOSFET
protection for abnormal input

• Advanced Planar MOSFET Process
• Advanced packages to enable reduction

• Smartphones, mobile phones, and

Industrial applications

wearable devices
• Tablet PCs, Notebooks
• Desktop PCs, Servers
• LCD/LED TVs
•
• Automotive*
•
e-Bikes and Motor controls
• Battery Management Systems
• Power tools and Servers
• Energy Storage System
• Other computing applications (Tablet

PCs, Notebooks, Desktops)
• Consumer applications (TV)
•
Industrial applications
• Automotive
• Adaptors for tablet PC/mobile

phone/smartphone

• Power supplies
• Lighting (ballast, HID, LED)
•
• LCD/LEDTVs

Industrial applications

Super Junction
MOSFET

of PCB mounting area

• Voltage options of 500V-900V
• Low RDS(ON)
• Epi stack process
• Zener diode option for MOSFET
protection for abnormal input
• Advanced SJ MOSFET process
• Advanced packages to enable reduction

of PCB mounting area

• LCD/LED/UHD TVs
• Lightings applications (ballast,

HID, LED)
• Smartphones
• Power supplies
• Servers and Telecom powers
•
Industrial applications
• EV charging station*

Product

IGBTs

AC-DC/DC-DC
Converter

LED Backlighting

Drivers

Key Features

Applications

• Low power loss by high speed

On board charger*

switching

• Voltage options of 650V/1200V
• Field Stop Trench IGBT
• Current options from 15A to 100A

• Wide control range for high power

application (>150W)

• Advanced BCDMOS process
• High Precision Voltage Reference
• Very low startup current consumption
• Fast load and line regulation
• Accurate output voltage
• OCP, SCP and thermal protections
• High efficiency, wide input voltage

range

• Advanced BCDMOS process
• OCP, SCP, OVP and UVLO protections
• Accurate LED current control and

multi-channel matching

• Programmable current limit, boost up

frequency

• Automotive
• Solar inverters
•
Industrial applications
• Consumer appliances
• LCD/LED/UHD TVs
• Power supplies
• Smartphones
• Mobile phones
• Notebooks
• Set-top boxes

• Tablet PCs
• Notebooks
• Smartphones
• LED/UHD TVs
• LED monitors

Digital Controlled
LED Driver

LED Lighting Drivers

• Multi-channel constant current control
•
• High efficiency, wide input voltage

12Bit gray scale with SPI

• Digital signage

• AC and DC LED lighting

Regulators

SSD PMIC

Logic PMIC

range

• Simple solutions with external
components fully integrated
• Advanced high voltage BCDMOS

process

• Accurate LED current control and high

power factor and low THB
• Single and multi-regulators
• Low Noise Output regulators
• Wide range of input voltage and

various output current

• CMOS and BCDMOS processes
• LDO (Low Drop Out — Linear

Regulator)

• High current buck
• PFM function
• High frequency switching
• High efficiency
• High integration technology
• Small QFN package
• High current boost
•
• LDO
•
• Negative Charge Pump
•
• Tiny Wafer Level CSP

3channel high current buck

2channel buffer Op-Amp.

Integrated pass transistor

In customer qualification stage

• Smartphones and Mobile phones
• Notebooks
• Computing applications

• Computing applications

• Notebooks
• Tablet PCs

Sales and Marketing

We focus our sales and marketing strategy on continuing to grow and leverage our existing relationships

with leading consumer electronics OEMs, while expanding into industrial and automotive end markets. We
believe our close collaboration with customers allows us to align our product and technology development with
our customers’ existing and future needs. Because our customers often service multiple end markets, our product
sales teams are organized by customers within the major geographies. We believe this facilitates the sale of
products that address multiple end-market applications to each of our customers.

We sell our products through a direct sales force and a network of authorized agents and distributors. We

have strategically located our sales and technical support offices near our customers. Our direct sales force
consists primarily of representatives co-located with our design center in Korea, as well as our local sales and
support offices and sales liaisons in Japan, Greater China, Taiwan and Europe. We have a network of agents and

distributors in the U.S., Europe and the Asia Pacific region. For the years ended December 31, 2022, 2021 and
2020, we derived 48%, 62% and 75% of net sales from our standard products business through our direct sales
force, respectively, and 52%, 38% and 25% of net sales from our standard products business through our
network of authorized agents and distributors, respectively.

Customers

We sell our Display Solutions and Power Solutions products to consumer, computing, communication,

automotive and industrial electronics OEMs, original design manufacturers and electronics manufacturing
services companies, as well as subsystem designers. For the years ended December 31, 2022, 2021 and 2020, our
ten largest customers accounted for 69.4%, 79.8% and 87.6% of net sales from our standard products business,
respectively. Our arrangements with and reliance on key customers, particularly customers for our display
products, may make it less practicable to pursue certain opportunities with other potential new and existing
customers. For the year ended December 31, 2022, sales to Samsung Display represented 19.0% of net sales
from our standard products business and 80.2% of net sales from our Display Solutions business line, and SAMT
represented 13.8% of net sales from our standard products business and 18.1% of net sales from our Power
Solutions business line. For the year ended December 31, 2021, sales to Samsung Display represented 42.5% of
net sales from our standard products business and 89.7% of net sales from our Display Solutions business line,
and SAMT represented 10.4% of net sales from our standard products business and 19.8% of net sales from our
Power Solutions business line. For the year ended December 31, 2020, sales to Samsung Display represented
56.2% of net sales from our standard products business and 87.5% of net sales from our Display Solutions
business line. For the year ended December 31, 2022, we recorded revenues of $10.4 million from customers in
the U.S. and $291.5 million from all foreign countries, of which 42.2% was from Greater China and 36.1% was
from Korea. For the year ended December 31, 2021, we recorded revenues of $6.1 million from customers in the
U.S. and $427.0 million from all foreign countries, of which 47.2% was from Greater China, 26.6% from Korea
and 18.9% from Vietnam. For the year ended December 31, 2020, we recorded revenues of $5.1 million from
customers in the U.S. and $460.4 million from all foreign countries, of which 61.9% was from Greater China,
23.1% from Korea and 10.8% from Vietnam. All information pertaining to the geographic source of revenues is
with respect to the geographic location to which our products are billed.

Intellectual Property

As of December 31, 2022, our portfolio of intellectual property assets included approximately 961 registered
patents and 144 pending patent applications. Approximately 433 and 52 of our patents and pending applications,
respectively, are novel in that they are not a foreign counterpart of an existing patent or patent application.
Because we file patents in multiple jurisdictions, we additionally have approximately 528 registered patents and
92 pending applications that relate to identical technical claims in our base patent portfolio. Our patents expire at
various times approximately over the next 19 years. While these patents are in the aggregate important to our
competitive position, we do not believe that any single registered or pending patent is material to us.

See ‘‘Item 1A. Risk Factors—Risks Related to Our Business—Our ability to compete successfully and

achieve future growth will depend, in part, on our ability to protect our intellectual property, proprietary
technology and know-how, as well as our ability to operate without infringing the proprietary rights of others.’’

National Core Technology

Under the Act on Prevention of Leakage and Protection of Industrial Technology of Korea (the ‘‘ITA’’), any

export (including various means of outflow such as sale or transfer outside Korea) of technology designated as
‘‘national core technology’’ (‘‘National Core Technology’’ or ‘‘NCT’’) by the Korean Ministry of Trade, Industry
and Energy (the ‘‘MOTIE’’) requires the filing of a prior-report with, and the acceptance of the same by, the
MOTIE. Any such export of NCT without the acceptance of the prior report with the MOTIE may be subject to
corrective orders by the relevant authorities, and failure to comply with such corrective orders may potentially
result in criminal liabilities.

The Notification Regarding Designation of National Core Technologies issued by the MOTIE was amended
on July 14, 2021 to add certain technologies to the list of National Core Technology designated by the MOTIE,
and the amended list includes the design technology for OLED Display Driver IC for driving display panels
(‘‘OLED DDI’’). In the ordinary course of business, our Korean subsidiary may provide certain information
relating to its products, including OLED DDI, to customers, suppliers or vendors, and such disclosure of
information may be subject to the NCT-related regulations under the ITA, and therefore the MOTIE’s acceptance
of prior-reports. Since the amendment of the foregoing NCT list in July 2021, we have filed prior-reports with
the MOTIE for the export of our OLED DDI product-related information to certain overseas vendors that
manufacture our products, and all such reports have thus far been accepted by the MOTIE.

Competition

We operate in highly competitive markets characterized by rapid technological change and continually
advancing customer requirements. Although no one company competes with us in all of our product lines, we
face significant competition in each of our market segments. Our competitors include other independent and
captive manufacturers and designers of analog and mixed-signal integrated circuits, including display driver and
power management semiconductor devices.

We compete based on design experience, manufacturing capabilities, the ability to satisfy customer needs

from the design phase through the shipping of a completed product, length of design cycle and quality of
technical support and sales personnel. Our ability to compete successfully will depend on internal and external
variables, both within and outside of our control. These variables include the timeliness with which we can
develop new products and technologies, product performance and quality, manufacturing yields, capacity
availability, customer service, pricing, industry trends and general economic trends.

Human Capital

Our worldwide workforce consisted of 897 employees (full- and part-time) as of December 31, 2022, of

which 202 were involved in sales, marketing, general and administrative, 222 in research and development
(including 87 with advanced degrees), 44 in quality, reliability and assurance, and 429 in manufacturing
(comprised of 46 in engineering and 383 in operations, maintenance and others). Our employees leverage their
extensive expertise in engineering, design and process to accelerate the advancement of technology and be
leaders in our industry. We pride our company on being a great workplace where employees from diverse
backgrounds can reach their full potential.

Labor Unions

As disclosed in previous reports, we have a labor union at our Korean subsidiary (the ‘‘First Union’’). On

September 16, 2021, the formation of a second labor union at our Korean subsidiary (the ‘‘Second Union’’) was
approved by local authorities (the First Union and the Second Union are collectively referred to as the
‘‘Magnachip Semiconductor Labor Unions’’). Both the First Union and the Second Union are members of a
supervisory association named ‘‘Federation of Korean Trade Unions.’’ The First Union represents member
employees who are factory workers and the Second Union represents member employees who are office workers,
in both cases at our Korean subsidiary.

As of December 31, 2022, of the 866 employees at our Korean subsidiary, 387 were represented by the First

Union, and 98 employees were represented by the Second Union. Approximately 56% of our employees at our
Korean subsidiary were represented by the Magnachip Semiconductor Labor Unions.

See ‘‘Item 1A. Risk Factors—Risks Related to Our Business—If we encounter future labor problems, we
may fail to deliver our products and services in a timely manner, which would adversely affect our revenues and
profitability.’’

Values and Culture

Our core values represent a commitment to building an environment of trust with our employees, customers,

investors and the communities in which we operate. Through our values and culture, we strive to shape a better
future not only for ourselves and our customers, but for humanity as a whole. At Magnachip, we strive to foster
effective collaboration by respecting different perspectives, giving and receiving constructive feedback, and
supporting one another.

Inclusion and Diversity

We support all employees, regardless of gender, gender identity or expression, age, veteran status, race,
ethnicity, national origin, religion or disability. We place great importance on inclusion and diversity within the
workplace, and believe that an inclusive and diverse culture creates a happier, more relaxed work environment.

Labor and Ethics

Magnachip strives to provide and maintain a working environment where management and employees are

happy and treated with dignity and respect. Magnachip adheres to human rights and labor standards of
international labor organizations, such as the United Nations and the International Labor Organization.
Magnachip prohibits all forms of discrimination based on gender, race, nationality, religion and age to ensure all
employees work in a safe and fair environment.

Empowering Great Talent

We offer a variety of offline training programs, including courses in the areas of design, engineering and
technology, as well as courses at different job levels and leadership education. We also offer a number of online
training programs, including in the areas of management/leadership and business skills such as presentation,
negotiation, reporting, Information Technology and foreign language, which allow employees to improve their
capabilities without time and space constraints. Every year, a majority of our employees are required to complete
certain educational programs in the areas of information security, industrial safety and health, and sexual
harassment prevention.

We believe the foundation of Magnachip is our research and development (‘‘R&D’’) talent. To ensure R&D

technical professionals continue to advance their skills and knowledge, we have technology committees that
attend regular seminars and conduct periodic research. We have a reward program for exemplary research.

We also offer a Vision Seminar, which is led by our CEO and is designed to share our company’s vision,
strategy and the management’s key messages to employees. Additionally, the CEO and management regularly
communicate with employees through CEO letters and town hall meetings.

Compensation and Benefits

We strive to reward employees with competitive compensation based on contribution and performance. We
periodically evaluate market practices for compensation and benefits, including with respect to job function, role
and responsibility, job level and region, and regularly review whether our compensation levels and distribution
methods are fair and equitable. Additionally, we have long- and mid-term retention programs to attract and retain
high-performing key talent.

We offer various employee benefits under the company philosophy that ensuring employees enjoy a happier
life with their families is as critical as promoting their own health and well-being. All employees and their family
members have access to annual medical checkup programs. Employees also have access to other benefits such as
personal pensions, housing assistance, medical reimbursement plans and educational assistance programs.

Safety and Wellness

During the ongoing COVID-19 pandemic, our priority has been ensuring the health and safety of our

employees and their families. We built a companywide control tower to provide appropriate response guidance as

the pandemic has evolved, and have secured internal/external capabilities to respond to emergencies
systematically. In response to the ongoing COVID-19 pandemic, we quickly instituted infrastructure to support
remote working, so that our employees could work from home in a safe and stable environment. In addition, we
have installed safety facilities within our business sites.

Environmental

We are subject to a variety of environmental, health and safety laws and regulations in each of the
jurisdictions in which we operate, governing, among other things, air emissions, wastewater discharges, the
generation, use, handling, storage and disposal of, and exposure to, hazardous substances (including asbestos) and
waste, soil and groundwater contamination and employee health and safety. These laws and regulations are
complex, change frequently and have tended to become more stringent over time. Since 2015, our Korean
subsidiary has been subject to a new set of greenhouse gas emissions regulation, the Korean Emissions Trading
Scheme, or K-ETS, under the Act on Allocation and Trading of Greenhouse Gas Emission Allowances. Under
K-ETS, our Korean subsidiary was allocated a certain amount of emissions allowance in accordance with the
National Allocation Plan prepared by the Korean government and is required to meet its allocated target by either
reducing the emission or purchasing the allowances from other participants in the emission trading market.

Another example is the newly reinforced regulations on chemicals under Chemicals Control Act and
K-REACH, which came into effect on January 1, 2015. Under these laws, our Korean subsidiary is required to
comply with various requirements to report, evaluate, manage and ensure the safe usage of the chemicals used in
its facilities. There can be no assurance that we have been or will be in compliance with all of these laws and
regulations, or that we will not incur material costs or liabilities in connection with these laws and regulations in
the future. The adoption of new environmental, health and safety laws and the failure to comply with new or
existing laws or issues relating to hazardous substances could subject us to material liability (including
substantial fines or penalties), impose the need for additional capital equipment or other process requirements
upon us, curtail our operations or restrict our ability to expand operations.

Raw Materials

We use processes that require specialized raw materials that are generally available from a limited number

of suppliers. We continue to attempt to qualify additional suppliers for our raw materials. The Securities and
Exchange Commission (the ‘‘SEC’’), as mandated by the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010, has adopted disclosure regulations for public companies that manufacture products
containing certain minerals that are mined from the Democratic Republic of Congo and adjoining countries.
These ‘‘conflict minerals’’ are commonly found in metals used in the manufacture of semiconductors. The
implementation of these requirements could adversely affect the sourcing, availability and pricing of metals used
in the manufacture of our products. See ‘‘Item 1A. Risk Factors—Risks Related to Our Business—Compliance
with regulations regarding the use of ‘‘conflict minerals’’ could limit the supply and increase the cost of certain
raw materials used in manufacturing our products.’’

Available Information

Our principal executive office is located at: c/o Magnachip Semiconductor, Ltd., 15F, 76, Jikji-daero

436beon-gil, Heungdeok-gu, Cheongju-si, Chungcheongbuk-do, 28581, Republic of Korea, and our email address
is investors@magnachip.com. Our website address is www.magnachip.com. Our annual, quarterly and current
reports on Forms 10-K, 10-Q or 8-K, respectively, and all amendments thereto filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act, can be accessed, free of charge, at our website as soon as
practicable after such reports are filed with the SEC. In addition, our Corporate Governance Guidelines, Code of
Business Conduct and Ethics, Clawback Policy, Audit Committee Charter, Compensation Committee Charter,
Nominating and Governance Committee Charter and Risk Committee Charter are available on our website.
Information contained on our website does not constitute, and shall not be deemed to constitute, part of this
Report and shall not be deemed to be incorporated by reference into this Report. In addition, the SEC maintains
an internet site, www.sec.gov, from which you can access our annual, quarterly and current reports on Form
10-K, 10-Q and 8-K, respectively, and all amendments to these materials after such reports and amendments are
filed with the SEC. You may also request a copy of these filings, at no cost, by writing or telephoning us at the
following address or phone number: c/o Magnachip Semiconductor, Ltd., 15F, 76 Jikji-daero 436beon-gil,
Heungdeok-gu, Cheongju-si, Chungcheongbuk-do, 28581, Republic of Korea; Attention: Investor Relations; email
address: investors@magnachip.com.

Information About Our Executive Officers

The following table sets forth certain information regarding our current executive officers:

Name

Age

Position

Young-Joon (YJ) Kim
Shin Young Park
Theodore Kim
Woung Moo Lee
Chan Ho Park

58 Director and Chief Executive Officer
42 Chief Financial Officer
53 Chief Compliance Officer, General Counsel and Secretary
60 General Manager of Worldwide Sales
59 General Manager of Power Solutions

Young-Joon (YJ) Kim, Board of Directors, Member of the Risk Committee and Chief Executive Officer.

Mr. YJ Kim became our Chief Executive Officer in May 2015 and has also served as a director on our Board
since that time. In February 2020, Mr. Kim assumed the additional role of General Manager of the Display
business to capitalize on attractive growth opportunities in OLED display and other relevant emerging markets.
He also served as the acting General Manager of Foundry Services Group from January 2019 until the
completion of the sale of the Foundry Services Group and the factory in Cheongju (‘‘Fab 4’’) on September 1,
2020. Mr. Kim joined our company in May 2013 and served as our Executive Vice President and General
Manager, Display Solutions Division. He was promoted to Interim Chief Executive Officer in May 2014. Prior to
joining our company, Mr. Kim held a variety of senior management roles at several global semiconductor firms.
His past roles include marketing, engineering, product development and strategic planning, and his product
expertise includes microprocessors, network processors, multi-core processors, FLASH, EPROM, analog,
mixed-signal, sensors, wireless base station, workstations and servers. Immediately before joining our company,
Mr. Kim served as Vice President, Infrastructure Processor Division, and General Manager of the OCTEON
Multi-Core Processor Group of Cavium, Inc., where he worked from 2006 to 2013. Prior to Cavium, Mr. Kim
served as Core Team Lead and General Manager of the Tolapai Program at Intel Corporation from 2004 to 2006.
In 1998, Mr. Kim co-founded API Networks, a joint venture between Samsung and Compaq, where he served as
the head of product management, worldwide sales and business development for Alpha processors. Prior to API
Networks, Mr. Kim served as Director of Marketing at Samsung Semiconductor, Inc. from 1996 to 1998.
Mr. Kim began his career as a product engineer at Intel Corporation in 1988. Mr. Kim holds B.S. and M. Eng.
degrees in Electrical Engineering from Cornell University. Our Board has concluded that Mr. YJ Kim is a
valuable member of the Board based on his understanding of our company’s products and technology as our
Chief Executive Officer and his deep knowledge of the semiconductor industry.

Shin Young Park, Chief Financial Officer. Ms. Shin Young Park became our Chief Financial Officer in

January 2022 and became our Chief Accounting Officer in March 2020. Ms. Park previously served as the
Company’s Corporate Controller from November 2018 to February 2020. Prior to that, she served as the SEC
Reporting and Accounting Director from April 2015 to October 2018. Before joining the Company in April 2014,
from 2005 to March 2014, Ms. Park served in various senior advisory and audit service positions at Deloitte, a
public accounting firm. From 2005 to 2009, she worked at Deloitte & Touche in Chicago, Illinois; from 2009 to
2011 and then from 2013 to March 2014, she worked at Deloitte Anjin in Seoul, South Korea; and from 2011 to
2013, she worked at Deloitte in London, U.K. Ms. Park holds a B.A. degree in business administration from
Sogang University, Seoul, Korea, and a Master’s degree in hospitality industry studies from New York
University.

Theodore Kim, Chief Compliance Officer, General Counsel and Secretary. Mr. Theodore (‘‘Ted’’) Kim

became our Chief Compliance Officer in May 2015 and became our General Counsel and Secretary in
November 2013. Mr. Kim previously served as our Senior Vice President from November 2013 to May 2015.
Prior to joining Magnachip, Mr. Kim served as Head Lawyer, Global Business Development at Samsung Fire &
Marine Insurance from October 2012 to October 2013. Mr. Kim was employed by Gibson Dunn, a law firm,
from October 2005 to July 2012, serving most recently as Of Counsel. Prior to that, he served as Foreign Legal
Consultant at Kim & Chang, a law firm in Korea, from 2001 to 2005, and prior to that, he worked as an
associate attorney at Morrison & Foerster, a law firm, from 1997 to 2001. Mr. Kim holds a B.A. degree in
Economics and a B.S. degree in Mechanical Engineering from University of California, Irvine, and a J.D. degree
from University of California, Los Angeles, School of Law.

Woung Moo Lee, General Manager of Worldwide Sales. Mr. Woung Moo Lee was named as General
Manager of Worldwide Sales since June of 2020. Prior to that, Mr. Lee served as General Manager of Worldwide
Sales and Power Solutions from February 2020. Mr. Lee had been appointed as General Manager of the Standard
Products Group in 2015 and prior to that served as our Senior Vice President, Korea Sales from 2013. Before
joining our company, he was one of the founding executives and served as Vice President of Global Strategy and
Marketing, Samsung LED Co., Ltd. from 2009 to 2011. In 1984, Mr. Lee began his career as a memory
semiconductor design engineer and served as Vice President of Memory Strategy & Marketing Team at Samsung
Electronics Co., Ltd. until 2009. Mr. Lee received the prestigious ‘‘Proud Samsung Employee Award’’ in 2005
and holds a B.S. degree in Electronic Engineering from Inha University.

Chan Ho Park, General Manager of Power Solutions. Dr. Chan Ho Park became our General Manager of
Power Solutions in June 2020 with over 30 years of hands-on experience in the development of discrete power
devices and market insights throughout the power semiconductor industry. Prior to joining our company, he was
a senior staff at Vishay Intertechnology Inc. since March, 2014. He developed cutting-edge technology platforms
for low voltages MOSFETs having 1.5 giga-cell density and provided high and low side MOSFETs for DrMOS
to various power stage solutions. Dr. Park started his professional career in 1986 as a design engineer in the field
of BJT, J-FET, and Schottky Diode at Samsung Electronics, located in Bucheon, Korea. Afterwards, he worked
for Fairchild Semiconductor in West Jordan, Utah and for Vishay Siliconix in San Jose, California. He rejoined
Samsung Electronics, System LSI Business in 2011 as the Vice President of Discrete Development Team, where
he led R&D, PE, FAE and high voltage power IC technologies for IGBTs, super-junction MOSFETs, split gate
MOSFETs and driver ICs. He received a Ph.D. in Electrical Engineering from KAIST (Korea Advanced Institute
of Science and Technology) and a B.S. in Physics from Seoul National University. He is a member of IEEE and
a peer reviewer for IEEE transactions on Electron Devices and Electron Device Letters.

Item 1A. Risk Factors

You should carefully consider the risk factors set forth below as well as the other information contained in
this Report. Any of the following risks could materially and adversely affect our business, financial condition or
results of operations. As a result, the price of our common stock could decline and you could lose all or part of
your investment in our common stock. Additional risks and uncertainties not currently known to us or those
currently viewed by us to be immaterial may also materially and adversely affect our business, financial
condition or results of operations.

Risk Factors Summary

The following is a summary of the risk factors included herein.
• We manufacture our products based on our estimates of customer demand, and if our estimates are

incorrect, our financial results could be negatively impacted.

•

A significant portion of our sales comes from a relatively limited number of customers, the loss of
which could adversely affect our financial results.

The average selling prices of our semiconductor products have at times declined rapidly and will
likely do so in the future, which could harm our revenue and gross profit.

• We are subject to risks associated with currency fluctuations, and changes in the exchange rates of

applicable currencies could impact our results of operations.

•

Global shortages in manufacturing capacities could interrupt or negatively affect our operations,
increase cost to manufacture and negatively impact our results of operations.

Expanded trade restrictions may limit our ability to sell to certain customers.

Recent changes in international trade policy and the imposition and threats of international tariffs,
including tariffs applied to goods traded between the United States and China, could materially and
adversely affect our business and results of operations.

Our Korean subsidiary has been designated as a regulated business under Korean environmental
law, and such designation could have an adverse effect on our financial position and results of
operations.

Our compliance with the Serious Accidents Punishment Act (the ‘‘SAPA’’) could require significant
expenditures and management time and expose us to liability for violations.

Our business depends on international customers, suppliers and operations in Asia, and as a result
we are subject to regulatory, operational, financial and political risks, which could adversely affect
our financial results.

• We cannot guarantee that our share repurchase program will be successfully consummated, or that
it will enhance shareholder value, and share repurchases could affect the price of our common
stock.

•

Provisions in our charter documents and Delaware Law may make it difficult for a third party to
acquire us and could depress the price of our common stock.

• We have not historically paid dividends and do not currently have any dividend or distribution policy,
and therefore, investors may need to rely on sales of their common stock as the only way to realize
any future gains on their investments.

Risks Related to Our Business

We operate in the highly cyclical semiconductor industry, which is subject to significant downturns that may
negatively impact our results of operations.

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological
change and price erosion, evolving technical standards, short product life cycles (for semiconductors and for the
end-user products in which they are used) and wide fluctuations in product supply and demand. From time to

time, these and other factors, together with changes in general economic conditions, cause significant upturns and
downturns in the industry in general and in our business in particular. Periods of industry downturns have been
characterized by diminished demand for end-user products, high inventory levels, underutilization of
manufacturing capacity, changes in revenue mix and accelerated erosion of average selling prices. We have
experienced these conditions in our business in the past and may experience renewed, and possibly more severe
and prolonged, downturns in the future as a result of such cyclical changes. This may reduce our results of
operations. Over the prior two years, increases in demand for semiconductor products resulted in a global
shortage of manufacturing capacities. As a result, we experienced increases in the costs to manufacture our
products. We are not able to foresee when the current shortage of manufacturing capacity will subside. If we are
unable secure manufacturing capacities from our current subcontractors, our ability to deliver our products to our
customers may be negatively impacted. These factors could cause a negative impact on our results of operations.
However, we are beginning to see some indicators of improvement of such supply shortage situation. Current
global macroeconomic conditions, including COVID-19 pandemic, higher inflation and interest rates and
uncertainty caused by the Russian-Ukraine war, have led to weaker end-market demand and an oversupply of
inventory. We continue to monitor these trends and uncertainties, and any decline in end-market demand and
increase in inventory levels could negatively impact our financial condition and results of operations.

We base our planned operating expenses in part on our expectations of future revenue, and a significant
portion of our expenses is relatively fixed in the short term. If revenue for a particular quarter is lower than we
expect, we likely will be unable to proportionately reduce our operating expenses for that quarter, which would
harm our operating results for that quarter.

Our restructuring activities and dispositions of assets and businesses could result in lost business and other
costs that could have a material adverse effect on our results of operations.

From time to time, we may choose to sell assets, restructure business operations, shut down manufacturing
lines or otherwise dispose of assets and businesses as part of management’s strategies to better align our product
offerings with market demands and our customers’ needs. In connection with these activities, we face risks that
we will disrupt service to our customers, lose business and incur significant costs related to such activities. These
risks include potential damage to our reputation and customer relationships if we are unable to effectively
transition such customer relationships to other production lines or products or if we cannot effectively manage
our supplier and vendor relationships during such activities. In addition, we may also face claims or costs
associated with transitioning or eliminating certain employee positions and modifying or terminating vendor
relationships in connection with those exit activities.

If we fail to develop new products and technologies or enhance our existing products in order to react to
rapid technological change and market demands, our business will suffer.

Our industry is subject to constant and rapid technological change and product obsolescence as customers

and competitors create new and innovative products and technologies. Products or technologies developed by
other companies may render our products or technologies obsolete or noncompetitive, and we may not be able to
access advanced process technologies, including smaller geometries, or to license or otherwise obtain essential
intellectual property required by our customers.

We must develop new products and enhance our existing products to meet rapidly evolving customer
requirements. We design products for customers that continually require higher performance and functionality at
lower costs. We must, therefore, continue to enhance the performance and functionality of our products. The
development process for these advancements is lengthy and requires us to accurately anticipate technological
changes and market trends. Developing and enhancing these products is uncertain and can be time-consuming,
costly and complex.

Customer and market requirements can change during the development of a product. There is a risk that

these developments and enhancements will be late, fail to meet customer or market specifications or not be
competitive with products from our competitors that offer comparable or superior performance and functionality.
Any new products, such as our expanding line of power management solutions, or product enhancements, may
not be accepted in new or existing markets. Our business will suffer if we fail to develop and introduce new
products or product enhancements on a timely and cost-effective basis.

We manufacture our products based on our estimates of customer demand, and if our estimates are incorrect,
our financial results could be negatively impacted.

We make significant decisions, including determining the levels of business that we will seek and accept,
production schedules, component procurement commitments, personnel needs and other resource requirements,
based on our estimates of customer demand and expected demand for and success of their products. The
short-term nature of commitments by many of our customers and the possibility of rapid changes in demand for
their products reduces our ability to estimate accurately future customer demand for our products. On occasion,
customers may require rapid increases in supply, which can challenge our production resources and reduce
margins. We may not have sufficient capacity at any given time to meet our customers’ increased demand for our
products. Conversely, downturns in the semiconductor industry have caused and may in the future cause our
customers to reduce significantly the amount of products they order from us. Because many of our costs and
operating expenses are relatively fixed, a reduction in customer demand would decrease our results of operations,
including our gross profit.

Our customers may cancel their orders, reduce quantities or delay production, which would adversely affect
our margins and results of operations.

We generally do not obtain firm, long-term purchase commitments from our customers. Customers may

cancel their orders, reduce quantities or delay production for a number of reasons. Cancellations, reductions or
delays by a significant customer or by a group of customers, which we have experienced as a result of periodic
downturns in the semiconductor industry, or failure to achieve design-wins, have affected and may continue to
affect our results of operations adversely. These risks are exacerbated because many of our products are
customized, which hampers our ability to sell excess inventory to the general market. We may incur charges
resulting from the write-off of obsolete inventory. In addition, while we do not obtain long-term purchase
commitments, we generally agree to the pricing of a particular product over a set period of time. If we
underestimate our costs when determining pricing, our margins and results of operations would be adversely
affected.

Our fab manufacturing depends on high utilization of our manufacturing capacity, a reduction of which
could have a material adverse effect on our business, financial condition and the results of our operations.

An important factor in our success is the extent to which we are able to utilize the available capacity in our
fabrication facility. As many of our costs are fixed, a reduction in capacity utilization, as well as changes in other
factors, such as reduced yield or unfavorable product mix, could reduce our profit margins and adversely affect
our operating results. A number of factors and circumstances may reduce utilization rates, including periods of
industry overcapacity, the inability to source sufficient materials necessary for manufacturing, low levels of
customer orders, operating inefficiencies, strategic evaluations and decisions by our Board related our overall
business, divisions and business lines, mechanical failures and disruption of operations due to expansion or
relocation of operations, power interruptions and fire, flood or other natural disasters or calamities. The potential
delays and costs resulting from these factors and circumstances could have a material adverse effect on our
business, financial condition and results of operations.

A significant portion of our sales comes from a relatively limited number of customers, the loss of which
could adversely affect our financial results.

Historically, we have relied on a limited number of customers for a substantial portion of our total revenue.
If we were to lose key customers or if customers cease to place orders for our high-volume products, particularly
our display products, our financial results could be adversely affected. In addition, our arrangements with and
reliance on key customers may make it less practicable to pursue certain opportunities with other potential new
and existing customers. For the years ended December 31, 2022, 2021 and 2020, our ten largest customers
accounted for 69.4%, 79.8% and 87.6% of net sales from our standard products business, respectively. For the
year ended December 31, 2022, sales to Samsung Display represented 19.0% of net sales from our standard
products business and 80.2% of net sales from our Display Solutions business line, and SAMT represented
13.8% of net sales from our standard products business and 18.1% of net sales from our Power Solutions
business line. For the year ended December 31, 2021, sales to Samsung Display represented 42.5% of net sales
from our standard products business and 89.7% of net sales from our Display Solutions business line, and SAMT
represented 10.4% of net sales from our standard products business and 19.8% of net sales from our Power

Solutions business line. For the year ended December 31, 2020, sales to Samsung Display represented 56.2% of
net sales from our standard products business and 87.5% of net sales from our Display Solutions business line.
Significant reductions in sales to any of these customers, especially our few largest customers, the loss of other
major customers or a general curtailment in orders for our high-volume products within a short period of time
could adversely affect our business.

The average selling prices of our semiconductor products have at times declined rapidly and will likely do so
in the future, which could harm our revenue and gross profit.

The semiconductor products we develop and sell are subject to rapid declines in average selling prices.
From time to time, we have had to reduce our prices significantly to meet customer requirements, and we may
be required to reduce our prices in the future. This would cause our gross profit to decrease. Our financial results
will suffer if we are unable to offset any reductions in our average selling prices by increasing our sales
volumes, reducing our costs or developing new or enhanced products on a timely basis with higher selling prices
or gross profit.

Our industry is highly competitive, and our ability to compete could be negatively impacted by a variety of
factors.

The semiconductor industry is highly competitive and includes hundreds of companies, a number of which

have achieved substantial market share within both our product categories and end markets. Current and
prospective customers for our products and services evaluate our capabilities against the merits of our
competitors. Some of our competitors are well established as independent companies and have substantially
greater market share and manufacturing, financial, research and development and marketing resources than we
do. We also compete with emerging companies that are attempting to sell their products in certain of our end
markets and with the internal semiconductor design and manufacturing capabilities of many of our significant
customers. We expect to experience continuing competitive pressures in our markets from existing competitors
and new entrants.

Any consolidation among our competitors could enhance their product offerings and financial resources,

further enhancing their competitive position. Our ability to compete will depend on a number of factors,
including the following:

•

our ability to offer cost-effective and high quality products and services on a timely basis using our
technologies;

our ability to accurately identify and respond to emerging technological trends and demand for product
features and performance characteristics;

our ability to continue to rapidly introduce new products that are accepted by the market;

our ability to adopt or adapt to emerging industry standards;

the number and nature of our competitors and competitiveness of their products and services in a given
market;

entrance of new competitors into our markets; and

our ability to enter the highly competitive power management market.

Many of these factors are outside of our control. In the future, our competitors may replace us as a supplier
to our existing or potential customers, and our customers may satisfy more of their requirements internally. As a
result, we may experience declining revenues and results of operations.

Changes in demand for consumer electronics in our end markets can impact our results of operations.

Demand for our products will depend in part on the demand for various consumer electronics products, in
particular, mobile phones and multimedia devices, digital televisions, flat panel displays, mobile PCs and digital
cameras, which in turn depends on general economic conditions and other factors beyond our control. If our
customers fail to introduce new products that employ our products or component parts, demand for our products
will suffer. To the extent that we cannot offset periods of reduced demand that may occur in these markets
through greater penetration of these markets or reduction in our production and costs, our sales and gross profit
may decline, which would negatively impact our business, financial condition and results of operations.

If we fail to achieve design-wins for our semiconductor products, we may lose the opportunity for sales to
customers for a significant period of time and be unable to recoup our investments in our products.

We expend considerable resources on winning competitive selection processes, known as design-wins, to

develop semiconductor products for use in our customers’ products. These selection processes are typically
lengthy and can require us to incur significant design and development expenditures. We may not win the
competitive selection process and may never generate any revenue despite incurring significant design and
development expenditures. Once a customer designs a semiconductor into a product, that customer is likely to
continue to use the same semiconductor or enhanced versions of that semiconductor from the same supplier
across a number of similar and successor products for a lengthy period of time due to the significant costs
associated with qualifying a new supplier and potentially redesigning the product to incorporate a different
semiconductor. If we fail to achieve initial design-wins in a customer’s qualification process, we may lose the
opportunity for significant sales to that customer for a number of products and for a lengthy period of time. This
may cause us to be unable to recoup our investments in our semiconductor products, which would harm our
business.

We have lengthy and expensive design-to-mass production and manufacturing process development cycles that
may cause us to incur significant expenses without realizing meaningful sales, the occurrence of which would
harm our business.

The cycle time from the design stage to mass production for some of our products is long and requires the

investment of significant resources with many potential customers without any guarantee of sales. Our
design-to-mass production cycle typically begins with a three-to-twelve month semiconductor development stage
and test period followed by a three-to-twelve month end-product qualification period by our customers. The
fairly lengthy front end of our sales cycle creates a risk that we may incur significant expenses but may be
unable to realize meaningful sales. Moreover, prior to mass production, customers may decide to cancel their
products or change production specifications, resulting in sudden changes in our product specifications,
increasing our production time and costs. Failure to meet such specifications may also delay the launch of our
products or result in lost sales.

Research and development investments may not yield profitable and commercially viable products, and thus
will not necessarily result in increases in revenues for us.

We invest significant resources in our research and development. Our research and development efforts,

however, may not yield profitable or commercially viable products. During each stage of research and
development, there is a substantial risk that we will have to abandon a potential product that is no longer
marketable and in which we have invested significant resources. In the event we are able to develop viable new
products, a significant amount of time will have elapsed between our investment in the necessary research and
development effort and the receipt of any related revenues.

We face numerous challenges relating to executing our growth strategy, and if we are unable to execute our
growth strategy effectively, our business and financial results could be materially and adversely affected.

Our growth strategy is to leverage our advanced analog and mixed-signal technology platform, continue to

innovate and deliver new products, increase business with existing customers, broaden our customer base,
aggressively grow our power business, and drive execution excellence. If we are unable to execute our growth
strategy effectively, we may not be able to take advantage of market opportunities, execute our business plan or
respond to competitive pressures. Moreover, if our allocation of resources does not correspond with future
demand for particular products, we could miss market opportunities and our business and financial results could
be materially and adversely affected.

We are subject to risks associated with currency fluctuations, and changes in the exchange rates of applicable
currencies could impact our results of operations.

Historically, a portion of our revenues and greater than the majority of our operating expenses and costs of

sales have been denominated in non-U.S. currencies, principally the Korean won, and we expect that this will
remain true in the future. Because we report our results of operations in U.S. dollars, changes in the exchange
rate between the Korean won and the U.S. dollar could materially impact our reported results of operations and
distort period to period comparisons. In particular, because of the difference in the amount of our consolidated

revenues and expenses that are in U.S. dollars relative to Korean won, a depreciation in the U.S. dollar relative
to the Korean won could result in a material increase in reported costs relative to revenues, and therefore could
cause our profit margins and operating income to appear to decline materially, particularly relative to prior
periods. The converse is true if the U.S. dollar were to appreciate relative to the Korean won. For example,
foreign currency fluctuations had an unfavorable impact on our reported profit margins and operating income
from operations for the fiscal year ended December 31, 2021 due to a relatively stronger Korean won during the
period, while we had a favorable impact on our reported profit margins and operating income from operations for
the fiscal year ended December 31, 2022 due to a relatively weaker Korean won during the period. Moreover,
our foreign currency gain or loss would be affected by changes in the exchange rate between the Korean won
and the U.S. dollar as a substantial portion of non-cash translation gain or loss is associated with the
intercompany long-term loans to our Korean subsidiary, which is denominated in U.S. dollars. As of
December 31, 2022, the outstanding intercompany loan balance including accrued interests between our Korean
subsidiary and our Dutch subsidiary was $311.0 million. Our Dutch subsidiary uses the U.S. dollar as their
functional currency. As a result of foreign currency fluctuations, it could be more difficult to detect underlying
trends in our business and results of operations. In addition, to the extent that fluctuations in currency exchange
rates cause our results of operations to differ from our expectations or the expectations of our investors, the
trading price of our common stock could be adversely affected.

From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of

exchange rate fluctuations. Our Korean subsidiary enters into foreign currency forward and zero cost collar
contracts in order to mitigate a portion of the impact of U.S. dollar-Korean won exchange rate fluctuations on
our operating results. These foreign currency forward and zero cost collar contracts typically require us to sell
specified notional amounts in U.S. dollars and provide us the option to sell specified notional amounts in
U.S. dollars during successive months to our counterparty in exchange for Korean won at specified exchange
rates. Obligations under these foreign currency forward and zero cost collar contracts must be cash collateralized
if our exposure exceeds certain specified thresholds. These forward and zero cost collar contracts may be
terminated by the counterparty in a number of circumstances, including if our total cash and cash equivalents is
less than $30 million at the end of a fiscal quarter. We cannot assure that any hedging technique we implement
will be effective. If our hedging activities are not effective, changes in currency exchange rates may have a more
significant impact on our results of operations. See ‘‘Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Factors Affecting our Results of Operations’’ for further details.

The loss of our key employees would materially adversely affect our business, and we may not be able to
attract or retain the technical or management employees necessary to compete in our industry.

Our key executives have substantial experience and have made significant contributions to our business, and

our continued success is dependent upon the retention of our key management executives. The loss of such key
personnel would have a material adverse effect on our business. In addition, our future success depends on our
ability to attract and retain skilled technical and managerial personnel. We do not know whether we will be able
to retain all of these employees as we continue to pursue our business strategy. The loss of the services of key
employees, especially our key design and technical personnel, or our inability to retain, attract and motivate
qualified design and technical personnel, could have a material adverse effect on our business, financial condition
and results of operations. This could hinder our research and product development programs or otherwise have a
material adverse effect on our business.

If we encounter future labor problems, we may fail to deliver our products and services in a timely manner,
which would adversely affect our revenues and profitability.

As of December 31, 2022, 485 employees, or approximately 56% of our employees, were represented by
the Magnachip Semiconductor Labor Unions. We can offer no assurance that any issues with the labor union and
other employees will be resolved favorably for us in the future, that we will not experience work stoppages or
other labor problems in future years or that we will not incur significant expenses related to such issues.

We may incur costs to engage in future business combinations or strategic investments, and we may not
realize the anticipated benefits of those transactions.

As part of our business strategy, we may seek to enter into business combinations, investments, joint
ventures and other strategic alliances with other companies in order to maintain and grow revenue and market
presence as well as to provide us with access to technology, products and services. Any such transaction would

be accompanied by risks that may harm our business, such as difficulties in assimilating the operations, personnel
and products of an acquired business or in realizing the projected benefits, disruption of our ongoing business,
potential increases in our indebtedness and contingent liabilities and charges if the acquired company or assets
are later determined to be worth less than the amount paid for them in an earlier original acquisition. In addition,
our indebtedness may restrict us from making acquisitions that we may otherwise wish to pursue.

The failure to achieve acceptable manufacturing yields could adversely affect our business.

The manufacturing of semiconductors involves highly complex processes that require precision, a highly
regulated and sterile environment and specialized equipment. Defects or other difficulties in the manufacturing
process can prevent us from achieving acceptable yields in the manufacturing of our products, which could lead
to higher costs, a loss of customers or delay in market acceptance of our products. Slight impurities or defects in
the photomasks used to print circuits on a wafer or other factors can cause significant difficulties, particularly in
connection with the production of a new product, the adoption of a new manufacturing process or any expansion
of our manufacturing capacity and related transitions. We may also experience manufacturing problems in
achieving acceptable yields as a result of, among other things, transferring production to other facilities,
upgrading or expanding existing facilities or changing our process technologies. Yields below our target levels
can negatively impact our gross profit and may cause us to eliminate underperforming products.

We rely on a number of independent subcontractors and the failure of any of these independent
subcontractors to perform as required could adversely affect our operating results.

A substantial portion of our net sales are derived from semiconductor devices assembled in packages or on

film. The packaging and testing of semiconductors require technical skills and specialized equipment. For the
portion of packaging and testing that we outsource, we use subcontractors located in Korea and China. We rely
on these subcontractors to package and test our devices with acceptable quality and yield levels, and, while we
specify quality standards, we are not able to directly oversee their day-to-day operations and the packaging and
testing of our devices. Onboarding of a new subcontractor, including as a result of switching from one
subcontractor to another, takes approximately three to six months to verify the subcontractor’s capabilities and an
additional six to twelve months to receive approval from our customers to use such subcontractor. We could be
adversely affected by political disorders, labor disruptions, public health issues (including viral outbreaks such as
COVID-19) and natural disasters where our subcontractors are located due to the time it would take to onboard a
new subcontractor. If our semiconductor packagers and test service subcontractors experience problems in
packaging and testing our semiconductor devices, experience prolonged quality or yield problems, experience
shutdowns or delays associated with public health issues (such as those associated with COVID-19), or decrease
the capacity of their operations available to us, our operating results could be adversely affected.

We cooperate with independent foundries to produce certain Display Solutions and Power Solutions products,
and the failure of such independent foundries to satisfy our demand could materially disrupt our business.

We use independent foundry services for certain of our OLED Display Solutions products and Power
Solutions products. Silicon wafer production at these facilities is allocated solely by our vendors and beyond our
direct control. Therefore, any disruption in wafer supply from these vendors could have a material impact on our
revenue and results of operations.

Global shortages in manufacturing capacities could interrupt or negatively affect our operations, increase cost
to manufacture and negatively impact our results of operations.

Increases in demand for semiconductor products resulted in a global shortage of manufacturing capacity
over the prior two years. As a result, we may experience increases in the costs to manufacture our products and
may not be able to manufacture and deliver all of the orders placed by our customers. We are not able to foresee
when the current shortage of manufacturing capacity will subside. If we are unable secure manufacturing
capacities from our current subcontractors, our ability to deliver our products to our customers may be negatively
impacted. Also, our subcontractors may increase their fees, which would result in an increase in our
manufacturing costs, which we may not be fully able to pass to our customers. These factors could cause a
negative impact on our results of operations.

We depend on successful parts and materials procurement for our manufacturing processes, and a shortage or
increase in the price of these materials could interrupt our operations and result in a decline of revenues and
results of operations.

We procure materials and electronic and mechanical components from international sources and original

equipment manufacturers. We use a wide range of parts and materials in the production of our semiconductors,
including silicon, processing chemicals, processing gases, precious metals and electronic and mechanical
components, some of which, such as silicon wafers, are specialized raw materials that are generally only
available from a limited number of suppliers. If demand increases or supply decreases for any reason, the costs
of our raw materials could significantly increase. For example, worldwide supplies of silicon wafers, an
important raw material for the semiconductors we manufacture, have been constrained in recent years due to an
increased demand for silicon. We from time to time may enter into multi-year agreements, which specify future
quantities and pricing of materials to be supplied by the vendors of these materials; however, this option may not
be available to us and we cannot assure that supply increases will match demand increases. If we cannot obtain
adequate materials in a timely manner or on favorable terms for the manufacture of our products, revenues and
results of operations will decline.

Compliance with regulations regarding the use of ‘‘conflict minerals’’ could limit the supply and increase the
cost of certain raw materials used in manufacturing our products.

The SEC, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,
adopted disclosure regulations for public companies that manufacture products containing certain minerals that
are mined from the Democratic Republic of Congo and adjoining countries and procedures pertaining to a
manufacturer’s efforts regarding the source of such minerals. These ‘‘conflict minerals’’ are commonly found in
metals used in the manufacture of semiconductors. Manufacturers are also required to disclose their efforts to
prevent the sourcing of such minerals and metals produced from them. The implementation of these requirements
could adversely affect the sourcing, availability and pricing of metals used in the manufacture of our products.
We may also incur additional costs to comply with the disclosure requirements, including costs related to
determining the source of any of the relevant minerals used in our products. We may also face difficulties in
satisfying customers who may require that our products be certified as free of ‘‘conflict materials,’’ which could
harm our relationships with these customers and lead to a loss of revenue.

We face warranty claims, product return, litigation and liability risks and the risk of negative publicity if our
products fail.

Our semiconductors are incorporated into a number of end products, and our business is exposed to product

return, warranty and product liability risk and the risk of negative publicity if our products fail. Although we
maintain insurance for product liability claims, the amount and scope of our insurance may not be adequate to
cover a product liability claim that is asserted against us. In addition, product liability insurance could become
more expensive and difficult to maintain and, in the future, may not be available on commercially reasonable
terms, or at all. In addition, we are exposed to the product liability risk and the risk of negative publicity
affecting our customers. Our sales may decline if any of our customers are sued on a product liability claim. We
also may suffer a decline in sales from the negative publicity associated with such a lawsuit or with adverse
public perceptions in general regarding our customers’ products. Further, if our products are delivered with
impurities or defects, we could incur additional development, repair or replacement costs, and our credibility and
the market’s acceptance of our products could be harmed.

We could suffer adverse tax and other financial consequences as a result of changes in, or differences in the
interpretation of, applicable tax laws, or the adoption of new U.S. or international tax legislation.

Our company’s organizational structure was created in part based on certain interpretations and conclusions

regarding various tax laws, including withholding tax and other tax laws of applicable jurisdictions. Our
interpretations and conclusions regarding tax laws, however, are not binding on any taxing authority and, if these
interpretations and conclusions are incorrect, if our business were to be operated in a way that rendered us
ineligible for tax exemptions or caused us to become subject to incremental tax, or if the authorities were to
change, modify or have a different interpretation of the relevant tax laws, we could suffer adverse tax and other
financial consequences, and the anticipated benefits of our organizational structure could be materially impaired.
Our company’s organizational structure and other tax positions are subject to review by tax authorities in the
local and other jurisdictions where we operate our business.

Our provision for income taxes is subject to volatility and could be negatively affected by earnings being

(i) lower than anticipated in jurisdictions that have lower statutory tax rates or (ii) higher than anticipated in
jurisdictions that have higher statutory tax rates. In addition, our provision for income taxes could be negatively
affected by changes in the valuation of our deferred tax assets and liabilities, changes to global intangible
low-tax income tax laws, transfer pricing adjustments, or changes in tax laws, regulations, or accounting
principles.

Additional changes in the U.S. tax regime or in how U.S. multinational corporations are taxed on foreign

income, including changes in how existing tax laws are interpreted or enforced, could adversely affect our
business, financial condition or results of operations. For example, the Organization for Economic Cooperation
and Development (OECD) has recommended changes to numerous long-standing international tax principles
through its base erosion and profit shifting (BEPS) project. These changes, to the extent adopted, may increase
tax uncertainty, result in higher compliance costs and adversely affect our provision for income taxes, results of
operations and/or cash flow.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (the ‘‘IRA’’), which, among other

things, implements a 15% alternative minimum tax on the adjusted financial statement income of large
corporations with average annual financial income exceeding $1 billion, a 1% excise tax on net stock repurchases
and several tax incentives to promote clean energy. The IRA provisions are effective for tax years beginning after
December 31, 2022. On December 12, 2022, the European Union member states agreed to implement the
OECD’s Pillar 2 global corporate minimum tax rate of 15% on companies with revenues of at least
EUR 750 million, which will be effective for fiscal years beginning on January 1, 2024. Additionally, South
Korea became one of the first countries to enact minimum tax rules. At this time, we do not anticipate that
changes in the tax laws will have a material impact to our consolidated tax provision for the year ending
December 31, 2022 or December 31, 2023. We will continue to monitor as new information and guidance
becomes available.

We are also subject to regular reviews, examinations and audits by the IRS and other taxing authorities,
including the Korean National Tax Service, with respect to income and non-income based taxes both within and
outside the U.S. In connection with the OECD’s BEPS project, companies are required to disclose more
information to tax authorities on operations around the world, which may lead to greater audit scrutiny of income
earned in various countries. Economic and political pressures to increase tax revenues in jurisdictions in which
we operate, or the adoption of new or reformed tax legislation or regulation, may make resolving tax disputes
more difficult and the final resolution of tax audits and any related litigation could differ from our historical
provisions and accruals, resulting in an adverse impact on our business, financial condition or results of
operations.

Expanded trade restrictions imposed by the United States may limit our ability to sell to certain customers.

On August 17, 2020, the U.S. Department of Commerce expanded the scope of export restrictions as applied

to products directed to Huawei and its affiliates listed on the Bureau of Industry and Security’s Entity List
(collectively, ‘‘Huawei’’). While prior restrictions had minimal effect on our ability to supply to customers, the
newly expanded restrictions would limit our ability to supply to a variety of customers who we believe
incorporate our products to those customers’ products directly or indirectly sold to Huawei. As of the date of this
Annual Report, we are uncertain on the seriousness of the restrictions’ impact or duration and the future
trajectory of our business from customers who directly or indirectly supply Huawei with products that
incorporate our products. For export of some of our products, we have successfully obtained the necessary export
licenses, and if exports of other products require export licenses due to the restrictions, we will consider applying
for the necessary export licenses to continue to sell to the affected customers. Although we have thus far
successfully obtained the necessary export licenses for exporting some of our products, we are unsure whether
our other applications will be successful. There is also a possibility that export restrictions may be further
expanded to target companies in addition to Huawei, which may have an additional impact on our ability to sell
to our customers. Export restrictions may also affect our contractors, suppliers or customers, and we cannot
assure that they will not violate the restrictions, and any such violations may result in fines or criminal sanctions
against us and damage our reputation.

Additionally, the U.S. has published significant changes to U.S. export control regulations with respect to

Russia and China, and we anticipate additional changes to export control regulations in the future. For example,

the U.S. government has implemented controls on advanced computing ICs, computer commodities that contain
such ICs, and certain semiconductor manufacturing items, as well as controls on transactions involving items for
supercomputer and semiconductor manufacturing end-users. The new controls expand the scope of
foreign-produced items subject to license requirements for certain entities on the U.S. government’s Entity List.
Future changes in the U.S. export control regulations, including changes in the enforcement and scope of such
regulations, may create delays in the introduction of our products or services in international markets or could
prevent our customers with international operations from deploying our products or services globally. In some
cases, such changes could prevent the export or import of our products, which could have a material impact on
our future results of operations and financial condition.

Expanded trade restrictions imposed by South Korea may limit our ability to sell to certain customers or
engage in any potential strategic opportunities.

Under the ITA, any export (including various means of outflow, such as sale or transfer outside Korea) of
National Core Technology by MOTIE requires the filing of a prior-report with, and the acceptance of the same
by, the MOTIE. Any such export of NCT without the acceptance of the prior-report with the MOTIE may be
subject to corrective orders by the relevant authorities, and failure to comply with such corrective orders may
potentially result in criminal liabilities.

The Notification Regarding Designation of National Core Technologies issued by the MOTIE was amended
on July 14, 2021 to add certain technologies to the list of National Core Technology designated by the MOTIE,
and the amended list includes the design technology for OLED DDI. In the ordinary course of business, our
Korean subsidiary may provide certain information relating to its products, including OLED DDI, to customers,
suppliers or vendors, and such disclosure of information may be subject to the NCT-related regulations under the
ITA, and therefore the MOTIE’s acceptance of prior reports. Since the amendment of the foregoing NCT list in
July 2021, we have filed prior-reports with the MOTIE for the export of our OLED DDI product-related
information to certain overseas vendors that manufacture our products, and all such reports have thus far been
accepted by the MOTIE.

There is no assurance, however, that any future prior-reports for the export of our product-related

information will be accepted by the MOTIE. In the event that any future prior-report is not accepted, we may be
unable to continue our business with the overseas customers, suppliers or vendors, including the manufacturing
and delivery of our OLED DDI products.

In addition, in the event that there is any M&A transaction with respect to our Korean subsidiary that results

in non-Korean ownership of 50% or more, or exertion of control over the appointment of officers/management
by a non-Korean person or entity as the largest shareholder, a prior-report with and the acceptance by the
MOTIE is required under the ITA. There is no assurance that any report for an M&A transaction involving
non-Korean acquirers or investors will be accepted by the MOTIE when such transaction is pursued in the future.

Recent changes in international trade policy and the imposition and threats of international tariffs, including
tariffs applied to goods traded between the United States and China, could materially and adversely affect our
business and results of operations.

Since the beginning of 2018, there have been increasing public threats and, in some cases, legislative or
executive action, from U.S. and foreign leaders regarding instituting tariffs against foreign imports of certain
materials. More specifically, since March of 2018, the U.S. and China have applied tariffs to certain of each
other’s exports. The institution of trade tariffs globally, and between the U.S. and China specifically, may
negatively impact the affected countries’ economic conditions, which could negatively affect demand for our
products in those countries and materially and adversely affect our business and results of operations of our
customers serving the affected markets. Imposition of tariffs could increase costs of the end-user products we
supply that we may not be able to pass on to our customers, which could in turn cause a decrease in the sales of
our products and materially and adversely affect our business and results of operations.

Our ability to compete successfully and achieve future growth will depend, in part, on our ability to protect
our intellectual property, proprietary technology and know-how, as well as our ability to operate without
infringing the proprietary rights of others.

We attempt to protect our intellectual property rights, both in the U.S. and in foreign countries, through a

combination of patent, trademark, copyright, mask works and trade secret laws, as well as licensing agreements
and third-party nondisclosure and assignment agreements. Because of the differences in foreign trademark, patent

and other laws concerning proprietary rights, our intellectual property rights may not receive the same degree of
protection in foreign countries as they would in the U.S. In particular, the validity, enforceability and scope of
protection of intellectual property in China, where we derive a significant portion of our net sales, and certain
other countries where we derive net sales, are uncertain and still evolving and historically have not protected,
and may not protect in the future, intellectual property rights to the same extent as do the laws and enforcement
procedures in the U.S. Our failure to obtain or maintain adequate protection of our intellectual property rights for
any reason could have a material adverse effect on our business, results of operations and financial condition.

We seek to protect our proprietary technologies and know-how through the use of patents, trade secrets,
confidentiality agreements and other security measures. The process of seeking patent protection takes a long
time and is expensive. There can be no assurance that patents will issue from pending or future applications or
that, if patents issue, they will not be challenged, invalidated or circumvented, or that the rights granted under
the patents will provide us with meaningful protection or any commercial advantage. Many of our patents are
subject to cross licenses, several of which are with our competitors. Some of our technologies are not covered by
any patent or patent application. The confidentiality agreements on which we rely to protect these technologies
may be breached and may not be adequate to protect our proprietary technologies. Further, it is possible that
others will independently develop the same or similar technologies, even without access to our proprietary
technologies.

We rely on our trademarks, trade names, and brand names to distinguish our products from the products of
our competitors, and have registered or applied to register many of these trademarks. We cannot assure you that
our trademark applications will be approved. Third parties may also oppose our trademark applications, or
otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we
could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to
devote resources advertising and marketing new brands. Further, we cannot assure you that competitors will not
infringe our trademarks, or that we will have adequate resources to enforce our trademarks.

Our ability to compete successfully depends on our ability to operate without infringing the proprietary
rights of others. We have no means of knowing what patent applications have been filed until they are published.

In addition, the semiconductor industry is characterized by frequent litigation regarding patent and other
intellectual property rights. We may need to file lawsuits to enforce our patents or intellectual property rights,
and we may need to defend against claimed infringement of the rights of others. Any litigation could result in
substantial costs to us and divert our resources, and we cannot assure you that we will prevail. Any claims of
intellectual property infringement or misappropriation against use, even those without merit, could require us to:

•

pay substantial damages or indemnify customers or licensees for damages they may suffer if the
products they purchase from us or the technology they license from us violate the intellectual property
rights of others;

stop our manufacture, use, sale or importation of the accused products;

redesign, reengineer or rebrand our products, if feasible;

expend significant resources to develop or acquire non-infringing technologies;

discontinue processes; or

obtain licenses to a third party’s intellectual property.

There can be no assurance that we would be successful in such development or acquisition or that such

licenses would be available under reasonable terms, or at all.

We license certain intellectual property from third parties. The termination of key third-party licenses

relating to the use of intellectual property in our products and our design processes would adversely affect certain
areas of our business.

We are subject to many environmental laws and regulations that could affect our operations or result in
significant expenses.

wastes, soil and groundwater contamination and employee health and safety. These laws and regulations are
complex, change frequently and have tended to become more stringent over time. Among them is the Act on
Remediation and Compensation for Damages arising from Environmental Contamination which came into effect
in Korea on January 1, 2016 and provides for strict liability of business entities in violation of the act and
alleviates the burden of proof for the damaged party. Further, under the amendment to the Act on the Control and
Aggravated Punishment of Environmental Offenses that becomes effective on November 27, 2020, certain
environmental offenses such as illegally emitting specified hazardous air pollutants or emitting air pollutants
without necessary permits will be subject to penalties of up to 5% of the sales amount generated from the
relevant business. Moreover, to effectively respond to environmental crimes, on November 14, 2022, a joint
investigation team was established, consisting of experts from both national and local governments, including the
prosecutor’s office, the Ministry of Environment. As a result, we have increased potential exposure to liability for
environmental contaminations that might have existed in the past or would arise in the future. There can be no
assurance that we have been, or will be, in compliance with all such laws and regulations or that we will not
incur material costs or liabilities in connection with these laws and regulations in the future. The adoption of new
environmental, health and safety laws, the failure to comply with new or existing laws, or issues relating to
hazardous substances could subject us to material liability (including substantial fines or penalties), impose the
need for additional capital equipment or other process requirements upon us, curtail our operations or restrict our
ability to expand operations.

Our Korean subsidiary has been designated as a regulated business under Korean environmental law, and
such designation could have an adverse effect on our financial position and results of operations.

Since 2015, our Korean subsidiary has been subject to K-ETS, a new set of greenhouse gas emissions
regulations, under the Act on Allocation and Trading of Greenhouse Gas Emission Allowances. Under K-ETS,
our Korean subsidiary was allocated a certain amount of emissions allowance in accordance with the National
Allocation Plan prepared by the Korean government, and is required to meet its allocated target by either
reducing emissions or purchasing allowances from other participants or the government in the emission trading
market. Reduction of our emissions or energy consumption may result in additional and potentially costly
compliance or remediation expenses, including potentially the installation of equipment and changes in the type
of materials we use in manufacturing, as well as cost of procuring emission allowances to cover the excess
emissions, which could adversely affect our financial position and results of operations. During the first
implementation period from 2015 to 2017 and second implementation period from 2018 to 2020, we did not
exceed the allocated emission amount. Our Korean subsidiary has been allocated emissions allowance in the third
implementation period from 2021 to 2025, and we do not expect to exceed the allocated emission amount during
the third implementation period. If, however, our Korean subsidiary exceeds the allocated emission amount the
third implementation period, we will be required to pay for the excess emissions and may be subject to other
regulatory action. We will continue to monitor our compliance with the emissions allowance on a yearly basis. In
addition, from time to time, if we assess that we have excess allowances, we may sell such excess allowances to
manufacturers in the emission market in Korea.

Furthermore, the Korean legislature enacted the Framework Act on Carbon Neutrality and Green Growth for

Responding to Climate Change (the ‘‘Carbon Neutrality Framework Act’’) on September 24, 2021. The Carbon
Neutrality Framework Act aims to reduce greenhouse gas emissions by more than 35% by 2030 (compared to
2018) and proclaims the achievement of carbon neutrality by 2050 as a national vision. The Carbon Neutrality
Framework Act is significant in that it legislates carbon neutrality and greenhouse gas reduction objectives, and
enables the central administrative agencies, local governments and public institutions to implement various
measures towards such objectives. On March 25, 2022, the Enforcement Decree of the Carbon Neutrality
Framework Act (the ‘‘Enforcement Decree’’) was enacted. The Enforcement Decree aims to provide details
required for the execution of items prescribed under the Carbon Neutrality Framework Act. The key provisions
of the Enforcement Decree include those setting the mid- to long-term greenhouse gas reduction goal at 40% and
implementing the climate change impact assessment scheme. It is anticipated that the Carbon Neutrality
Framework Act, which aims to promote the harmonious development of the economy and the environment in
conjunction with active greenhouse gas reduction measures, will serve as the foundation for the government’s
climate change response policy going forward.

Our compliance with the Serious Accidents Punishment Act (the ‘‘SAPA’’) could require significant
expenditures and management time and expose us to liability for violations.

Enacted on January 26, 2021 and effective as of January 27, 2022 in Korea, the SAPA will impose
enhanced liability exposure for workplace accidents. The legislative goal of the SAPA is to prevent serious
accidents by prescribing punishments and punitive damages liability for business owners or responsible
management personnel who have violated safety and health measures in the event of such serious accidents
(serious industrial accidents and serious civil accidents). Since the law applies to businesses in Korea with 50 or
more full-time employees starting from January 27, 2022, our Korean subsidiary becomes subject to the law after
the effective date. According to the SAPA, if a serious occupational accident occurs that results in at least one
deceased person, at least two persons wounded for six months or more, or at least three persons suffering from
occupational diseases within a one year period, if the ‘‘business owners or responsible management personnel’’ of
the relevant business place is found to have failed to perform its ‘‘obligation to secure safety and health,’’ that
person may be subject to imprisonment for up to 7 year or a fine of up to KRW 100 million (in case of death,
imprisonment for not less than 1 year or a fine of not less than KRW 1 billion). Additionally, if there was
negligence of the company in giving due attention and supervision to prevent such accident, the company will be
subject to a fine up to KRW 5 billion under joint penalty provisions. Relevant responsible management personnel
will also be required to spend more time, effort and cost to comply with the SAPA and perform the necessary
additional duties imposed by the law to ensure compliance.

We may need additional capital in the future, and such capital may not be available on acceptable terms or at
all, which would have a material adverse effect on our business, financial condition and results of operations.

We may require more capital in the future from equity or debt financings to fund operating expenses, such
as research and development costs, finance investments in equipment and infrastructure, acquire complementary
businesses and technologies, and respond to competitive pressures and potential strategic opportunities. If we
raise additional funds through further issuances of equity or other securities convertible into equity, our existing
stockholders could suffer significant dilution, and any new shares we issue could have rights, preferences or
privileges senior to those of the holders of our common stock. There can be no assurance that any additional
equity or debt financing would be available to us, or if available, that such financing would be on favorable
terms to us. Accordingly, if we are unable to obtain additional capital or our business does not generate sufficient
cash flows from operating activities to fund our working capital needs and planned capital expenditures, and our
cash reserves are depleted, we may need to take various actions, such as down-sizing and/or eliminating certain
operations, which could include additional exit costs, reducing or delaying capital expenditures, selling assets, or
other restructuring actions. There can be no assurance that we would be successful in taking such actions and, in
any event, such actions may result in a material adverse effect on our business and results of operations. In
addition, our indebtedness limits our ability to incur additional indebtedness under certain circumstances.

Our business depends on international customers, suppliers and operations in Asia, and as a result we are
subject to regulatory, operational, financial and political risks, which could adversely affect our financial
results.

We rely on, and expect to continue to rely on, suppliers, subcontractors and operations located primarily in

Asia. As a result, we face risks inherent in international operations, such as unexpected changes in regulatory
requirements, tariffs and other market barriers, political, social and economic instability, adverse tax
consequences, war, civil disturbances and acts of terrorism, public health issues (including viral outbreaks such
as COVID-19), difficulties in accounts receivable collection, extended payment terms and differing labor
standards, enforcement of contractual obligations and protection of intellectual property. These risks may lead to
increased costs or decreased revenue growth, or both.

Our business, results of operations and financial condition and prospects may be materially and adversely
affected by the ongoing COVID-19 pandemic or any future pandemic, epidemic or outbreak of any other
highly infectious disease.

As a result of COVID-19, including the emergence of various variants, governments in affected countries

have imposed travel bans, quarantines and other emergency public health measures. In response to the virus,
national and local governments in numerous countries around the world have implemented substantial business
restrictions and lockdown measures and may continue to impose similar policies in the future from time to time

in response to further outbreaks of the virus. Private sector companies have also taken precautionary measures,
such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses
and facilities. These restrictions have had, and these and future prevention and mitigation measures, may
continue to have, an adverse impact on global economic conditions, which could materially adversely affect our
future operations.

These measures have impacted and may further impact our workforce and operations, the operations of our
customers, and those of our respective vendors, suppliers, and partners. The disruptions to our operations caused
by the COVID-19 outbreak may result in inefficiencies, delays and additional costs in our research and
development, sales and marketing, and customer service efforts that we cannot fully mitigate through remote or
other alternative work arrangements. Also, some suppliers of materials used in the production of our products
may have been or will be more severely impacted by COVID-19, which could limit our ability to obtain
sufficient materials for our products. In addition, the severe global economic disruption caused by COVID-19
may cause our customers and end-users of our products to suffer significant economic hardship, which could
result in decreased demand for our products in the future and materially adversely affect our business, results of
operations, financial condition (including liquidity) and prospects.

The full extent to which COVID-19, or any future pandemic, epidemic or outbreak of any other highly
infectious disease, impacts our operations and causes disruptions on our customers, end-users, overall demand for
our products, supply chain, and the related financial impact to us, will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such
pandemic, the emergence and characteristics of new variants, the actions taken to contain the pandemic or
mitigate its impact, including the adoption, administration and effectiveness of available COVID-19 vaccines, and
the direct and indirect economic effects of the pandemic and containment measures, among others. Should such
disruptions continue for an extended period of time, the impact could have a more severe adverse effect on our
business, results of operations and financial condition (including liquidity). Additionally, weaker economic
conditions generally could result in impairment in value of our tangible or intangible assets, or our ability to
raise additional capital, if needed.

Tensions with North Korea could have an adverse effect on us and the market value of our shares.

Relations between South Korea and North Korea have been tense throughout Korea’s modern history. The

level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and
future events. In particular, in recent years, there have been heightened security concerns stemming from North
Korea’s nuclear weapon and long-range missile programs and increased uncertainty regarding North Korea’s
actions and possible responses from the international community.

North Korea’s economy also faces severe challenges, and any adverse economic developments may further

aggravate social and political tensions within North Korea.

Although we do not derive any revenue from, nor sell any products in, North Korea, any future increase in

tensions between South Korea and North Korea that may occur, for example, if North Korea experiences a
leadership crisis, high-level contacts between South Korea and North Korea break down, or military hostilities
occur, could have a material adverse effect on the South Korean economy and on our business, financial
condition, results of operations and the market value of our common stock.

We may be subject to disruptions, breaches or cyber-attacks of our secured networks and information
technology systems that could damage our reputation, harm our business, expose us to liability and materially
adversely affect our results of operations.

In the ordinary course of our business, we collect and store sensitive data, including IP and other proprietary

information about our business and that of our customers, suppliers and business partners. Secure maintenance,
processing and transmission of this information is critical to our operations and business strategy. We may be
subject to disruptions, breaches or cyber-attacks of our secured networks and information technology systems
caused by illegal hacking, criminal fraud or impersonation, computer viruses, acts of vandalism or terrorism or
employee error, and our security measures or those of any third party service providers we use may not detect or
prevent such security breaches. We may incur significant costs to eliminate or alleviate cybersecurity breaches
and vulnerabilities, which could be significant, and our efforts to protect against such breaches or vulnerabilities
may not be successful and could result in system interruptions that may materially impede our sales,

manufacturing, distribution, finance or other critical functions. Any such compromise of our information security
could also result in the unauthorized publication of our confidential business or proprietary information or that of
other parties with which we do business, an interruption in our operations, the unauthorized transfer of cash or
other assets, the unauthorized release of customer or employee data or a violation of privacy or other laws in the
jurisdictions in which we operate. Any of the foregoing could irreparably damage our reputation and business
and/or expose us to material monetary liability, which could have a material adverse effect on our results of
operations.

You may not be able to bring an action or enforce any judgment obtained in United States courts, or bring an
action in any other jurisdiction, against us or our subsidiaries or our directors, officers or independent
auditors that are organized or residing in jurisdictions other than the United States.

Most of our subsidiaries are organized or incorporated outside of the U.S. and some of our directors and
executive officers as well as our independent auditors are organized or reside outside of the U.S. Most of our and
our subsidiaries’ assets are located outside of the U.S. and in particular, in Korea. Accordingly, any judgment
obtained in the U.S. against us or our subsidiaries may not be collectible in the U.S. As a result, it may not be
possible for you to effect service of process within the U.S. upon these persons or to enforce against them or us
court judgments obtained in the U.S. that are predicated upon the civil liability provisions of the federal
securities laws of the U.S. or of the securities laws of any state of the U.S. In particular, there is doubt as to the
enforceability in Korea or any other jurisdictions outside the U.S., either in original actions or in actions for
enforcement of judgments of U.S. courts, of civil liabilities predicated on the federal securities laws of the
U.S. or the securities laws of any state of the U.S.

We are a holding company and depend on the business of our subsidiaries to make payments to us.

We are a holding company with no independent operations of our own. Our subsidiaries conduct
substantially all of the operations necessary to fund our obligations. Our ability to pay dividends or to make
payments on any future obligations will depend on our subsidiaries’ cash flow and their payment of funds to us.
Our subsidiaries’ ability to make payments to us will depend on:

•

their earnings;

covenants contained in any debt agreements to which we may then be subject, including any debt
agreements of our subsidiaries;

covenants contained in other agreements to which we or our subsidiaries are or may become subject;

business and tax considerations; and

applicable law, including any restrictions under Korean law that may be imposed on our Korean
subsidiary that would restrict its ability to make payments on intercompany loans from our Dutch
subsidiary.

We cannot assure that the operating results of our subsidiaries at any given time will be sufficient to make

distributions or other payments to us.

We may at times need to incur impairment, restructuring and other restructuring related charges, which could
materially affect our results of operations and financial condition.

During industry downturns and for other reasons, we may need to record impairment, restructuring or other

restructuring related charges. In the future, we may need to record additional impairment charges or to further
restructure our business or incur additional restructuring charges, any of which could have a material adverse
effect on our results of operations or financial condition.

We are subject to litigation risks, which may be costly to defend and the outcome of which is uncertain.

All industries, including the semiconductor industry, are subject to legal claims, with and without merit, that

may be particularly costly and which may divert the attention of our management and our resources in general.

We are involved in a variety of legal matters, most of which we consider routine matters that arise in the

normal course of business. These routine matters typically fall into broad categories such as those involving
customers, employment and labor and intellectual property. Even if the final outcome of these legal claims does

not have a material adverse effect on our financial position, results of operations or cash flows, defense and
settlement costs can be substantial. Due to the inherent uncertainty of the litigation process, the resolution of any
particular legal claim or proceeding could have a material effect on our business, financial condition, results of
operations or cash flows.

The price of our common stock may be volatile and you may lose all or a part of your investment.

The trading price of our common stock might be subject to wide fluctuations. Factors, some of which are

beyond our control, that could affect the trading price of our common stock may include:

•

actual or anticipated variations in our results of operations from quarter to quarter or year to year;

announcements by us or our competitors of significant agreements, technological innovations or
strategic alliances;

changes in recommendations or estimates by any securities analysts who follow our securities;

addition or loss of significant customers;

recruitment or departure of key personnel;

changes in economic performance or market valuations of competing companies in our industry;

price and volume fluctuations in the overall stock market;

• market conditions in our industry, end markets and the economy as a whole;
•

subsequent sales of stock and other financings; and

•

litigation, legislation, regulation or technological developments that adversely affect our business.

In the past, following periods of volatility in the market price of a public company’s securities, securities

class action litigation often has been instituted against the public company. Regardless of its outcome, this type
of litigation could result in substantial costs to us and a likely diversion of our management’s attention. You may
not receive a positive return on your investment when you sell your shares, and you could lose some or the
entire amount of your investment.

We cannot guarantee that our share repurchase program will be successfully consummated, or that it will
enhance shareholder value, and share repurchases could affect the price of our common stock.

On December 21, 2021, the Board of Directors authorized us to repurchase up to $75.0 million of our

outstanding common stock and we entered into an accelerated stock repurchase agreement (the ‘‘ASR
Agreement’’) with JPMorgan Chase Bank, National Association (‘‘JPM’’) to repurchase an aggregate of
$37.5 million of our common stock. Pursuant to the terms of the ASR Agreement, we paid JPM $37.5 million in
cash and received an initial delivery of 994,695 shares of our common stock. Upon final settlement of the ASR
Agreement, we received an additional 1,031,576 shares of common stock from JPM. On August 31, 2022, the
Board of Directors authorized an expansion of our previously announced stock repurchase program from
$75 million to $87.5 million of our common stock. The remaining $50 million of the expanded $87.5 million
program was planned to be repurchased in the open market or through privately negotiated transactions. In
connection with the repurchase program, we established a stock trading plan with Oppenheimer & Co. Inc. in
accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. This share repurchase
program could affect the price of our common stock, increase volatility and diminish our cash reserves. The IRA
enacted in August 2022 imposes a 1% excise tax on the fair market value of stock repurchases made by covered
corporations after December 31, 2022. The total taxable value of shares repurchased is reduced by the fair
market value of any newly issued shares during the taxable year. We are assessing the potential impact of the
stock repurchase excise tax. Based on our preliminary assessment, we do not expect a material impact on our
overall share repurchase program or our consolidated financial statements.

See ‘‘Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial
Statements—Note 13. Stockholders’ Equity and Stock-Based Compensation’’ for more information.

Significant ownership of our common stock by certain stockholders could adversely affect our other
stockholders.

The concentration of ownership of our common stock by certain stockholders may limit the ability of other
stockholders to influence corporate matters and, as a result, we may take actions that our public stockholders do
not view as beneficial. For example, any concentration of ownership could have the effect of delaying or
preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of
us, which in turn could cause the market price of our common stock to decline or prevent our stockholders from
realizing a premium over the market price for their shares of our common stock.

Under our certificate of incorporation, our non-employee directors and non-employee holders of five percent
or more of our outstanding common stock do not have a duty to refrain from engaging in a corporate opportunity
in the same or similar activities or lines of business as those engaged in by us, our subsidiaries and other related
parties. Also, we have renounced any interest or expectancy in such business opportunities even if the
opportunity is one that we might reasonably have pursued or had the ability or desire to pursue if granted an
opportunity to do so.

Provisions in our charter documents and Delaware Law may make it difficult for a third party to acquire us
and could depress the price of our common stock.

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change

of control or changes in our management. Among other things, our certificate of incorporation and bylaws:

•

authorize our Board of Directors to issue, without stockholder approval, preferred stock with such
terms as the Board of Directors may determine;

prohibit action by written consent of our stockholders;

prohibit any person other than our Board of Directors, the chairman of our Board of Directors, our
Chief Executive Officer or holders of at least 25% of the voting power of all then outstanding shares of
capital stock of the corporation entitled to vote generally in the election of directors to call a special
meeting of our stockholders; and

specify advance notice requirements for stockholder proposals and director nominations.

In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law (the
‘‘DGCL’’), regulating corporate takeovers and which has an anti-takeover effect with respect to transactions not
approved in advance by our Board of Directors, including discouraging takeover attempts that might result in a
premium over the market price for shares of our common stock. In general, those provisions prohibit a Delaware
corporation from engaging in any business combination with any interested stockholder for a period of three
years following the date that the stockholder became an interested stockholder, unless:

•

the transaction is approved by the board of directors before the date the interested stockholder attained
that status;

upon consummation of the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced; or

on or after such date, the business combination is approved by the board of directors and authorized at
a meeting of stockholders, and not by written consent, by at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder.

In general, DGCL Section 203 defines a business combination to include the following:
•

any merger or consolidation involving the corporation and the interested stockholder;

•

any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving
the interested stockholder;

subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation
of any stock of the corporation to the interested stockholder;

any transaction involving the corporation that has the effect of increasing the proportionate share of the
stock of any class or series of the corporation beneficially owned by the interested stockholder; or

the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or
other financial benefits provided by or through the corporation.

In general, DGCL Section 203 defines an interested stockholder as any entity or person beneficially owning

15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or
controlling or controlled by any such entity or person.

A Delaware corporation may opt out of this provision by express provision in its original certificate of

incorporation or by amendment to its certificate of incorporation or bylaws approved by its stockholders.
However, we have not opted out of, and do not currently intend to opt out of, this provision.

We have not historically paid dividends and do not currently have any dividend or distribution policy, and
therefore, investors may need to rely on sales of their common stock as the only way to realize any future
gains on their investments.

We have not historically paid cash dividends and do not currently have any dividend or distribution policy.

Any determination to pay dividends in the future will be at the discretion of our Board of Directors. Accordingly,
unless the Board implements a future dividend or distribution policy, investors must rely on sales of their
common stock after price appreciation, which may never occur, as the only way to realize any future gains on
their investments.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2.

Properties

Our manufacturing operations take place in a single fabrication facility located in Korea in Gumi. Our
facility has a capacity of approximately 36,000 eight-inch equivalent wafers per month. We manufacture wafers
utilizing geometries ranging from 0.35 to 0.50 microns. The Gumi facility has one main building with
41,022 square meters devoted to manufacturing, testing and packaging.

In addition to our fabrication facility in Gumi, we lease facilities in Cheongju and Seoul, Korea. Each of
these facilities includes administration, sales and marketing and research and development functions. We lease
sales and marketing offices through our subsidiaries in several other countries.

The ownership of our wafer manufacturing assets is an important component of our business strategy.
Maintaining manufacturing control enables us to develop proprietary, differentiated products and results in higher
production yields, as well as shortened design and production cycles. We believe our facilities are suitable and
adequate for the conduct of our business for the foreseeable future and that we have sufficient production
capacity to service our business as currently contemplated without significant capital investment.

All of our assembly, test and packaging services for our Display Solutions business and for our Power

Solutions business are outsourced with the balance handled in-house. The independent providers of these
outsourced services are located in Korea and China. The relative cost of outsourced services, as compared to
in-house services, depends upon many factors specific to each product and circumstance. However, we generally
incur higher costs for outsourced services, which can result in lower margins.

Item 3.

Legal Proceedings

We are involved in a variety of legal matters, most of which we consider routine matters that arise in the

normal course of business. These routine matters typically fall into broad categories such as those involving
customers, employment and labor and intellectual property. Intellectual property litigation and infringement
claims, in particular, could cause us to incur significant expenses or prevent us from selling our products. We are
currently not involved in any legal proceedings that we believe would have a material adverse effect on our
business, financial condition or results of operations.

See also ‘‘Item 1A. Risk Factors’’ in this Report for additional information.

Item 4.

Mine Safety Disclosures

Not applicable.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

Market Information

Our common stock is listed on the New York Stock Exchange under the symbol ‘‘MX.’’

Stock Performance Graph

The graph and table below compare the cumulative total stockholder return of our common shares with the

cumulative total return of the S&P 500 Index and the Philadelphia Semiconductor Index (PHLX) from
December 29, 2017 (the last trading day before the beginning of our fifth preceding fiscal year) through
December 30, 2022. The graph assumes that $100 was invested on December 29, 2017 in our common shares
and in each index and that any dividends were reinvested. No cash dividends have been declared on our common
shares during the five-year period ended December 30, 2022.

Comparison of Cumulative Total Return*

Among Magnachip Semiconductor Corporation, the S&P 500 Index and the PHLX

The stock performance included in this graph is not necessarily indicative of future stock performance.

Total Return to Stockholders (Including Reinvestment of Dividends)

Indexed Returns

Company/Index

Base Period
12/29/2017

12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/30/2022

Magnachip Semiconductor Corporation . . . . . .
S&P 500 Index. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Philadelphia Semiconductor Index . . . . . . . . . . .

100
100
100

62.41
93.76
92.19

116.68
121.85
147.61

135.88
140.49
223.10

210.75
178.27
314.93

94.37
143.61
202.08

Holders

The approximate number of record holders of our outstanding common stock as of February 10, 2023 was

70. This number does not include beneficial owners for whom shares are held by nominees in street name.

Stock-Based Compensation

For information on securities authorized for issuance under our equity compensation plans, see Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Dividends

We have not historically paid any cash dividends on our common stock. Our Board of Directors

continuously evaluates our capital allocation strategy and liquidity targets, but has not currently implemented any
dividend or distribution policy. Any determination to pay dividends in the future will be at the discretion of our
Board of Directors.

Issuer Purchases of Equity Securities

The following table shows the monthly activity related to our repurchases of common stock for the quarter

ended December 31, 2022.

Period

Total Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs(1)

Approximate dollar
value of Shares that may
yet be Purchased under
the Plans or Programs
(in thousands)(1)

October 2022 . . . . . . . . . . . . . . . . . . . . . . . . .
November 2022 . . . . . . . . . . . . . . . . . . . . . . .
December 2022 . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

403,823
314,041
193,143

911,007

$10.24
$ 9.65
$ 8.83

$ 9.74

403,823
314,041
193,143

911,007

$42,625
$39,195
$37,489

$37,489

(1) On August 31, 2022, the Company’s Board of Directors authorized an expansion of the Company’s previously announced stock

repurchase program from $75 million to $87.5 million of the Company’s common stock. The Company has already repurchased shares
worth $37.5 million under the program through an accelerated stock repurchase agreement on December 21, 2021 with JPMorgan
Chase Bank, National Association. The remaining $50.0 million of the expanded $87.5 million program will be repurchased in the open
market or through privately negotiated transactions. In connection with the repurchase program, the Company has established a stock
trading plan with Oppenheimer & Co. Inc. in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

See ‘‘Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial

Statements—Note 13. Stockholders’ Equity and Stock-Based Compensation’’ in this Report for a description of
the Accelerated Stock Repurchase Program.

Item 6.

[Reserved]

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the audited consolidated financial

statements, together in each case with the related notes, included elsewhere in this Report. This discussion and
analysis contains, in addition to historical information, forward-looking statements that include risks and
uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements
as a result of certain factors, including those set forth under the heading ‘‘Risk Factors’’ and elsewhere in this
Report.

The following section generally discusses our financial condition and results of operations for our fiscal year

ended December 31, 2022 (‘‘fiscal year 2022’’) compared to our fiscal year ended December 31, 2021
(‘‘fiscal year 2021’’). A discussion regarding our financial condition and results of operations for fiscal year 2021
compared to our fiscal year ended December 31, 2020 (‘‘fiscal year 2020’’) can be found in Part II, Item 7 of
our Annual Report on Form 10-K for fiscal year 2021, filed with the Securities and Exchange Commission
(the ‘‘SEC’’) on February 23, 2022.

Overview

We are a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for
communications, IoT applications, consumer, computing, industrial and automotive applications. We have a
proven record with more than 40 years of operating history, a portfolio of approximately 1,100 registered patents
and pending applications and extensive engineering and manufacturing process expertise.

Our standard products business includes our Display Solutions and Power Solutions business lines.

Our Display Solutions line of products provide flat panel display solutions to major suppliers of large and

small flat panel displays. These products include source and gate drivers and timing controllers that cover a wide
range of flat panel displays used in mobile communications, automotives, entertainment devices, IT applications
such as monitors, notebook PCs, tablet PC and TVs applied with liquid crystal display (LCD), organic light
emitting diodes (OLED) and Micro light emitting diode (Micro LED) panel. Since 2007, we have designed and
manufactured OLED display driver integrated circuit (IC) products. Our current portfolio of OLED solutions
address a wide range of resolutions ranging from HD (High Definition) to UHD (Ultra High Definition) for a
wide range of applications including smartphones, TVs, automotive and IT applications such as monitors,
notebook PCs, tablet PCs as well as AR/VRs.

Our Power Solutions business line produces power management semiconductor products including discrete

and integrated circuit solutions for power management in communications, consumer, computing, servers,
automotive, and industrial applications. These products include metal oxide semiconductor field effect transistors
(MOSFETs), insulated-gate bipolar transistors (IGBTs), AC-DC/DC-DC converters, LED drivers, regulators and
power management integrated circuits (PMICs) for a range of devices, including televisions, smartphones, mobile
phones, wearable devices, desktop PCs, notebooks, tablet PCs, other consumer electrics, automotive, and
industrial applications such as power suppliers, e-bikes, solar inverters, LED lighting and motor drives.

Our wide variety of analog and mixed-signal semiconductor products combined with our mature technology
platform allow us to address multiple high-growth end markets and rapidly develop and introduce new products
and services in response to market demands. Our design center and substantial manufacturing operation in Korea
place us at the core of the global electronics device supply chain. We believe this enables us to quickly and
efficiently respond to our customers’ needs, and allows us to better serve and capture additional demand from
existing and new customers. Certain of our OLED products are produced using external 12-inch foundries.
Through a strategic cooperation with external 12-inch foundries, we are managing to ensure outsourcing wafers
at competitive price and produce quality products.

To maintain and increase our profitability, we must accurately forecast trends in demand for electronics
devices that incorporate semiconductor products we produce. We must understand our customers’ needs as well
as the likely end market trends and demand in the markets they serve. We must also invest in relevant research
and development activities and purchase necessary materials on a timely basis to meet our customers’ demand
while maintaining our target margins and cash flow.

The semiconductor markets in which we participate are highly competitive. The prices of our products tend

to decrease regularly over their useful lives, and such price decreases can be significant as new generations of
products are introduced by us or our competitors. We strive to offset the impact of declining selling prices for

existing products through cost reductions and the introduction of new products that command selling prices
above the average selling price of our existing products. In addition, we seek to manage our inventories and
manufacturing capacity so as to mitigate the risk of losses from product obsolescence.

Demand for our products and services is driven by overall demand for communications, IoT, consumer and

industrial products and can be adversely affected by periods of weak consumer and enterprise spending or by
market share losses by our customers. In order to mitigate the impact of market volatility on our business, we
continually strive to diversify our portfolio of products, customers, and target applications. We also expect that
new competitors will emerge in these markets that may place increased pressure on the pricing for our products
and services. While we believe we are well positioned competitively to compete in these markets and against
these new competitors as a result of our long operating history, existing manufacturing capacity and our
worldwide customer base, if we are not effective in competing in these markets, our operating results may be
adversely affected.

Net sales for our standard products business are driven by design wins in which we are selected by an
electronics original equipment manufacturer (OEM) or other potential customer to supply its demand for a
particular product. A customer will often have more than one supplier designed into multi-source components for
a particular product line. Once we have design wins and the products enter into mass production, we often
specify the pricing of a particular product for a set period of time, with periodic discussions and renegotiations of
pricing with our customers. In any given period, our net sales depend heavily upon the end-market demand for
the goods in which our products are used, the inventory levels maintained by our customers and, in some cases,
allocation of demand for components for a particular product among selected qualified suppliers.

In contrast to completely fabless semiconductor companies, our internal manufacturing capacity provides us

with greater control over certain manufacturing costs and the ability to implement process and production
improvements for our internally manufactured products, which can favorably impact gross profit margins. Our
internal manufacturing capacity also allows for better control over delivery schedules, improved consistency over
product quality and reliability and improved ability to protect intellectual property from misappropriation on
these internally manufactured products. However, having internal manufacturing capacity exposes us to the risk
of under-utilization of manufacturing capacity that results in lower gross profit margins, particularly during
downturns in the semiconductor industry.

Our standard products business requires investments in capital equipment. Analog and mixed-signal
manufacturing facilities and processes are typically distinguished by the design and process implementation
expertise rather than the use of the most advanced equipment. Many of these processes also tend to migrate more
slowly to smaller geometries due to technological barriers and increased costs. For example, some of our
products use high-voltage technology that requires larger geometries and that may not migrate to smaller
geometries for several years, if at all. As a result, our manufacturing base and strategy do not require substantial
investment in leading edge process equipment for those products, allowing us to utilize our facilities and
equipment over an extended period of time with moderate required capital investments. In addition, we are less
likely to experience significant industry overcapacity, which can cause product prices to decline significantly. In
general, we seek to invest in manufacturing capacity that can be used for multiple high-value applications over
an extended period of time. In addition, we outsource manufacturing of those products which do require
advanced technology and 12-inch and 8-inch wafer capacity, such as organic light emitting diodes (OLED). We
believe this balanced capital investment strategy enables us to optimize our capital investments and facilitates
more diversified product and service offerings.

Since 2007, we had designed and manufactured OLED display driver ICs in our internal manufacturing

facilities. As we expanded our design capabilities to products that require lower geometries unavailable at our
existing manufacturing facilities, we began outsourcing manufacturing of certain OLED display driver ICs to
external 12-inch foundries starting in the second half of 2015 and we have started outsourcing 8-inch wafer for
OLED TV IC after the sale of our fabrication facility located in Cheongju, Korea in 2020. This additional source
of manufacturing is an increasingly important part of our supply chain management. By outsourcing
manufacturing of OLED products to external foundries, we are able to adapt dynamically to changing customer
requirements and address growing markets without substantial capital investments by us. However, relying on
external foundries exposes us to the risk of being unable to secure manufacturing capacity, particularly under the

current global shortage of foundry services. Although we are working strategically with external foundries to
ensure long-term wafer capacity, if these efforts are unsuccessful, our ability to deliver products to our customers
may be negatively impacted, which would adversely affect our relationship with customers and opportunities to
secure new design-wins.

Our success going forward will depend upon our ability to adapt to future challenges such as the emergence

of new competitors for our products and services or the consolidation of current competitors. Additionally, we
must innovate to remain ahead of, or at least rapidly adapt to, technological breakthroughs that may lead to a
significant change in the technology necessary to deliver our products and services. We believe that our
established relationships and close collaboration with leading customers enhance our awareness of new product
opportunities, market and technology trends and improve our ability to adapt and grow successfully.

Recent Developments

Expanded Stock Repurchase Program

On August 31, 2022, our Board of Directors authorized an expansion of the previously announced stock
repurchase program from $75.0 million to $87.5 million of our common stock. We have already repurchased
shares worth $37.5 million under the program through an accelerated stock repurchase agreement on
December 21, 2021 with JPMorgan Chase Bank, National Association. The remaining $50.0 million of the
expanded $87.5 million program has been and will be repurchased in the open market or through privately
negotiated transactions. In connection with the repurchase program, we have established a stock trading plan with
Oppenheimer & Co. Inc. in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as
amended.

From September 2022 to December 2022, we repurchased 1,235,650 shares of our common stock in the
open market for an aggregate purchase price of $12.5 million and a price per share of $10.13 under the stock
repurchase program.

Global Semiconductor Industry Trends

Increases in demand for semiconductor products resulted in a global shortage of manufacturing capacity

over the prior two years. As a result, we may experience increased costs to manufacture our products and may
not be able to manufacture and deliver all of the orders placed by our customers. Specifically, if we are unable to
secure manufacturing capacity from the external foundries we rely on, our ability to deliver products to our
customers may be negatively impacted. Also, shortage of manufacturing capacity may lead to an increase in our
manufacturing costs. Our principal pricing strategy is to pass on the increased manufacturing costs to our
customers; however, we may not be fully able to do this in all cases. Total revenues for the years ended
December 31, 2022 and 2021 were severely impacted by these persisting supply shortages, in particular for
28nm 12-inch OLED wafers, which impacted design-in projects from our large panel customer in Korea that are
typically given 9 to 12 months in advance.

In an effort to minimize the potential adverse impact of the supply shortage, we continue to work
strategically with certain external foundries to help ensure long-term wafer capacity. If these efforts are
unsuccessful, however, such shortage could limit our ability to meet demand for our products in the future,
which would adversely affect our reputation and competitive position, resulting in a negative impact on results of
operations.

We are not able to foresee when the shortage of manufacturing capacity will subside, but we are beginning

to see some indicators of improvement of such supply shortage situation. However, the global shortage for
semiconductor products over the prior two years has led to overbooking backordered demand and oversupply. As
a result, the current global macroeconomic conditions, including COVID-19 pandemic, higher inflation and
interest rates and uncertainty caused by the Russian-Ukraine war, have led to weaker end-market demand and an
oversupply of inventory. We continue to monitor these trends and uncertainties, and any decline in end-market
demand and increase in inventory levels could negatively impact our financial condition and results of
operations.

COVID-19 Pandemic

China. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.
Governmental authorities throughout the world have implemented numerous containment measures, including
travel bans and restrictions, quarantines, shelter-in-place orders, and business restrictions and shutdowns, resulting
in rapidly changing market and economic conditions. Although some of these restrictions and other containment
measures have since been lifted or scaled back, ongoing surges of COVID-19 have, in some cases, resulted in
the re-imposition of certain restrictions and containment measures, and may continue to lead to other restrictions
being re-implemented in the foreseeable future in response to efforts to reduce the rapid spread of COVID-19.

We experienced some minor disruption in our Power Solutions business line from assembly and test
subcontractors located in China in the first quarter of 2020 as a result of the COVID-19 pandemic. To date, our
external Display Solutions business line contractors and sub-contractors have not been materially impacted by the
COVID-19 pandemic. We are, however, unable to accurately predict the full impact that the COVID-19
pandemic will have on future results of operations due to numerous uncertainties. The extent to which the
COVID-19 pandemic impacts our business, results of operations and financial condition will depend on future
developments, which, despite progress in vaccination efforts, are highly uncertain and cannot be predicted with
confidence, including the duration of the outbreak, new information that may emerge concerning the severity of
the COVID-19 pandemic, such as new strains of the virus that may emerge, which may impact rates of infection
and vaccination efforts, developments or perceptions regarding the safety of vaccines and the extent and
effectiveness of actions to contain the COVID-19 pandemic or treat its impact, including vaccination campaigns
and lockdown measures, among others. In addition, recurrences or additional waves of COVID-19 cases could
cause other widespread or more severe impacts depending on where infection rates are highest. We cannot
presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of
our customers and suppliers were to experience prolonged business shutdowns or other disruptions, our ability to
conduct our business could be materially and negatively affected, which could have a material adverse impact on
our business, results of operations and financial condition.

We continue to closely monitor and evaluate the nature and scope of the impact of the COVID-19 pandemic

to our business, consolidated results of operations, and financial condition, and may take further actions altering
our business operations and managing our costs and liquidity that we deem necessary or appropriate to respond
to this ongoing and uncertain global health crisis and the resulting global economic consequences.

Developments in Export Control Regulations

On October 7, 2022, the Bureau of Industry and Security of the U.S. Department of Commerce published

changes to U.S. export control regulations (U.S. Export Regulations), including new restrictions on Chinese
entities’ ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture
advanced semiconductors. Further, on October 12, 2022, a new rule went into effect requiring U.S. persons to
obtain a license prior to engaging in certain activities that could ‘‘support’’ certain end-uses and end-users,
including those related to weapons of mass destruction. Additionally, on October 21, 2022, the Bureau of
Industry and Security brought into effect a series of new Foreign Direct Product (FDP) rules and various new
controls on advanced computing items, significantly expanding the scope of items that are subject to export
control under the U.S. Export Regulations. Based on our understanding of the current U.S. Export Regulations
and related rules, we do not anticipate that they will have a material impact on our business. Additional changes
to the U.S. Export Regulations are expected, but the scope or timing of such changes is unknown. We will
continue to monitor such developments, including potential additional trade restrictions, and other regulatory or
policy changes by the U.S. and foreign governments.

Explanation and Reconciliation of Non-U.S. GAAP Measures

Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income

We use the terms Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income (including on a

per share basis) in this Report. Adjusted EBITDA, as we define it, is a non-U.S. GAAP measure. We define
Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) equity-based
compensation expense, (ii) foreign currency loss, net, (iii) derivative valuation gain, net, (iv) inventory reserve
related to Huawei impact of downstream trade restrictions, (v) merger-related income, net and (vi) other charges,
net. EBITDA for the periods indicated is defined as net income (loss) before interest income, interest expense,
income tax expense, and depreciation and amortization.

See the footnotes to the table below for further information regarding these items. We present Adjusted

EBITDA as a supplemental measure of our performance because:

•

we believe that Adjusted EBITDA, by eliminating the impact of a number of items that we do not
consider to be indicative of our core ongoing operating performance, provides a more comparable
measure of our operating performance from period-to-period and may be a better indicator of future
performance;

we believe that Adjusted EBITDA is commonly requested and used by securities analysts, investors and
other interested parties in the evaluation of a company as an enterprise level performance measure that
eliminates the effects of financing, income taxes and the accounting effects of capital spending, as well
as other one time or recurring items described above; and

we believe that Adjusted EBITDA is useful for investors, among other reasons, to assess a company’s
period-to-period core operating performance and to understand and assess the manner in which
management analyzes operating performance.

We use Adjusted EBITDA in a number of ways, including:

•

for planning purposes, including the preparation of our annual operating budget;

to evaluate the effectiveness of our enterprise level business strategies;

in communications with our Board of Directors concerning our consolidated financial performance; and

in certain of our compensation plans as a performance measure for determining incentive compensation
payments.

We encourage you to evaluate each adjustment and the reasons we consider them appropriate. In evaluating
Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in
this presentation. Adjusted EBITDA is not a measure defined in accordance with U.S. GAAP and should not be
construed as an alternative to net income or any other performance measure derived in accordance with U.S
GAAP, or as an alternative to cash flows from operating activities as a measure of liquidity. A reconciliation of
net income (loss) to Adjusted EBITDA is as follows:

Year Ended
Year Ended
December 31,
December 31,
2021
2022
(Dollars in millions)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EBITDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments:

Equity-based compensation expense(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency loss, net(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative valuation gain, net(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory reserve related to Huawei impact of downstream trade restrictions(d) . . . . . .
Merger-related income, net(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other charges, net(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (8.0)
(6.0)
1.2
5.2
15.0

$ 7.3

6.0
3.0
(0.1)
—
—
3.3

$ 56.7
(2.6)
1.4
17.3
14.2

$ 87.0

7.7
11.9
(0.1)
(1.5)
(35.5)
1.3

$19.5

$ 70.7

(a)

This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash
equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used
by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating
performance without the effects of these non-cash expenses as supplemental information.

(b)

(c)

(d)

(e)

(f)

on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or
losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects
of these primarily non-cash gains or losses, which we cannot control. Additionally, we believe the isolation of this adjustment provides
investors with enhanced comparability to prior and future periods of our operating performance results.

This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents derivatives value changes
excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative
transactions are limited to a certain portion of our expected cash flows denominated in U.S. dollars, and we do not enter into derivative
transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating
performance.

For the year ended December 31, 2021, this adjustment eliminates the impact of sales of inventories for which excess and obsolete
reserves were previously recognized in relation to the U.S. Government’s export restrictions on Huawei, which is a downstream
customer of some of our direct customers, as these reserved inventories were subsequently sold to certain other customers. As this
charge and the timing of its reversal meaningfully impacted our operational results and are not expected to represent an ongoing
operating expense subject to our ability to foresee and control, we believe our operating performance results are more meaningfully
compared if this charge and related reversal are excluded.

For the year ended December 31, 2021, this adjustment eliminates $70.2 million income from the recognition of a reverse termination
fee as a result of the termination of the merger transaction, which was offset in part by a $34.7 million of professional service fees and
expenses incurred in connection with the contemplated merger transaction that was terminated in December 2021. As these adjustments
meaningfully impacted our operating results and are not expected to represent an ongoing operating expense or income to us, we
believe our operating performance results are more usefully compared if these adjustments are excluded.

For the year ended December 31, 2022, this adjustment eliminates $2.8 million of one-time employee incentives and professional
service fees and expenses of $1.0 million incurred in connection with certain strategic evaluations, which was offset in part by a
$0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi. For the year
ended December 31, 2021, this adjustment eliminates $3.4 million non-recurring professional service fees and expenses incurred in
connection with the regulatory requests, which was offset in part by $1.4 million gain on sale of certain legacy equipment of the closed
back-end line in our fabrication facility in Gumi, and $0.7 million legal settlement gain related to certain expenses incurred in prior
periods in connection with our legacy Fab 4 (which was sold during the year ended December 31, 2020) and awarded in the third
quarter of 2021. As these adjustments meaningfully impacted our operating results and are not expected to represent an ongoing
operating expense or income to us, we believe our operating performance results are more usefully compared if these adjustments are
excluded.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our
results as reported under U.S. GAAP. Some of these limitations are:

•

Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual
commitments;

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal
payments, on our debt;

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be
replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

Adjusted EBITDA does not consider the potentially dilutive impact of issuing equity-based compensation to our management
team and employees;

Adjusted EBITDA does not reflect the costs of holding certain assets and liabilities in foreign currencies; and

other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative
measure.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in
the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted
EBITDA only supplementally.

We present Adjusted Operating Income as supplemental measures of our performance. We prepare Adjusted

Operating Income by adjusting operating income (loss) to eliminate the impact of equity-based compensation
expenses and other items that may be either one time or recurring that we do not consider to be indicative of our
core ongoing operating performance. We believe that Adjusted Operating Income is useful to investors to provide
a supplemental way to understand our underlying operating performance and allows investors to monitor and
understand changes in our ability to generate income from ongoing business operations.

Adjusted Operating Income is not a measure defined in accordance with U.S. GAAP and should not be

construed as an alternative to operating income or any other performance measure derived in accordance with
U.S GAAP. We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other
companies in our industry may calculate Adjusted Operating Income differently than we do, limiting its
usefulness as a comparative measure. In addition, in evaluating Adjusted Operating Income, you should be aware
that in the future we may incur expenses similar to the adjustments in this presentation. We define Adjusted

Operating Income for the periods indicated as operating income adjusted to exclude (i) equity-based
compensation expense, (ii) inventory reserve related to Huawei impact of downstream trade restrictions,
(iii) merger-related income, net and (iv) other charges, net.

The following table summarizes the adjustments to operating income (loss) that we make in order to

calculate Adjusted Operating Income for the periods indicated:

Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments:

Equity-based compensation expense(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory reserve related to Huawei impact of downstream trade restrictions(b) . . . . . .
Merger-related income, net(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other charges, net(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended
Year Ended
December 31,
December 31,
2022
2021
(Dollars in millions)

$(5.2)

$ 83.4

6.0
—
—
3.3

7.7
(1.5)
(35.5)
2.0

$ 4.1

$ 56.1

(a)

(b)

(c)

(d)

For the year ended December 31, 2022, this adjustment eliminates $2.8 million of one-time employee incentives and professional
service fees and expenses of $1.0 million incurred in connection with certain strategic evaluations, which was offset in part by a
$0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi. For the year
ended December 31, 2021, this adjustment eliminates $3.4 million non-recurring professional service fees and expenses incurred in
connection with the regulatory requests, which was offset in part by $1.4 million gain on sale of certain legacy equipment of the closed
back-end line in our fabrication facility in Gumi. As these adjustments meaningfully impacted our operating results and are not
expected to represent an ongoing operating expense or income to us, we believe our operating performance results are more usefully
compared if these adjustments are excluded.

We present Adjusted Net Income (including on a per share basis) as a further supplemental measure of our

performance. We prepare Adjusted Net Income (including on a per share basis) by adjusting income (loss) to
eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring
that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted
Net Income (including on a per share basis) is particularly useful because it reflects the impact of our asset base
and capital structure on our operating performance. We present Adjusted Net Income (including on a per share
basis) for a number of reasons, including:

•

we use Adjusted Net Income (including on a per share basis) in communications with our Board of
Directors concerning our consolidated financial performance without the impact of non-cash expenses
and the other items as we discussed below since we believe that it is a more consistent measure of our
core operating results from period to period; and

we believe that reporting Adjusted Net Income (including on a per share basis) is useful to readers in
evaluating our core operating results because it eliminates the effects of non-cash expenses as well as
the other items we discuss below, such as foreign currency gains and losses, which are out of our
control and can vary significantly from period to period.

Adjusted Net Income (including on a per share basis) is not a measure defined in accordance with U.S.
GAAP and should not be construed as an alternative to net income or any other performance measure derived in
accordance with U.S GAAP, or as an alternative to cash flows from operating activities as a measure of liquidity.
We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other companies
in our industry may calculate Adjusted Net Income (including on a per share basis) differently than we do,
limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Net Income (including on a
per share basis), you should be aware that in the future we may incur expenses similar to the adjustments in this
presentation. We define Adjusted Net Income (including on a per share basis); for the periods indicated as
income (loss), adjusted to exclude (i) equity-based compensation expense, (ii) foreign currency loss, net,
(iii) derivative valuation gain, net, (iv) inventory reserve related to Huawei impact of downstream trade
restrictions, (v) merger-related income, net, (vi) other charges, net and (vii) income tax effect on non-GAAP
adjustments

The following table summarizes the adjustments to income (loss) that we make in order to calculate

Adjusted Net Income (including on a per share basis) for the periods indicated:

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments:

Equity-based compensation expense(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency loss, net(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative valuation gain, net(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory reserve related to Huawei impact of downstream trade

restrictions(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related income, net(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other charges, net(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax effect on non-GAAP adjustments(g) . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted Net Income(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended
December 31,
2022

Year Ended
December 31,
2021(h)

(Dollars in millions, except per
share data)

(8.0)

56.7

6.0
3.0
(0.1)

—
—
3.3
4.6

8.8

7.7
11.9
(0.1)

(1.5)
(35.5)
1.3
9.7

50.2

Reported earnings (loss) per share—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reported earnings (loss) per share—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average number of shares—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average number of shares—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted earnings per share—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted earnings per share—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average number of shares—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average number of shares—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(0.18)
$
$
(0.18)
44,850,791
44,850,791
0.20
$
$
0.19
44,850,791
45,795,559

1.26
$
$
1.21
44,879,412
47,709,373
1.12
$
$
1.07
44,879,412
47,709,373

(a)

(b)

(c)

This adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations
and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses
on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or
losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects
of these primarily non-cash gains or losses, which we cannot control. Additionally, we believe the isolation of this adjustment provides
investors with enhanced comparability to prior and future periods of our operating performance results.

(d)

(e)

(f)

(g)

(h)

customer of some of our direct customers, as these reserved inventories were subsequently sold to certain other customers. As this
charge and the timing of its reversal meaningfully impacted our operational results and are not expected to represent an ongoing
operating expense subject to our ability to foresee and control, we believe our operating performance results are more meaningfully
compared if this charge and related reversal are excluded.

For the years ended December 31, 2022 and 2021, income tax effect on non-GAAP adjustments were calculated by calculating the tax
expense of each jurisdiction with or without the non-GAAP adjustments. For the year ended December 31, 2022, income tax effect on
non-GAAP adjustments related to our Korean subsidiary and the U.S parent entity were $6.2 million and negative $1.7 million,
respectively. For the year ended December 31, 2021, income tax effect on non-GAAP adjustments related to our Korean subsidiary and
the U.S parent entity were $2.8 million and $6.9 million, respectively.

The adjustment for GAAP and cash tax expense difference in connection with the release of valuation allowances will no longer be an
adjustment included in this non-GAAP financial measure. The reconciliation for the year ended December 31, 2021 presented above
has been recast to reflect the removal of this adjustment in accordance with Securities and Exchange Commission guidance.

We believe that all adjustments to income (loss) used to calculate Adjusted Net Income was applied consistently to the periods
presented. Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for
analysis of our results as reported under U.S. GAAP. Some of these limitations are:

•

Adjusted Net Income does not reflect changes in, or cash requirements for, our working capital needs;

Adjusted Net Income does not consider the potentially dilutive impact of issuing equity-based compensation to our management
team and employees;

Adjusted Net Income does not reflect the costs of holding certain assets and liabilities in foreign currencies; and

other companies in our industry may calculate Adjusted Net Income differently than we do, limiting its usefulness as a
comparative measure.

Because of these limitations, Adjusted Net Income should not be considered as a measure of profitability of our business. We
compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted Net Income only as a supplement.

Factors Affecting Our Results of Operations

Net Sales. We derive substantially all of our sales (net of sales returns and allowances) from our standard

products business. We outsource manufacturing of mobile OLED products to external 12-inch foundries. Our
product inventory is primarily located in Korea and is available for drop shipment globally. Outside of Korea, we
maintain limited product inventory, and our sales representatives generally relay orders to our factories in Korea
for fulfillment. We have strategically located our sales offices near concentrations of major customers. Our sales
offices are located in Korea, Japan, Taiwan and Greater China. Our network of authorized agents and distributors
is in the U.S., Europe and the Asia Pacific region.

We recognize revenue when a customer obtains control of the product, which is generally upon product

shipment, delivery at the customer’s location or upon customer acceptance, depending on the terms of the
arrangement. For the years ended December 31, 2022 and 2021, we sold products to 175 and 177 customers,
respectively, and our net sales to our ten largest customers represented 69% and 80% of our net sales—standard
products business, respectively.

We will provide the Transitional Fab 3 Foundry Services up to September 1, 2023 at an agreed upon cost

plus a mark-up.

Gross Profit. Our overall gross profit generally fluctuates as a result of changes in overall sales volumes

and in the average selling prices of our products and services. Other factors that influence our gross profit
include changes in product mix, the introduction of new products and services and subsequent generations of
existing products and services, shifts in the utilization of our manufacturing facility and the yields achieved by
our manufacturing operations, changes in material, labor and other manufacturing costs including outsourced
manufacturing expenses, and variation in depreciation expense.

Average Selling Prices. Average selling prices for our products tend to be highest at the time of introduction

of new products which utilize the latest technology and tend to decrease over time as such products mature in
the market and are replaced by next generation products. We strive to offset the impact of declining selling prices
for existing products through our product development activities and by introducing new products that command
selling prices above the average selling price of our existing products. In addition, we seek to manage our
inventories and manufacturing capacity so as to preclude losses from product and productive capacity
obsolescence.

Material Costs. Our material costs consist of costs of raw materials, such as silicon wafers, chemicals, gases
and tape and packaging supplies. We use processes that require specialized raw materials, such as silicon wafers,
that are generally available from a limited number of suppliers. If demand increases or supplies decrease, the
costs of our raw materials could increase significantly.

Labor Costs. A significant portion of our employees are located in Korea. Under Korean labor laws, most

employees and certain executive officers with one or more years of service are entitled to severance benefits
upon the termination of their employment based on their length of service and rate of pay. As of December 31,
2022, approximately 97% of our employees were eligible for severance benefits.

Depreciation Expense. We periodically evaluate the carrying values of long-lived assets, including property,

plant and equipment and intangible assets, as well as the related depreciation periods. We depreciated our
property, plant and equipment using the straight-line method over the estimated useful lives of our assets.
Depreciation rates vary from 30-40 years on buildings to 3 to 12 years for certain equipment and assets. Our
evaluation of carrying values is based on various analyses including cash flow and profitability projections. If our
projections indicate that future undiscounted cash flows are not sufficient to recover the carrying values of the
related long-lived assets, the carrying value of the assets is impaired and will be reduced, with the reduction
charged to expense so that the carrying value is equal to fair value.

Selling Expenses. We sell our products worldwide through a direct sales force as well as a network of sales

agents and representatives to OEMs, including major branded customers and contract manufacturers, and
indirectly through distributors. Selling expenses consist primarily of the personnel costs for the members of our
direct sales force, a network of sales representatives and other costs of distribution. Personnel costs include base
salary, benefits and incentive compensation.

General and Administrative Expenses. General and administrative expenses consist of the costs of various

corporate operations, including finance, legal, human resources and other administrative functions. These
expenses primarily consist of payroll-related expenses, consulting and other professional fees and office
facility-related expenses.

Research and Development. The rapid technological change and product obsolescence that characterize our

industry require us to make continuous investments in research and development. Product development time
frames vary but, in general, we incur research and development costs one to two years before generating sales
from the associated new products. These expenses include personnel costs for members of our engineering
workforce, cost of photomasks, silicon wafers and other non-recurring engineering charges related to product
design. Additionally, we develop base line process technology through experimentation and through the design
and use of characterization wafers that help achieve commercially feasible yields for new products. The majority
of research and development expenses of our display business are material and design-related costs for OLED
display driver IC product development involving 28-nanometer or finer processes. The majority of research and
development expenses of our power business are certain equipment, material and design-related costs for power
discrete products and material and design-related costs for power IC products. Power IC uses standard BCD
process technologies which can be sourced from multiple foundries.

Impact of Foreign Currency Exchange Rates on Reported Results of Operations. Historically, a portion of
our revenues and cost of sales and greater than the majority of our operating expenses have been denominated in
non-U.S. currencies, principally the Korean won, and we expect that this will remain true in the future. Because
we report our results of operations in U.S. dollars converted from our non-U.S. revenues and expenses based on
monthly average exchange rates, changes in the exchange rate between the Korean won and the U.S. dollar could
materially impact our reported results of operations and distort period to period comparisons. In particular,
because of the difference in the amount of our consolidated revenues and expenses that are in U.S. dollars
relative to Korean won, depreciation in the U.S. dollar relative to the Korean won could result in a material

increase in reported costs relative to revenues, and therefore could cause our profit margins and operating income
to appear to decline materially, particularly relative to prior periods. The converse is true if the U.S. dollar were
to appreciate relative to the Korean won. Moreover, our foreign currency gain or loss would be affected by
changes in the exchange rate between the Korean won and the U.S. dollar as a substantial portion of non-cash
translation gain or loss is associated with the intercompany long-term loans to our Korean subsidiary, which is
denominated in U.S. dollars. As of December 31, 2022, the outstanding intercompany loan balance including
accrued interest between our Korean subsidiary and our Dutch subsidiary was $311.0 million. As a result of such
foreign currency fluctuations, it could be more difficult to detect underlying trends in our business and results of
operations. In addition, to the extent that fluctuations in currency exchange rates cause our results of operations
to differ from our expectations or the expectations of our investors, the trading price of our stock could be
adversely affected.

From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of
exchange rate fluctuations. Our Korean subsidiary enters into foreign currency zero cost collar contracts in order
to mitigate a portion of the impact of U.S. dollar-Korean won exchange rate fluctuations on our operating results.
Obligations under these foreign currency zero cost collar contracts must be cash collateralized if our exposure
exceeds certain specified thresholds. These zero cost collar contracts may be terminated by a counterparty in a
number of circumstances, including if our total cash and cash equivalents is less than $30.0 million at the end of
a fiscal quarter unless a waiver is obtained from the counterparty. We cannot assure that any hedging technique
we implement will be effective. If our hedging activities are not effective, changes in currency exchange rates
may have a more significant impact on our results of operations. See ‘‘Note 10. Derivative Financial
Instruments’’ to our consolidated financial statements under ‘‘Item 8. Financial Statements and Supplementary
Data’’ for additional information regarding our foreign exchange hedging activities.

Foreign Currency Gain or Loss. Foreign currency translation gains or losses on transactions by us or our

subsidiaries in a currency other than our or our subsidiaries’ functional currency are included in foreign currency
gain (loss), net in our statements of operations. A substantial portion of this net foreign currency gain or loss
relates to non-cash translation gain or loss related to the principal balance of intercompany balances at our
Korean subsidiary that are denominated in U.S. dollars. This gain or loss results from fluctuations in the
exchange rate between the Korean won and U.S. dollar.

Income Taxes. We record our income taxes in each of the tax jurisdictions in which we operate. This
process involves using an asset and liability approach whereby deferred tax assets and liabilities are recorded for
differences in the financial reporting bases and tax basis of our assets and liabilities. We exercise significant
management judgment in determining our provision for income taxes, deferred tax assets and liabilities. We
assess whether it is more likely than not that the deferred tax assets existing at the period-end will be realized in
future periods. In such assessment, we consider all available positive and negative evidence, including scheduled
reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent results of
operations. In the event we were to determine that we would be able to realize the deferred income tax assets in
the future in excess of their net recorded amount, we would adjust the valuation allowance, which would reduce
the provision for income taxes.

We are subject to income- or non-income-based tax examinations by tax authorities of the U.S., Korea and

multiple other foreign jurisdictions for all open tax years. Significant estimates and judgments are required in
determining our worldwide provision for income- or non-income based taxes. Some of these estimates are based
on interpretations of existing tax laws or regulations. The ultimate amount of tax liability may be uncertain as a
result.

Capital Expenditures. We primarily invest in manufacturing equipment, software design tools and other
tangible assets mainly for fabrication facility maintenance, capacity expansion and technology improvement.
Capacity expansions and technology improvements typically occur in anticipation of increases in demand. We
typically pay for capital expenditures in partial installments with portions due on order, delivery and final
acceptance. Our capital expenditures mainly include our payments for the purchase of property, plant and
equipment.

Inventories. We monitor our inventory levels in light of product development changes and market

expectations. We may be required to take additional charges for quantities in excess of demand, cost in excess of
market value and product age. Our analysis may take into consideration historical usage, expected demand,

anticipated sales price, new product development schedules, the effect new products might have on the sales of
existing products, product age, customer design activity, customer concentration and other factors. These
forecasts require us to estimate our ability to predict demand for current and future products and compare those
estimates with our current inventory levels and inventory purchase commitments. Our forecasts for our inventory
may differ from actual inventory use.

Results of Operations

Comparison of Years Ended December 31, 2022 and 2021

The following table sets forth consolidated results of operations for the years ended December 31, 2022 and

2021:

Year Ended
December 31, 2022
% of
Total
revenues

Amount

Year Ended
December 31, 2021
% of
Total
revenues

Amount
(Dollars in millions)

Change
Amount

Revenues

Net sales—standard products business . . . . . . . . . . . . . . .
Net sales—transitional Fab 3 foundry services . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales—standard products business. . . . . . . . . . . .
Cost of sales—transitional Fab 3 foundry services . . . . .
Total cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . .
Research and development expenses . . . . . . . . . . . . . . . . . .
Merger-related income, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Other charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency loss, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) before income tax expense . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$301.9
35.8
337.7

202.3
34.0
236.4
101.3
50.9
52.3
—
3.3
(5.2)
6.0
(1.2)
(3.0)
0.6
2.4
(2.9)
5.2
$ (8.0)

89.4% $433.1
41.1
10.6
474.2
100.0

91.3% $(131.2)
(5.4)
(136.6)

8.7
100.0

283.5
59.9
37.2
10.1
320.7
70.0
153.5
30.0
52.4
15.1
51.2
15.5
(35.5)
—
2.0
1.0
83.4
(1.6)
2.6
1.8
(1.4)
(0.3)
(11.9)
(0.9)
1.2
0.2
(9.4)
0.7
74.0
(0.9)
1.5
17.3
(2.4)% $ 56.7

59.8
7.8
67.6
32.4
11.1
10.8
(7.5)
0.4
17.6
0.6
(0.3)
(2.5)
0.2
(2.0)
15.6
3.6

(81.2)
(3.1)
(84.3)
(52.3)
(1.6)
1.1
35.5
1.3
(88.7)
3.4
0.2
8.8
(0.6)
11.8
(76.8)
(12.1)
12.0% $ (64.7)

Results by business line

Year Ended
December 31, 2022

Year Ended
December 31, 2021

% of
Total
revenues

Amount

% of
Total
revenues

Change
Amount

Amount
(Dollars in millions)

Revenues

Net sales—standard products business

Display Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Power Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total standard products business . . . . . . . . . . . . . . . . . . . .
Net sales—transitional Fab 3 foundry services . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71.4
230.5
301.9
35.8
$337.7

21.2
205.3
68.3
227.8
89.4
433.1
41.1
10.6
100.0% $474.2

43.3
48.0
91.3
8.7

(133.9)
2.7
(131.2)
(5.4)
100.0% $(136.6)

Year Ended
December 31, 2022

Year Ended
December 31, 2021

% of

Amount

Net Sales Amount

% of
Net Sales

Change
Amount

(Dollars in millions)

Gross Profit

Gross profit—standard products business . . . . . . . . . . . . . . . . .
Gross profit—transitional Fab 3 foundry services. . . . . . . . . . .
Total gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

99.5
1.7
$101.3

149.6
33.0
4.8
3.9
30.0% $153.5

(50.0)
34.5
9.6
(2.2)
32.4% $(52.3)

Revenues

Total revenues were $337.7 million for the year ended December 31, 2022, a $136.6 million, or 28.8%,
decrease compared to $474.2 million for the year ended December 31, 2021. This decrease was primarily due to
a decrease in revenue related to our standard products business as described below.

The standard products business. Net sales from our standard products business were $301.9 million for the

year ended December 31, 2022, a $131.2 million, or 30.3%, decrease compared to $433.1 million for the year
ended December 31, 2021. Net sales from our Display Solutions business line was significantly decreased due
primarily to a decrease in revenue from our mobile OLED display driver ICs stemming from a lower customer
demand resulting from a slowdown in the Chinese smartphone market, and a lack of secured manufacturing
capacity (in particular for 28nm 12-inch OLED wafers) at external 12-inch foundries, which was offset in part by
a higher demand for our OLED TV display driver ICs and auto-LCD display driver ICs. The slight increase in
net sales from our Power Solutions business line was attributable to a strong demand for power products such as
high-end MOSFETs for computing and lighting solutions, and IGBTs mainly for solar inverters, which was offset
in part by a lower demand for MOSFETs primarily for smartphones and e-bikes.

The transitional Fab 3 foundry services. Net sales from the transitional Fab 3 foundry services were

$35.8 million and $41.1 million for the years ended December 31, 2022 and 2021, respectively.

Gross Profit

Total gross profit was $101.3 million for the year ended December 31, 2022 compared to $153.5 million for

the year ended December 31, 2021, representing a $52.3 million, or 34.0%, decrease. Gross profit as a
percentage of total revenues for the year ended December 31, 2022 decreased to 30.0% compared to 32.4% for
the year ended December 31, 2021. The decrease in gross profit and gross profit as a percentage of net sales was
primarily due to the decrease in gross profit and gross profit as a percentage of net sales from our standard
products business as further described below.

The standard products business. Gross profit from our standard products business was $99.5 million for the

year ended December 31, 2022, representing a $50.0 million, or 33.5%, decrease from $149.6 million for the
year ended December 31, 2021. The decrease in gross profit was primarily attributable to a significant decrease
in net sales from our Display Solutions business line as explained above. Gross profit as a percentage of net
sales for the year ended December 31, 2022 decreased to 33.0% compared to 34.5% for the year ended

December 31, 2021. The decrease in gross profit as a percentage of net sales was primarily attributable to certain
inventory reserves and scrap cost related to 12-inch display products resulted from lower demand for China
smartphones.

Net Sales—Standard Products Business by Geographic Region

We report net sales—standard products business by geographic region based on the location to which the
products are billed. The following table sets forth our net sales—standard products business by geographic region
and the percentage of total net sales—standard products business represented by each geographic region for the
years ended December 31, 2022 and 2021:

Year Ended
December 31, 2022
% of
Net Sales –
standard
products
business

Amount

Year Ended
December 31, 2021
% of
Net Sales –
standard
products
business

Amount
(Dollars in millions)

Change
Amount

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific (other than Korea) . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$105.3
179.6
10.4
6.7
—

$301.9

34.9% $113.8
306.3
59.5
6.1
3.4
5.7
2.2
1.2
—

26.3% $
70.7
1.4
1.3
0.3

(8.5)
(126.8)
4.3
1.0
(1.2)

100.0% $433.1

100.0% $(131.2)

Net sales—standard products business in Korea for the year ended December 31, 2022 decreased from
$113.8 million to $105.3 million compared to the year ended December 31, 2021, or by $8.5 million, or 7.5%,
primarily due to weaker demand for power products such as MOSFETs, including high-end MOSFETs, primarily
for TVs and smartphone applications, which was offset in part by an increase in revenue from our mobile OLED
display driver ICs in the first half of 2022 and OLED TV display driver ICs.

Net sales—standard products business in the Asia Pacific for the year ended December 31, 2022 decreased
from $306.3 million to $179.6 million compared to the year ended December 31, 2021, or by $126.8 million, or
41.4%, primarily due to a significant decrease in revenue from our mobile OLED display driver ICs stemming
from a lower customer demand resulting from a slowdown in the Chinese smartphone market, and a lack of
secured manufacturing capacity (in particular for 28nm 12-inch OLED wafers) at external 12-inch foundries,
which was offset in part by a higher demand for power products such as high-end MOSFETs, primarily for
computing, and IGBTs mainly for solar inverters. The increased demand for our auto-LCD display driver ICs
also favorably affected this year.

Net sales—standard products business in the U.S. for the year ended December 31, 2022 increased from
$6.1 million to $10.4 million compared to the year ended December 31, 2021, or by $4.3 million, or 71.3%,
primarily due to a change in billing location of a global customer who offers lighting solutions combined with
the increase of high-end MOSFET design wins with the customer.

Operating Expenses

Selling, General and Administrative Expenses. Selling, general and administrative expenses were

$50.9 million, or 15.1% of total revenues for the year ended December 31, 2022, compared to $52.4 million, or
11.1% of total revenues for the year ended December 31, 2021. The decrease of $1.6 million, or 3.0%, was
primarily attributable to a net decrease in estimated employee compensation reflecting the current year’s financial
performance, and a decrease in running royalties recognized based on the sale of certain mobile OLED display
driver ICs.

Research and Development Expenses. Research and development expenses were $52.3 million, or 15.5% of
total revenues for the year ended December 31, 2022, compared to $51.2 million, or 10.8%, of total revenues for
the year ended December 31, 2021. The increase of $1.1 million, or 2.2%, was primarily attributable to an
increase in outside service fees, including those for software design tools.

Merger-related Income, Net. For the year ended December 31, 2021, we recorded a $70.2 million income
from the recognition of a reverse termination fee as a result of the termination of the merger transaction, which
was offset in part by a $34.7 million of professional service fees and expenses incurred in connection with the
contemplated merger transaction that was terminated in December 2021.

Other Charges, Net. For the year ended December 31, 2022, we recorded a $2.8 million of one-time

employee incentives and professional service fees and expenses of $1.0 million incurred in connection with
certain strategic evaluations, which was offset in part by a $0.5 million gain on sale of certain legacy equipment
of the closed back-end line in our fabrication facility in Gumi. For the year ended December 31, 2021, we
recorded a $3.4 million of non-recurring professional service fees and expenses incurred in connection with the
regulatory requests, which was offset in part by a $1.4 million gain on sale of certain legacy equipment of the
closed back-end line in our fabrication facility in Gumi.

Operating Income (Loss)

As a result of the foregoing, operating loss of $5.2 million was recorded for the year ended December 31,

2022 compared to operating income of $83.4 million the year ended December 31, 2021. The decrease in
operating income of $88.7 million resulted primarily from a $52.3 million decrease in gross profit and a
$35.5 million net decrease in merger-related income.

Other Income (Expense)

Interest Income. Interest income was $6.0 million and $2.6 million for the years ended December 31, 2022

and December 31, 2021, respectively. The increase of $3.4 million, or 129.2%, was primarily attributable to an
increase in interest income on cash and cash equivalents held by our Korean subsidiary, which benefited from the
favorable financial market environment.

Interest Expense. Interest expense was $1.2 million and $1.4 million for the years ended December 31,

2022 and December 31, 2021, respectively.

Foreign Currency Loss, Net. Net foreign currency loss for the year ended December 31, 2022 was

$3.0 million compared to net foreign currency loss of $11.9 million for the year ended December 31, 2021. The
net foreign currency losses for the years ended December 31, 2022 and 2021 were due to the depreciation in the
value of the Korean won relative to the U.S. dollar during each period.

A substantial portion of our net foreign currency gain or loss is non-cash translation gain or loss associated

with the intercompany long-term loans to our Korean subsidiary, which is denominated in U.S. dollars, and is
affected by changes in the exchange rate between the Korean won and the U.S. dollar. As of December 31, 2022
and 2021, the outstanding intercompany loan balance including accrued interest between our Korean subsidiary
and our Dutch subsidiary was $311.0 million and $344.4 million, respectively. Foreign currency translation gain
or loss from intercompany balances were included in determining our consolidated net income since the
intercompany balances were not considered long-term investments in nature because management intended to
settle these intercompany balances at their respective maturity dates.

Others, Net. Others were comprised of rental income and gains and losses from valuation of derivatives
which were designated as hedging instruments. Others, net for the years ended December 31, 2022 and 2021 was
$0.6 million and $1.2 million, respectively. Others, net for the year ended December 31, 2021, included a
$0.7 million legal settlement gain related to certain expenses incurred in prior periods in connection with our
legacy Fab 4 (which was sold during the year ended December 31, 2020) and awarded in the third quarter of
2021.

Income Tax Expense

We are subject to income taxes in the U.S. and many foreign jurisdictions and our effective tax rate is

affected by changes in the mix of earnings between countries with differing tax rates.

We recorded a $5.2 million income tax expense for the year ended December 31, 2022, which is primarily
composed of income tax expense from our Korean subsidiary due mainly to its realized foreign currency gains
resulting in taxable income for the year, and this expense was partially offset by income tax benefit from our
Dutch subsidiary. The Dutch subsidiary’s tax benefit was mainly attributable to the reversal of withholding tax
with respect to the waiver of the accrued interest on the loans granted to our Korean subsidiary by our Dutch
subsidiary.

We recorded a $17.3 million income tax expense for the year ended December 31, 2021, which was
primarily composed of the income tax expense of $6.9 million from our Korean subsidiary, primarily due to its
taxable income for the year, and the income tax expense of $8.2 million from the parent entity in the U.S. The
U.S. parent’s tax expense was mainly attributable to the recognition of income and expenses related to the
Merger combined with the utilization of its available net operating loss carry-forwards.

Net Income (Loss)

As a result of the foregoing, net loss of $8.0 million was recorded for the year ended December 31, 2022

compared to net income of $56.7 million for the year ended December 31, 2021. As discussed above, the
$64.7 million decrease in net income was primarily attributable to an $88.7 million decrease in operating income,
which was offset in part by a $12.1 million decrease in income tax expense, an $8.8 million improvement in net
foreign currency loss and a $3.4 million increase in interest income.

Liquidity and Capital Resources

Our principal capital requirements are to fund sales and marketing, invest in research and development and
capital equipment, and to fund working capital needs. We calculate working capital as current assets less current
liabilities.

Our principal sources of liquidity are our cash, cash equivalents, our cash flows from operations and our

financing activities. Our ability to manage cash and cash equivalents may be limited, as our primary cash flows
are dictated by the terms of our sales and supply agreements, contractual obligations, debt instruments and legal
and regulatory requirements. From time to time, we may sell accounts receivable to third parties under factoring
agreements or engage in accounts receivable discounting to facilitate the collection of cash. In addition, from
time to time, we may make payments to our vendors on extended terms with their consent. As of December 31,
2022, we did not have any accounts payable on extended terms or payment deferment with our vendors.

As of June 29, 2018, our Korean subsidiary entered into an arrangement whereby it (i) acquired a water

treatment facility from SK hynix for $4.2 million to support our fabrication facility in Gumi, Korea, and
(ii) subsequently sold the water treatment facility for $4.2 million to a third party management company that we
engaged to run the facility for a 10-year term beginning July 1, 2018. As of December 31, 2022, the outstanding
obligation of this arrangement is approximately $24.8 million for remaining service term through 2028.

As of December 31, 2022, cash and cash equivalents held by our Korean subsidiary were $207.9 million,
which represents 92% of our total cash and cash equivalents on a consolidated basis. We currently believe that
we will have sufficient cash reserves from cash on hand and expected cash from operations to fund our
operations as well as capital expenditures for the next twelve months and the foreseeable future.

Year ended December 31, 2022 compared to year ended December 31, 2021

As of December 31, 2022, our cash and cash equivalents balance was $225.5 million, a $54.1 million

decrease compared to $279.5 million as of December 31, 2021.

Cash inflow provided by operating activities totaled $5.2 million for the year ended December 31, 2022,
compared to $87.7 million of cash inflow provided by operating activities for the year ended December 31, 2021.

The net operating cash inflow for the year ended December 31, 2022 reflects our net loss of $8.0 million, as

adjusted favorably by $57.6 million, which mainly consisted of depreciation and amortization, provision for
severance benefits, net foreign currency loss and stock-based compensation, and net unfavorable impact of
$44.4 million from changes of operating assets and liabilities.

Our working capital balance as of December 31, 2022 was $290.6 million compared to $323.6 million as of

December 31, 2021. The $33.0 million decrease was primarily attributable to a $54.1 million decrease in cash
and cash equivalents and a $18.0 million decrease in other receivables mainly resulted from receipt of reverse
termination fee, which was offset in part by a $19.6 million decrease in accounts payable, a $10.4 million
decrease in accrued expenses and a $4.9 million increase in advance payments to certain suppliers, including
external foundries to meet our planned production.

Cash outflow used in investing activities totaled $24.9 million for the year ended December 31, 2022,
compared to a $31.4 million of cash outflow used in investing activities for the year ended December 31, 2021.

The $6.5 million decrease in cash outflow was attributable to an $8.8 million decrease in purchase of property,
plant and equipment, which was offset in part by a $1.9 million net increase in hedge collateral and a
$0.9 million decrease in proceeds from disposal of property, plant and equipment.

Cash outflow used in financing activities totaled $12.7 million for the year ended December 31, 2022,
compared to $35.5 million of cash outflow used in financing activities for the year ended December 31, 2021.
The financing cash outflow for the year ended December 31, 2022 was primarily attributable to a payment of
$12.1 million for the repurchases of our common stock in 2022 pursuant to our stock repurchase program and a
payment of $1.8 million for the repurchase of our common stock to satisfy tax withholding obligations in
connection with the vesting of restricted stock units, which was offset in part by $1.8 million of proceeds
received from the issuance of common stock in connection with the exercise of stock options. The financing cash
outflow for the year ended December 31, 2021 was primarily attributable to a payment of $37.5 million for
accelerated stock repurchase program and a payment of $1.7 million for the repurchase of our common stock to
satisfy tax withholding obligations in connection with the vesting of restricted stock units, which was offset in
part by $4.3 million of proceeds received from the issuance of common stock in connection with the exercise of
stock options.

We routinely make capital expenditures for fabrication facility maintenance, enhancement of our existing

facility and reinforcement of our global research and development capability. For the year ended December 31,
2022, capital expenditures for property, plant and equipment were $23.4 million, an $8.8 million, or 27.4%,
decrease from $32.2 million for the year ended December 31, 2021. The capital expenditures for the years ended
December 31, 2022 and 2021 were related to meeting our customer demand and supporting technology and
facility improvement at our fabrication facility.

Critical Accounting Policies and Estimates

Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the
reported amounts of revenues and expenses during the reporting periods and the related disclosures in our
consolidated financial statements and accompanying notes.

We believe that the accounting policies discussed below are critical due to the fact that they involve a high

degree of judgment and estimates about the effects of matters that are inherently uncertain. We base these
estimates and judgments on historical experience, knowledge of current conditions and other assumptions and
information that we believe to be reasonable. Estimates and assumptions about future events and their effects
cannot be determined with certainty. Accordingly, these estimates may change as new events occur, as more
experience is acquired, as additional information is obtained and as the business environment in which we
operate changes.

Inventories

Inventories are stated at the lower of cost or net realizable value, using the first in, first out method

(‘‘FIFO’’). If net realizable value is less than cost at the balance sheet date, the carrying amount is reduced to the
realizable value, and the difference is recognized as a loss on valuation of inventories within cost of sales.
Inventory reserves are established when conditions indicate that the net realizable value is less than costs due to
physical deterioration, obsolescence, changes in price levels, or other causes based on individual facts and
circumstances. We evaluate the sufficiency of inventory reserves and take into consideration historical usage,
expected demand, anticipated sales price, new product development schedules, the effect new products might
have on the sale of existing products, product age and other factors. Reserves are also established for excess
inventory based on our current inventory levels and projected demand and our ability to sell those specific
products. Situations that could cause these inventory reserves include a decline in business and economic
conditions, decline in consumer confidence caused by changes in market conditions, sudden and significant
decline in demand for our products, inventory obsolescence because of rapidly changing technology and
consumer requirements, or failure to estimate end customer demand properly. A reduction of these inventory
reserves may be recorded if previously reserved items are subsequently sold as a result of unexpected changes to
certain aforementioned situations.

The gross amount of inventory reserves charged to cost of sales totaled $13.3 million and $7.6 million in

the fiscal years ended December 31, 2022 and 2021, respectively. The new cost base related to the sale of
inventory that was previously written down totaled $3.6 million and $5.3 million in the fiscal years ended
December 31, 2022 and 2021, respectively.

As prescribed in ASC 330, ‘‘Inventory,’’ once a reserve is established for a particular item based on our
assessment as described above, it is maintained until the related item is sold or scrapped as a new cost basis has
been established that cannot subsequently be marked up. In addition, the cost of inventories is determined based
on the normal capacity of each fabrication facility. In case the capacity utilization is lower than a certain level
that management believes to be normal, the fixed overhead costs per production unit which exceed those under
normal capacity are charged to cost of sales rather than capitalized as inventories.

Income Taxes

We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgments and estimates are

required in evaluating our uncertain tax positions and determining our provision for income taxes.

We make an ongoing assessment of our deferred tax assets for recoverability considering historical
profitability, projected future taxable income, the expected timing of the reversals of existing temporary
differences, expiration of tax credits and net operating loss carry-forwards and tax planning strategies. Then, if
necessary, we record valuation allowances against our deferred tax assets in order for the net amount of deferred
tax assets to be recorded only to the extent that we conclude that it is more likely than not that our net deferred
tax assets will be realized. We will continue to evaluate the ability to realize our net deferred tax assets on an
ongoing basis to identify whether any significant changes in circumstances or assumptions have occurred that
could materially affect the ability to realize deferred tax assets.

We recognize and measure uncertain tax positions taken or expected to be taken in a tax return utilizing a
two-step process. In the first step, recognition, we determine whether it is more likely than not that a tax position
will be sustained upon examination, including resolution of any related appeals or litigation processes, based on
the technical merits of the position. The second step addresses measurement of a tax position that meets the more
likely than not criteria. The tax position is measured at the largest amount of benefit that has a likelihood of
greater than 50 percent of being realized upon ultimate settlement.

Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of

these matters will not be different from that which is reflected in our historical income tax provisions and
accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit
or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the
amounts recorded, such differences will impact the provisions for income taxes in the period in which such
determination is made. The provision for income taxes includes the effect of reserve provisions and changes to
reserves that are considered appropriate, as well as the related net interest and penalties.

Recent Accounting Pronouncements

See Note 1 ‘‘Business, Basis of Presentation and Summary of Significant Accounting Policies’’ in the Notes

to the Consolidated Financial Statements in Item 8 of Part II of this Report, for a full description of recent
accounting pronouncements, including the expected dates of adoption, which is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to the market risk that the value of a financial instrument will fluctuate due to changes in

market conditions, primarily from changes in foreign currency exchange rates. In the normal course of our
business, we are subject to market risks associated with currency movements on our assets and liabilities.

Foreign Currency Exposures

We have exposure to foreign currency exchange rate fluctuations on net income from our subsidiaries
denominated in currencies other than U.S. dollars, as our foreign subsidiaries in Korea, Taiwan, China, Japan and
Hong Kong use local currency as their functional currency. From time to time these subsidiaries have cash and
financial instruments in local currency. The amounts held in Japan, Taiwan, Hong Kong and China are not

material in regards to foreign currency movements. However, based on the cash and financial instruments
balance at December 31, 2022 for our Korean subsidiary, a 10% devaluation of the Korean won against the U.S.
dollar would have resulted in a decrease of $0.7 million in our U.S. dollar financial instruments and cash
balances.

See ‘‘Note 10. Derivative Financial Instruments’’ to our consolidated financial statements under ‘‘Item 8.
Financial Statements and Supplementary Data’’ and ‘‘Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Factors Affecting Our Results of Operations—Impact of Foreign Currency
Exchange Rates on Reported Results of Operations’’ for additional information regarding our foreign exchange
hedging activities.

Item 8.

Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID 1103) . . . . . . . . . . . . . . . . . . . . . . . . .
Magnachip Semiconductor Corporation Consolidated Balance Sheets as of December 31, 2022 and 2021 . . .
Magnachip Semiconductor Corporation Consolidated Statements of Operations for the Years Ended

58
60

December 31, 2022, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Magnachip Semiconductor Corporation Consolidated Statements of Comprehensive Income (Loss) for the

Years Ended December 31, 2022, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Magnachip Semiconductor Corporation Consolidated Statements of Changes in Stockholders’ Equity for the
Years Ended December 31, 2022, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Magnachip Semiconductor Corporation Consolidated Statements of Cash Flows for the Years Ended

December 31, 2022, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Magnachip Semiconductor Corporation Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . .

64
66

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Magnachip Semiconductor Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Magnachip Semiconductor Corporation
and its subsidiaries (the ‘‘Company’’) as of December 31, 2022 and 2021, and the related consolidated statements
of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three
years in the period ended December 31, 2022, including the related notes (collectively referred to as the
‘‘consolidated financial statements’’). We also have audited the Company’s internal control over financial
reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,

the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control—Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over
Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company’s internal control over financial reporting based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement, whether due to error or fraud, and whether effective internal control over
financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made

only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit committee
and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and
(ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we
are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.

Realizability of Deferred Tax Assets

As described in Notes 1 and 16 to the consolidated financial statements, the Company has net deferred tax

assets of $38.3 million, including a valuation allowance of $84.6 million, as of December 31, 2022. Management
determines deferred tax assets and liabilities based upon the difference between the financial statement carrying
amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. Valuation allowances are established when it is necessary to reduce deferred
tax assets to the amount expected to be realized. The evaluation of the recoverability of the deferred tax asset
and the need for a valuation allowance requires management to weigh all positive and negative evidence to reach
a conclusion that it is more likely than not that all or some portion of the deferred tax asset will not be realized.
Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including
historical operating results, expected timing of the reversals of existing temporary differences, the Company’s
ability to generate future taxable income, and tax planning strategies.

The principal considerations for our determination that performing procedures relating to the realizability of

deferred tax assets is a critical audit matter are (i) the significant judgment by management when assessing the
available positive and negative evidence surrounding the realizability of deferred tax assets, including the
application of tax law to the projected tax calculation and a high degree of estimation uncertainty relative to the
estimates of future taxable income, (ii) a high degree of auditor judgment, subjectivity and effort in performing
procedures and evaluating audit evidence related to management’s estimates of future taxable income,
(iii) auditor judgment in assessing management’s application of tax law to the projected tax calculation, and
(iv) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming

our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of
controls relating to the realizability of deferred tax assets. These procedures also included, among others, (i) evaluating
the appropriateness of management’s calculation used, (ii) testing the completeness, accuracy and relevance of the
underlying data used in the calculation, and (iii) evaluating the reasonableness of significant assumptions used in the
calculation of future taxable income. Evaluating management’s assumptions related to estimates of future taxable
income involved evaluating whether the assumptions used were reasonable considering (i) current and past
profitability, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were
consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were
used to assist in evaluating management’s assumptions and calculation for assessing the realizability of deferred tax
assets, including the mechanics and application of tax law to the projected tax calculation.

/s/ Samil PricewaterhouseCoopers
Seoul, Korea
February 22, 2023

We have served as the Company’s auditor since 2004.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31,

2022

2021

(In thousands of U.S. dollars,
except share data)

Assets
Current assets

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables (Note 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedge collateral (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right-of-use assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes (Note 16). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 225,477
35,380
39,883
7,847
10,560
2,940
15,766

337,853
110,747
5,265
1,930
10,939
38,324
11,587

$ 279,547
50,954
39,370
25,895
7,675
3,060
2,619

409,120
107,882
4,275
2,377
8,243
41,095
10,662

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 516,645

$ 583,654

Liabilities and Stockholders’ Equity
Current liabilities

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued severance benefits, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 17,998
9,702
9,688
3,154
1,397
5,306

47,245
23,121
4,091
14,035

88,492

$ 37,593
6,289
20,071
11,823
2,323
7,382

85,481
33,064
1,952
10,395

130,892

Commitments and contingencies (Note 19)
Stockholders’ equity

Common stock, $0.01 par value, 150,000,000 shares authorized, 56,432,449 shares
issued and 43,824,575 outstanding at December 31, 2022 and 55,905,320 shares
issued and 45,659,304 outstanding at December 31, 2021. . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, 12,607,874 shares at December 31, 2022 and 10,246,016 shares at
December 31, 2021, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

564
266,058
335,506

(161,422)
(12,553)

Total stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

428,153

559
241,197
343,542

(130,306)
(2,230)

452,762

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 516,645

$ 583,654

The accompanying notes are an integral part of these consolidated financial statements

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,
2021
(In thousands of U.S. dollars, except share data)

2020

2022

Revenues:

Net sales—standard products business . . . . . . . . . . . . . . . . . . . . . . . . $
Net sales—transitional Fab 3 foundry services . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost of sales:

Cost of sales—standard products business . . . . . . . . . . . . . . . . . . . . .
Cost of sales—transitional Fab 3 foundry services. . . . . . . . . . . . . . .

Total cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . .
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related costs (income), net. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Early termination and other charges, net . . . . . . . . . . . . . . . . . . . . . . .

301,896
35,762

337,658

202,347
34,047

236,394

101,264

50,872
52,338
—
3,298

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

106,508

Operating income (loss): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency loss, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of borrowings . . . . . . . . . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations before income tax expense

(benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . .

(5,244)
5,980
(1,157)
(3,019)
—
561

(2,879)
5,157

(8,036)
—

433,099
41,131

474,230

283,503
37,184

320,687

153,543

52,440
51,212
(35,527)
2,011

70,136

83,407
2,609
(1,371)
(11,853)
—
1,177

73,969
17,261

56,708
—

465,519
41,540

507,059

338,420
40,322

378,742

128,317

49,974
45,698
653
4,976

101,301

27,016
2,740
(18,147)
(382)
(766)
370

10,831
(46,228)

57,059
287,906

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

(8,036) $

56,708

344,965

Basic earnings (loss) per common share—

Continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Diluted earnings (loss) per common share—

Continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Weighted average number of shares—

(0.18) $
—

(0.18) $

(0.18) $
—

(0.18) $

1.26
—

1.26

1.21
—

1.21

1.62
8.18

9.80

1.35
6.19

7.54

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44,850,791
44,850,791

44,879,412
47,709,373

35,213,525
46,503,586

The accompanying notes are an integral part of these consolidated financial statements

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

2022

Year Ended December 31,
2021
(In thousands of U.S. dollars)

2020

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (8,036)

$56,708

$344,965

Other comprehensive income (loss)

Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . .
Derivative adjustments

Fair valuation of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustment for loss (gain) on derivatives

(10,558)

(2,839)

(8,279)

(3,913)

included in net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,514

819

Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

(10,323)

(5,933)

6,274

1,452

(1,363)

6,363

Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(18,359)

$50,775

$351,328

The accompanying notes are an integral part of these consolidated financial statements

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands of U.S. dollars,
except share data)

Common Stock
Shares

Amount

Additional
Paid-In
Capital

Retained
Earnings
(Deficit)

Treasury
Stock

Accumulated
Other
Comprehensive
Income (Loss)

Total

Balance at December 31, 2019. . . 34,800,312

$439

$152,404 $ (58,131) $(107,033)

$ (2,660)

$ (14,981)

Stock-based compensation . . . . .
Exercise of stock options . . . . . .
Settlement of restricted stock

units . . . . . . . . . . . . . . . . . . . . .
Acquisition of treasury stock . . .
Other comprehensive income,

net . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . .

—
510,648

—
5

6,699
3,913

6
581,215
(108,828) —

(6)
—

—
—

—
(1,364)

—
—

6,699
3,918

—
(1,364)

—
—

—
—
— 344,965

—
—

6,363
—

6,363
344,965

Balance at December 31, 2020. . . 35,783,347

$450

$163,010 $286,834 $(108,397)

$ 3,703

$345,600

Stock-based compensation . . . . .
Exchange of exchangeable

—

7,704

senior note . . . . . . . . . . . . . . . . 10,144,131
336,870

Exercise of stock options . . . . . .
Settlement of restricted stock

101
3

83,639
4,276

—

—
—

—

—
—

units . . . . . . . . . . . . . . . . . . . . .
Accelerated stock repurchase . . .
Acquisition of treasury stock . . .
Other comprehensive loss, net . .
Net income . . . . . . . . . . . . . . . . .

—
—
480,465
(5)
— (20,073)
(994,695) — (17,427)
(1,836)
—
—
—
—
—
—
— 56,708

(90,814) —
—
—
—
—

—

—
—

—
—
—
(5,933)
—

7,704

83,740
4,279

—
(37,500)
(1,836)
(5,933)
56,708

Balance at December 31, 2021. . . 45,659,304

$559

$241,197 $343,542 $(130,306)

$ (2,230)

$452,762

Stock-based compensation . . . . .
Exercise of stock options . . . . . .
Settlement of restricted stock

units . . . . . . . . . . . . . . . . . . . . .
Accelerated stock repurchase . . .
Acquisition of treasury stock . . .
Other comprehensive loss, net . .
Net loss . . . . . . . . . . . . . . . . . . . .

—
152,326

—
1

6,037
1,785

—
—

6,037
1,786

374,803

4
(1,031,576) —
(1,330,282) —
—
—
—
—

(178)
—
—
17,217
— (17,217)
— (13,899)
—
—
—
—
—
— (8,036)

—
—
—
(10,323)
—

(174)
—
(13,899)
(10,323)
(8,036)

Balance at December 31, 2022. . . 43,824,575

$564

$266,058 $335,506 $(161,422)

$(12,553)

$428,153

The accompanying notes are an integral part of these consolidated financial statements

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

2022

Year Ended December 31,
2021
(In thousands of U.S. dollars)

2020

Cash flows from operating activities
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash provided by

operating activities
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for severance benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs and original issue discount . . . . . .
Loss (gain) on foreign currency, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for inventory reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of borrowings . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in operating assets and liabilities

Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contributions to severance insurance deposit accounts . . . . . . . . . . . . . .
Payment of severance benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities

Proceeds from settlement of hedge collateral . . . . . . . . . . . . . . . . . . . . .
Payment of hedge collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from disposal of property, plant and equipment. . . . . . . . . . . .
Purchase of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . .
Payment for intellectual property registration . . . . . . . . . . . . . . . . . . . . .
Collection of guarantee deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of guarantee deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of discontinued operations . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by (used in) investing activities. . . . . . . . . . . . . . . . . . .

$ (8,036)

$ 56,708

$ 344,965

15,000
6,289
—
19,729
9,574
6,037
—
—
278
664

10,276
—
(12,626)
18,146
(4,150)
(16,325)
(9,410)
(7,228)
(8,400)
(1,261)
(645)
749
(7,899)
(6,012)
415

5,165

15,232
(15,282)
550
(23,394)
(390)
—
(2,381)
—
737

(24,928)

14,239
8,282
261
32,432
2,244
7,704
—
—
918
(613)

7,505
—
(5,939)
(21,538)
12,397
(11,437)
(7,798)
4,637
(1)
(131)
1,445
(1,398)
(5,688)
(6,679)
193

87,743

5,214
(3,349)
1,446
(32,212)
(614)
3,192
(5,001)
—
(114)

(31,438)

16,481
16,743
2,220
(23,233)
3,695
6,699
766
(287,117)
(44,441)
217

(19,268)
14,260
(816)
6,954
13,561
4,907
(12,000)
(26,201)
10,825
2,174
279
3,521
(11,921)
(12,076)
(3,724)

7,470

13,762
(8,839)
65
(36,100)
(741)
1,024
(1,236)
350,553
(6)

318,482

The accompanying notes are an integral part of these consolidated financial statements

2022

Year Ended December 31,
2021
(In thousands of U.S. dollars)

2020

Cash flows from financing activities

Repayment of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of stock under accelerated stock repurchase agreement . . .
Payment under accelerated stock repurchase agreement . . . . . . . . . . . . .
Repayment of financing related to water treatment facility

arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rates on cash and cash equivalents . . . . . . . . . . . . . . . .

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period. . . . . . . . . . . . . . . . . . . .

—
1,786
(13,960)
—
—

(500)
(70)

(12,744)
(21,563)

(54,070)
279,547

—
4,279
(1,653)
(20,073)
(17,427)

(563)
(107)

(35,544)
(21,154)

(393)
279,940

(224,250)
3,918
(1,125)
—
—

(546)
(278)

(222,281)
24,612

128,283
151,657

Cash and cash equivalents at end of period. . . . . . . . . . . . . . . . . . . . . . . . .

$225,477

$279,547

$ 279,940

Supplemental cash flow information
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash investing and financing activities
Property, plant and equipment additions in other accounts payable . . . . . .
Acquisition of treasury stock to satisfy the tax withholding obligations

in connection with equity-based compensation . . . . . . . . . . . . . . . . . . . .
Unsettled common stock repurchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange of exchangeable senior notes into common stock . . . . . . . . . . .

— $

$
$ 18,988

2,094
$ 12,672

$ 22,221
$ 23,056

$
$
$

190

747

—

826

$
387
378
$
— $ 83,740

$
— $
$

643
—
—

The accompanying notes are an integral part of these consolidated financial statements

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

1. Business, Basis of Presentation and Significant Accounting Policies

Business

Magnachip Semiconductor Corporation (together with its subsidiaries, the ‘‘Company’’) is a designer and

manufacturer of analog and mixed-signal semiconductor platform solutions for communications, Internet of
Things (‘‘IoT’’) applications, consumer, computing, industrial and automotive applications.

On September 1, 2020 (the ‘‘Closing Date’’), the Company completed the sale of the Company’s Foundry

Services Group business and its fabrication facility located in Cheongju, Korea, known as ‘‘Fab 4’’ to Key
Foundry Co., Ltd. (the ‘‘Buyer’’), a Korean corporation, in exchange for a purchase price equal to approximately
$350.6 million in cash, pursuant to the terms of a business transfer agreement (the ‘‘Business Transfer
Agreement’’) dated March 31, 2020 by and among the Company and Magnus Semiconductor, LLC, a Korean
limited liability company (‘‘Magnus’’). The purchase price was paid in a combination of U.S. Dollars in the
amount of $46.5 million and Korean Won in the amount of approximately KRW 360.6 billion. In addition to the
purchase price, the Buyer assumed all severance liabilities relating to the transferred employees, which had a
value of approximately $100 million. The Buyer is a wholly owned subsidiary of Magnus, which was established
by Alchemist Capital Partners Korea Co., Ltd. and Credian Partners, Inc. On April 20, 2020, Magnus assigned,
and the Buyer assumed, all rights and obligations of Magnus under the Business Transfer Agreement. This
divestiture of the Foundry Services Group business and Fab 4 was made in connection with the Company’s
strategic shift of its operational focus to its standard products business. The Foundry Services Group was
historically a reportable segment. The Foundry Services Group business was classified as discontinued operations
in the Company’s consolidated statements of operations and excluded from both continuing operations and
segment results for the 2020 fiscal year. Accordingly, the Company has one reportable segment, its standard
products business, together with transitional foundry services associated with its fabrication facility located in
Gumi, Korea, known as ‘‘Fab 3,’’ that it expects to perform for the Buyer for a period of up to three years from
the Closing Date (the ‘‘Transitional Fab 3 Foundry Services’’).

The Company’s standard products business includes its Display Solutions and Power Solutions business
lines. The Company’s Display Solutions products provide panel display solutions to major suppliers of large and
small rigid and flexible panel displays, and a wide range of applications including smartphones, TVs, automotive
and IT applications such as monitors, notebook PCs, tablet PCs as well as AR/VRs. The Company’s Power
Solutions products include discrete and integrated circuit solutions for power management in communications,
consumer, computing, servers, automotive, and industrial applications.

Basis of Presentation

The consolidated financial statements are presented in accordance with U.S. GAAP.

Significant accounting policies followed by the Company in the preparation of the accompanying

consolidated financial statements are summarized below.

The consolidated statement of cash flows for the 2020 fiscal year has not been adjusted to separately

disclose cash flows related to discontinued operations, but the material items in the operating and investing
activities of the cash flow relating to discontinued operations for the same period are disclosed in Note 2. Unless
otherwise stated, information in these notes to consolidated financial statements relates to the Company’s
continuing operations and excludes the discontinued operations. See Note 2 ‘‘Discontinued Operations’’ for
additional information.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company including its wholly-owned

subsidiaries. All intercompany transactions and balances are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make
estimates and assumptions about future events. These estimates and the underlying assumptions affect the

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts
of revenue and expenses. Such estimates include the valuation of accounts receivable, inventories, stock-based
compensation, property, plant and equipment, leases, other long-lived assets, long-term employee benefits,
contingencies liabilities, estimated future cash flows and other assumptions used in long-lived asset impairment
tests, and calculation of current and deferred income taxes and deferred tax valuation allowances, among others.
Although these estimates and assumptions are based on management’s best knowledge of current events and
actions that the Company may undertake in the future, actual results may be significantly different from the
estimates. The Company assessed the impact of COVID-19 on the estimates and assumptions to the extent
applicable, and determined that there was no material impact on the Company’s consolidated financial statements
as of and for the years ended December 31, 2022, 2021 and 2020. However, the Company is not able to predict
with certainty the future impact of COVID-19 on its estimates and assumptions due to the rapidly changing
nature of the COVID-19 pandemic.

Discontinued Operations

The Company reports the results of operations of a business as discontinued operations if a disposal

represents a strategic shift that has or will have a major effect on the Company’s operations and financial results
when the business is sold and classified as held for sale, in accordance with the criteria of Accounting Standards
Codification (‘‘ASC’’) 205, ‘‘Presentation of Financial Statements’’ (‘‘ASC 205’’) and ASC 360, ‘‘Property, Plant
and Equipment’’ (‘‘ASC 360’’). The results of discontinued operations are reported in ‘‘Income from discontinued
operations, net of tax’’ in the accompanying consolidated statements of operations for the year ended
December 31, 2020 commencing in the period in which the business meets the criteria.

Foreign Currency Translation

The Company has assessed in accordance with ASC 830, ‘‘Foreign Currency Matters’’ (‘‘ASC 830’’), the
functional currency of each of its subsidiaries in Luxembourg and the Netherlands and has designated the U.S.
dollar to be their respective functional currencies. The Korean Won is the functional currency for the Company’s
Korean subsidiary, which is the primary operating subsidiary of the Company. The Company and its other
subsidiaries are utilizing their local currencies as their functional currencies. The financial statements of the
subsidiaries in functional currencies other than the U.S. dollar are translated into the U.S. dollar in accordance
with ASC 830. All the assets and liabilities are translated to the U.S. dollar at the end-of-period exchange rates.
Capital accounts are determined to be of a permanent nature and are therefore translated using historical
exchange rates. Revenues and expenses are translated using average exchange rates for the respective periods.
Foreign currency translation adjustments arising from differences in exchange rates from period to period are
included in the foreign currency translation adjustment account in accumulated other comprehensive income or
loss of stockholders’ equity. Foreign currency translation gains or losses on transactions by the Company or its
subsidiaries in a currency other than its or its subsidiaries’ functional currency are included in foreign currency
loss, net in its statements of operations.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with an original maturity date of three months or less

when purchased.

Accounts Receivable Reserves

The Company makes estimates of expected credit losses for the allowance for credit losses based upon its

assessment of various factors, including historical collection experience, the age of the accounts receivable
balances, current economic conditions, reasonable and supportable forecasts of future economic conditions, and
other factors that may affect its ability to collect from customers. The Company also records an estimate for
sales returns, included within accounts receivable, net, based on the historical experience of the amount of goods
that will be returned and refunded or replaced.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

Sales of Accounts Receivable

The Company accounts for transfers of financial assets under ASC 860, ‘‘Transfers and Servicing,’’ as either
sales or financings. Transfers of financial assets that result in sales accounting are those in which (1) the transfer
legally isolates the transferred assets from the transferor, (2) the transferee has the right to pledge or exchange
the transferred assets and no condition both constrains the transferee’s right to pledge or exchange the assets and
provides more than a trivial benefit to the transferor, and (3) the transferor does not maintain effective control
over the transferred assets. If the transfer does not meet these criteria, the transfer is accounted for as a
financing. Financial assets that are treated as sales are removed from the Company’s accounts with any realized
gain or loss reflected in earning during the period of sale.

Inventories

Inventories are stated at the lower of cost or net realizable value, using the first in, first out method

(‘‘FIFO’’). If net realizable value is less than cost at the balance sheet date, the carrying amount is reduced to the
realizable value, and the difference is recognized as a loss on valuation of inventories within cost of sales.
Inventory reserves are established when conditions indicate that the net realizable value is less than costs due to
physical deterioration, obsolescence, changes in price levels, or other causes based on individual facts and
circumstances. The Company evaluates the sufficiency of inventory reserves and takes into consideration
historical usage, expected demand, anticipated sales price, new product development schedules, the effect new
products might have on the sale of existing products, product age and other factors. Reserves are also established
for excess inventory based on the Company’s current inventory levels and projected demand and its ability to sell
those specific products. Situations that could cause these inventory reserves include a decline in business and
economic conditions, decline in consumer confidence caused by changes in market conditions, sudden and
significant decline in demand for the Company’s products, inventory obsolescence because of rapidly changing
technology and consumer requirements, or failure to estimate end customer demand properly. A reduction of
these inventory reserves may be recorded if previously reserved items are subsequently sold as a result of
unexpected changes to certain aforementioned situations.

In addition, as prescribed in ASC 330, ‘‘Inventory,’’ once a reserve is established for a particular item based
on the Company’s assessment as described above, it is maintained until the related item is sold or scrapped as a
new cost basis has been established that cannot subsequently be marked up. In addition, the cost of inventories is
determined based on the normal capacity of the Company’s fabrication facility. In case the capacity utilization is
lower than a certain level that management believes to be normal, the fixed overhead costs per production unit
which exceeds those under normal capacity are charged to cost of sales rather than capitalized as inventories.

Advances to Suppliers

The Company, from time to time, may make advances in form of prepayments or deposits to suppliers,

including external foundries, to meet its planned production. The Company recorded advances of
$6,605 thousand and $1,708 thousand as other current assets as of December 31, 2022 and 2021, respectively.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed

using the straight-line method over the estimated useful lives of the assets as set forth below.

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building related structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30 - 40 years
10 - 20 years
10 - 12 years
3 - 10 years

Routine maintenance and repairs are charged to expense as incurred. Expenditures that enhance the value or

significantly extend the useful lives of the related assets are capitalized.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

Impairment of Long-Lived Assets

The Company reviews property, plant and equipment and other long-lived assets for impairment whenever

events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with
ASC 360, ‘‘Property, Plant and Equipment.’’ Recoverability is measured by comparing its carrying amount with
the future net undiscounted cash flows the assets are expected to generate. If such assets are considered to be
impaired, the impairment is measured as the difference between the carrying amount of the assets and the fair
value of assets using the present value of the future net cash flows generated by the respective long-lived assets.

Leases

The Company determines if an arrangement is a lease at inception of a contract considering whether the

arrangement conveys the right to control the use of an identified asset over the period of use. Control of an
underlying asset is conveyed if the Company has the right to direct the use of, and to obtain substantially all of
the economic benefits from the use of, the identified asset. The Company accounts for lease transactions as either
an operating or a finance lease, depending on the terms of the underlying lease arrangement. Assets related to
operating leases are recorded on the balance sheet as operating lease right-of-use assets; the related liabilities are
recorded as operating lease liabilities for the current portion and non-current operating lease liabilities for the
non-current portion. Finance lease right-of-use assets are included in property, plant and equipment, net and the
related lease liabilities are included in other current liabilities and other non-current liabilities on the consolidated
balance sheets.

Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease
liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets
and liabilities are recognized based on the present value of the future minimum lease payments over the lease
term. As most of the Company’s leases do not provide a readily determinable implicit rate, the Company
estimates its incremental borrowing rates in determining the present value of future payments based on the lease
term of each lease and market information available at commencement date. Finance lease right-of-use assets are
amortized on a straight-line basis over the respective lease term with the interest expense on the lease liability
recorded using the interest method. The amortization and interest expense are recorded separately in the
consolidated statements of operations. Amortization of operating lease right-of-use assets and interest expense on
operating lease liabilities are recognized on a straight-line basis over the respective lease term.

An extension or contraction of a lease term is considered if the related option to extend or early terminate

the lease is reasonably certain to be exercised by the Company. Operating lease right-of-use assets may also
include any advance lease payments made and exclude lease incentives and initial direct costs incurred. The
Company has lease agreements with lease and non-lease components, which are generally accounted for
separately. For certain equipment leases, lease and non-lease components are accounted for as a single lease
component.

Variable lease payment amounts that cannot be determined at the commencement of the lease such as

increases in lease payments based on changes in index rates are not included in the right-of-use assets or
liabilities. These variable lease payments are expensed as incurred.

The Company does not recognize operating lease right-of-use assets and operating lease liabilities that arise

from short-term leases but rather recognizes fixed lease payments in the statements of operations on a
straight-line basis and variable payments in the period in which the related obligations incur.

Intangible Assets

Intellectual property assets acquired represent rights under patents, trademarks and property use rights and

are amortized over their respective periods of benefit, ranging up to ten years, on a straight-line basis.

Fair Value Disclosures of Financial Instruments

The Company follows ASC 820, ‘‘Fair Value Measurements and Disclosures’’ (‘‘ASC 820’’) for

measurement and disclosures about fair value of its financial instruments. ASC 820 establishes a framework for

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. To increase
consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair
value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad
levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for
identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value
hierarchy defined by ASC 820 are:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the
measurement date.

Level 2—Inputs (other than quoted market prices included in Level 1) are either directly or indirectly
observable for the asset or liability through correlation with market data at the measurement date and for the
duration of the instrument’s anticipated life.

Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the
asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation
technique and the risk inherent in the inputs to the model. Valuation of instruments includes unobservable
inputs to the valuation methodology that are significant to the measurement of fair value of assets or
liabilities.

As defined by ASC 820, the fair value of a financial instrument is the amount at which the instrument could

be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale, which
was further clarified as the price that would be received to sell an asset or paid to transfer a liability (‘‘an exit
price’’) in an orderly transaction between market participants at the measurement date. The carrying amounts of
the Company’s financial assets and liabilities, such as cash equivalents, accounts receivable, other receivables,
accounts payable and other accounts payable approximate their fair values because of the short maturity of these
instruments.

Accrued Severance Benefits

The majority of accrued severance benefits are for employees in the Company’s Korean subsidiary,

Magnachip Semiconductor, Ltd. Pursuant to Employee Retirement Benefit Security Act of Korea, eligible
employees and executive officers with one or more years of service are entitled to severance benefits upon the
termination of their employment based on their length of service and rate of pay. As of December 31, 2022, 97%
of all employees of the Company were eligible for severance benefits.

Beginning in July 2018, the Company began contributing to certain severance insurance deposit accounts a
percentage of severance benefits, which may be adjusted from time to time, accrued for eligible employees for
their services beginning January 1, 2018 pursuant to Employee Retirement Benefit Security Act of Korea. These
accounts consist of time deposits and other guaranteed principal and interest accounts, and are maintained at
insurance companies, banks or security companies for the benefit of the Company’s employees.

Accrued severance benefits were partly funded through a group severance insurance plan. The amounts

funded under this insurance plan were classified as a reduction of the accrued severance benefits.

In accordance with the National Pension Act of the Republic of Korea, a certain portion of accrued
severance benefits was deposited with the National Pension Fund and deducted from the accrued severance
benefits. The contributed amount is paid to employees from the National Pension Fund upon their retirement.

Revenue Recognition

The Company recognizes revenue when it satisfies the performance obligation of transferring control over a
product or service to a customer. Revenue is measured based on the consideration specified in a contract with a
customer, which consideration is paid in exchange for a product or service.

The Company sells products manufactured based on the Company’s design. The Company’s products are
either standardized with an alternative use or the Company does not have an enforceable right to payment for the

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

related manufacturing services completed to date. Therefore, revenue for the products is recognized when a
customer obtains control of the product, which is generally upon product shipment, delivery at the customer’s
location or upon customer acceptance, depending on the terms of the arrangement.

In accordance with revenue recognition guidance, any tax assessed by a governmental authority that is both
imposed on and concurrent with a specific revenue-producing transaction, and that is collected by the Company
from a customer, is excluded from revenue and related revenue is presented in the statements of operations on a
net basis.

The Company provides warranties under which customers can return defective products. The Company

estimates the costs related to warranty claims and repair or replacements, and records them as components of
cost of sales.

In addition, the Company offers sales returns (other than those that relate to defective products under

warranty), cash discounts for early payments and sales incentives, and certain allowances to the Company’s
customers, including the Company’s distributors. The Company records reserves for those returns, discounts,
incentives and allowances as a deduction from sales, based on historical experience and other quantitative and
qualitative factors.

Substantially all of the Company’s contracts are one year or less in duration. The standard payment terms
with customers are generally thirty to sixty days from the time of shipment, product delivery to the customer’s
location or customer acceptance, depending on the terms of the related arrangement.

All amounts billed to a customer related to shipping and handling are classified as sales while all costs
incurred by the Company for shipping and handling are classified as selling, general and administrative expenses.
The amounts charged to selling, general and administrative expenses were $1,060 thousand, $1,271 thousand and
$993 thousand for the years ended December 31, 2022, 2021 and 2020, respectively.

Of the recorded deferred revenue of $2,383 thousand as of December 31, 2021 and $2,680 thousand as of
December 31, 2020, $2,383 thousand and $2,680 thousand were recognized as revenue during the years ended
December 31, 2022 and 2021, respectively.

Advertising

The Company expenses advertising costs as incurred. Advertising expenses were $46 thousand,

$71 thousand and $87 thousand for the years ended December 31, 2022, 2021 and 2020, respectively.

Product Warranties

The Company records, in other current liabilities, warranty liabilities for the estimated costs that may be

incurred under its basic limited warranty. The standard limited warranty period is one to two years for the
majority of products. This warranty covers defective products, and related liabilities are accrued when product
revenues are recognized. Factors that affect the Company’s warranty liabilities include historical and anticipated
rates of warranty claims and repair or replacement costs per claim to satisfy the Company’s warranty obligation.
The Company periodically assesses the adequacy of those recorded warranty liabilities and adjusts its estimates
when necessary.

Derivative Financial Instruments

The Company applies the provisions of ASC 815, ‘‘Derivatives and Hedging’’ (‘‘ASC 815’’). This statement

requires the recognition of all derivative instruments as either assets or liabilities measured at fair value.

Under the provisions of ASC 815, the Company may designate a derivative instrument as hedging the
exposure to variability in expected future cash flows that are attributable to a particular risk (a ‘‘cash flow
hedge’’) or hedging the exposure to changes in the fair value of an asset or a liability (a ‘‘fair value hedge’’).
Special accounting for qualifying hedges allows the effective portion of a derivative instrument’s gains and losses

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

to offset related results on the hedged item in the consolidated statements of operations and requires that a
company formally document, designate and assess the effectiveness of the transactions that receive hedge
accounting treatment. Both at the inception of a hedge and on an ongoing basis, a hedge must be expected to be
highly effective in achieving offsetting changes in cash flows or fair value attributable to the underlying risk
being hedged. If the Company determines that a derivative instrument is no longer highly effective as a hedge, it
discontinues hedge accounting prospectively and future changes in the fair value of the derivative are recognized
in current earnings. The Company assesses hedge effectiveness at the end of each quarter. The Company does
not offset derivative assets and liabilities within the consolidated balance sheets.

In accordance with ASC 815, changes in the fair value of derivative instruments that are cash flow hedges

are recognized in accumulated other comprehensive income or loss and reclassified into earnings in the period in
which the hedged item affects earnings. Derivative instruments that do not qualify, or cease to qualify, as hedges
must be adjusted to fair value and the adjustments are recorded through net income or loss.

The cash flows from derivative instruments receiving hedge accounting treatment are classified in the same

categories as the hedged items in the consolidated statements of cash flows.

Research and Development

Research and development expenses are expensed as incurred and include wafers, masks, employee

expenses, contractor fees, building costs, utilities and administrative expenses.

Licensed Patents and Technologies

The Company has entered into a number of royalty agreements to license patents and technology used in the

design of its products. The Company carries two types of royalties: lump-sum and running basis. Lump-sum
royalties, which require initial payments, usually paid in installments, represent a non-refundable commitment,
such that the total present value of these payments is recorded as a prepaid expense and a liability upon
execution of the agreements and the costs are amortized over the contract period using the straight-line method
and charged to research and development expenses in the consolidated statements of operations.

Running royalties are paid based on the revenue of related products sold by the Company.

Stock-Based Compensation

The Company follows the provisions of ASC 718, ‘‘Compensation-Stock Compensation’’ (‘‘ASC 718’’).
Under ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the
award, and is recognized as expense, net of the estimated forfeiture rate, over the requisite service period. As
permitted under ASC 718, the Company elected to recognize compensation expense for all options with graded
vesting based on the graded attribution method.

The Company uses the Black-Scholes option-pricing model to measure the grant-date-fair-value of options.

The Black-Scholes model requires certain assumptions to determine an option’s fair value, including expected
term, risk free interest rate and expected volatility. The expected term of each option grant was based on
employees’ expected exercises and post-vesting employment termination behavior and the risk free interest rate
was based on the U.S. Treasury yield curve for the period corresponding with the expected term at the time of
grant. No dividends were assumed for this calculation of option value.

Earnings (Loss) Per Share

In accordance with ASC 260, ‘‘Earnings Per Share’’, the Company computes basic earnings per share by

dividing net income or loss available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflect the dilution of potential common stock
outstanding during the period including stock options and restricted stock units, using the treasury stock method
(by using the average stock price for the period to determine the number of shares assumed to be purchased from

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

the exercise of stock options and restricted stock units), and convertibles, using the if-converted method. In
determining the hypothetical shares repurchased, the Company uses the average share price for the period. In the
case that earnings are negative, any potential common stock equivalents would have the effect of being
anti-dilutive in the computation of net loss per share.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, ‘‘Income Taxes’’ (‘‘ASC 740’’).

ASC 740 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in a company’s financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based upon the difference between the financial statement carrying
amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. Income tax expense is the tax payable for the period and the change during
the period in deferred tax assets and liabilities. Valuation allowances are established when it is necessary to
reduce deferred tax assets to the amount expected to be realized. The evaluation of the recoverability of the
deferred tax assets and the need for a valuation allowance requires management to weigh all positive and
negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax
assets will not be realized. Realization of the future tax benefits related to the deferred tax assets is dependent on
many factors, including historical operating results, expected timing of the reversals of existing temporary
differences, the Company’s ability to generate future taxable income, and tax planning strategies.

The Company recognizes and measures uncertain tax positions taken or expected to be taken in a tax return
utilizing a two-step process. In the first step, recognition, the Company determines whether it is more likely than
not that a tax position will be sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. The second step addresses measurement of a
tax position that meets the more likely than not criteria. The tax position is measured at the largest amount of
benefit that has a likelihood of greater than 50 percent of being realized upon ultimate settlement.

Concentration of Credit Risk

The Company performs periodic credit evaluations of its customers’ financial condition and generally does
not require collateral for customers on accounts receivable. The Company maintains reserves for potential credit
losses, which are periodically reviewed.

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update
(‘‘ASU’’) No. 2020-06, ‘‘Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)’’(‘‘ASU 2020-06’’), which updates various
codification topics to simplify the accounting guidance for certain financial instruments with characteristics of
liabilities and equity, with a specific focus on convertible instruments and the derivative scope exception for
contracts in an entity’s own equity and amends the diluted EPS computation for these instruments. The Company
adopted ASU 2020-06 as of January 1, 2022, and the adoption of ASU 2020-06 did not have an impact on the
Company’s consolidated financial statements.

In May 2021, the FASB issued ASU No. 2021-04, ‘‘Earnings Per Share (Topic 260), Debt-Modifications

and Extinguishments (Subtopic 470-50)’’, Compensation-Stock Compensation (Topic 718), and Derivatives and
Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or
Exchanges of Freestanding Equity-Classified Written Call Options’’ (‘‘ASU 2021-04’’), ASU 2021-04 clarifies
the accounting for modifications or exchanges of freestanding equity-classified written call options so that the
transaction should be treated as an exchange of the original instrument for a new instrument. The Company
adopted ASU 2021-04 as of January 1, 2022, and the adoption of ASU 2021-04 did not have an impact on the
Company’s consolidated financial statements.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

2. Discontinued Operations

On September 1, 2020, the Company completed the sale of its Foundry Services Group business and Fab 4.

As a result of the sale of the Foundry Services Group business and Fab 4, the Company recorded a gain of
$287,117 thousand and all operations from the Foundry Services Group business and Fab 4 were classified as
discontinued operations for all periods presented. Following the consummation of the sale, and for up to three
years, the Company is expected to provide the Transitional Fab 3 Foundry Services at an agreed upon cost plus
mark-up. For the periods prior to the Closing Date, revenue from providing the Transitional Fab 3 Foundry
Services to the Foundry Services Group is recorded at cost on both of the continuing and discontinued businesses
for comparative purposes. Cash inflows to the Company from the Buyer related to providing the Transitional
Fab 3 Foundry Services were $41,115 thousand, $46,611 thousand and $7,643 thousand for the years ended
December 31, 2022, 2021 and 2020, respectively.

The following table summarizes the results from discontinued operations, net of tax, for the year ended

December 31, 2020.

Year Ended
December 31, 2020
(In thousands of U.S. dollars)

Revenues:

Net sales—Foundry Services Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net sales—transitional Fab 3 foundry services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost of sales:

Cost of sales—Foundry Services Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales—transitional Fab 3 foundry services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign currency gain, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from discontinued operations before income tax expense . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from discontinued operations, net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$254,732
(25,887)

228,845

182,872
(25,887)

156,985

71,860

14,797
19,484
15,873

50,154
21,706

1,277
72

23,055
11,452
287,117
(10,814)

287,906

For the year ended December 31, 2020, the Company recorded $15,873 thousand, in professional fees and

transaction related expenses incurred in connection with the sale of the Foundry Services Group business and
Fab 4, and recorded such costs as restructuring and other charges.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

The following table provides supplemental cash flows information related to discontinued operations:

Year Ended
December 31, 2020
(In thousands of U.S. dollars)

Significant non-cash operating activities:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for severance benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5,365
8,209
388

Investing activities:

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(5,838)

3. Fair Value Measurements

ASC 820 defines fair value, establishes a consistent framework for measuring fair value and expands
disclosure requirements about fair value measurements. ASC 820 requires, among other things, the Company’s
valuation techniques used to measure fair value to maximize the use of observable inputs and minimize the use
of unobservable inputs.

Fair Value of Financial Instruments

As of December 31, 2022, the following table represents the Company’s liabilities measured at fair value on

a recurring basis and the basis for that measurement (in thousands):

Carrying Value
December 31, 2022

Fair Value
Measurement
December 31, 2022

Quoted Prices in
Active Markets
for Identical
Liability (Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Liabilities:

Derivative liabilities (other

current liabilities) . . . . . . . . . .

$2,015

—

$2,015

—

As of December 31, 2021, the following table represents the Company’s liabilities measured at fair value on

a recurring basis and the basis for that measurement (in thousands):

Carrying Value
December 31, 2021

Fair Value
Measurement
December 31, 2021

Quoted Prices in
Active Markets
for Identical
Liability (Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Liabilities:

Derivative liabilities (other

current liabilities) . . . . . . . . . .

$2,020

—

$2,020

—

Items not reflected in the table above include cash equivalents, accounts receivable, other receivables,
accounts payable, and other accounts payable, fair value of which approximate carrying values due to the
short-term nature of these instruments. The fair value of assets and liabilities whose carrying value approximates
fair value is determined using Level 2 inputs.

Fair Values Measured on a Non-recurring Basis

The Company’s non-financial assets, such as property, plant and equipment, and intangible assets are

recorded at fair value upon acquisition and are remeasured at fair value only if an impairment charge is
recognized. As of December 31, 2022 and 2021, the Company did not have any assets or liabilities measured at
fair value on a non-recurring basis.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

4. Accounts Receivable

Accounts receivable as of December 31, 2022 and 2021 consisted of the following (in thousands):

Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:

December 31,

2022

2021

$35,610
32

$50,363
1,242

Allowance for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales return reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(79)
(183)

(466)
(185)

Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$35,380

$50,954

Changes in allowance for credit losses for the years ended December 31, 2022, 2021 and 2020 are as

follows (in thousands):

Year Ended December 31,
2021

2020

2022

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(466)
—
378
9

$ (79)

$(188)
(302)
—
24

$(466)

$ (49)
(131)
—
(8)

$(188)

Changes in sales return reserves for the years ended December 31, 2022, 2021 and 2020 are as follows (in

thousands):

Year Ended December 31,
2021

2020

2022

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal (provision). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(185)
(11)
—
13

$(183)

$(173)
(27)
—
15

$(185)

$(387)
22
196
(4)

$(173)

Commencing in March 2012, the Company has been a party to an agreement to sell selected trade accounts

receivable to a financial institution from time to time. After a sale, the Company does not retain any interest in
the receivables and the applicable financial institution collects these accounts receivable directly from the
customer. There were no sale of accounts receivable for the years ended December 31, 2022, 2021 and 2020. Net
proceeds of this accounts receivable sale program are recognized in the consolidated statements of cash flows as
part of operating cash flows.

The Company uses receivable discount programs with certain customers. These discount arrangements allow

the Company to accelerate collection of customers’ receivables.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

5. Inventories

Inventories as of December 31, 2022 and 2021 consist of the following (in thousands):

Finished goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Semi-finished goods and work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Materials in-transit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: inventory reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2022

2021

$ 6,799
40,265
7,460
36
(14,677)

$ 9,594
25,968
9,443
95
(5,730)

Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 39,883

$39,370

Changes in inventory reserve for the years ended December 31, 2022, 2021 and 2020 are as follows

(in thousands):

Year Ended December 31,
2021

2022

2020

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in reserve

$ (5,730) $(5,901) $(5,947)

Inventory reserve charged to costs of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of previously reserved inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(13,310)
3,631

Write off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassified to assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9,679)
582
150
—

(7,626)
5,349

(2,277)
1,875
573
—

(7,268)
4,349

(2,919)
2,679
(408)
694

Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(14,677) $(5,730) $(5,901)

Inventory reserve represents the Company’s best estimate in value lost due to excessive inventory level,

physical deterioration, obsolescence, changes in price levels, or other causes based on individual facts and
circumstances. Inventory reserve relates to inventory items including finished goods, semi-finished goods,
work-in-process and raw materials. Write off of this reserve is recognized only when the related inventory has
been disposed or scrapped.

6. Property, Plant and Equipment

Property, plant and equipment as of December 31, 2022 and 2021 are comprised of the following (in

thousands):

Buildings and related structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease right-of-use assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2022

2021

$ 24,780
137,666
389
33,890

196,725
(101,502)
13,034
2,490

$ 24,273
105,300
316
32,396

162,285
(94,119)
13,898
25,818

Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 110,747

$107,882

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

Aggregate depreciation expenses totaled $14,317 thousand, $13,495 thousand and $10,448 thousand for the

years ended December 31, 2022, 2021 and 2020, respectively.

7. Intangible Assets

Intangible assets as of December 31, 2022 and 2021 are comprised of the following (in thousands):

Intellectual property assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$9,111

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$9,111

$(7,181)

December 31, 2022
Accumulated
amortization

Gross
amount

December 31, 2021
Accumulated
amortization

Gross
amount

Intellectual property assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$9,312

$(6,935)

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$9,312

$(6,935)

Aggregate amortization expense for intangible assets totaled $683 thousand, $744 thousand and

$668 thousand for the years ended December 31, 2022, 2021 and 2020, respectively.

The aggregate amortization expense of intangible assets for the next five years are estimated to be

$595 thousand, $456 thousand, $339 thousand, $235 thousand and $148 thousand for the years ended
December 31, 2023, 2024, 2025, 2026 and 2027, respectively.

Net
amount

$1,930

Net
amount

$2,377

8. Leases

The Company has operating and finance leases for buildings and other assets such as vehicles and office

equipment. The Company’s leases have remaining lease terms ranging from 1 year to 5 years.

The tables below present financial information related to the Company’s leases.

Supplemental balance sheets information related to leases as of December 31, 2022 and 2021 are as follows

(in thousands):

Leases

Assets

Classification

Operating lease . . . . . . . . . . . . . .
Finance lease . . . . . . . . . . . . . . . .

Operating lease right-of-use assets
Property, plant and equipment, net

Total lease assets . . . . . . . . . . . . . .

Liabilities
Current

Operating . . . . . . . . . . . . . . . . . . .
Finance . . . . . . . . . . . . . . . . . . . .

Operating lease liabilities
Other current liabilities

Non-current

Operating . . . . . . . . . . . . . . . . . . .
Finance . . . . . . . . . . . . . . . . . . . .

Non-current operating lease liabilities
Other non-current liabilities

Total lease liabilities . . . . . . . . . . .

December 31,

2022

2021

$5,265
143

$5,408

$4,275
126

$4,401

$1,397
90

$2,323
68

4,091
63

1,952
73

$5,641

$4,416

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

The following table presents the weighted average remaining lease term and discount rate:

December 31,

2022

2021

Weighted average remaining lease term

Operating leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.7 years
2.4 years

2.4 years
2.0 years

Weighted average discount rate

6.6%
7.6%

4.2%
7.8%

The components of lease cost included in the Company’s consolidated statements of operations, are as

follows (in thousands):

Year Ended December 31,
2021

2020

2022

Operating lease cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease cost

$2,261

$2,777

$1,885

Amortization of right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68
10

65
14

63
18

Total lease cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,339

$2,856

$1,966

The above table does not include an immaterial cost of short-term leases for the years ended December 31,

2022, 2021 and 2020.

Other lease information is as follows (in thousands):

Year Ended December 31,
2021

2020

2022

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating cash flows from finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing cash flows from finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,276
10
70

$2,777
14
65

$1,885
18
76

Non-cash transaction amounts of lease liabilities arising from obtaining right-of-use assets were

$4,601 thousand, $2,768 thousand and $4,702 thousand for the years ended December 31, 2022, 2021 and 2020,
respectively.

The aggregate future lease payments for operating and finance leases as of December 31, 2022 are as

follows (in thousands):

Operating
Leases

Finance
Leases

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total future lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,707
1,594
1,386
958
663

6,308
(820)

Present value of future payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,488

$ 99
28
27
14
—

168
(15)

$153

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

9. Accrued Expenses

Accrued expenses as of December 31, 2022 and 2021 are comprised of the following (in thousands):

Payroll, benefits and related taxes, excluding severance benefits. . . . . . . . . . . . . . . . . . . .
Withholding tax attributable to intercompany interest income . . . . . . . . . . . . . . . . . . . . . .
Outside service fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2022

$7,620
43
1,642
—
383

$9,688

2021

$ 9,548
1,950
1,088
7,035
450

$20,071

10. Derivative Financial Instruments

The Company’s Korean subsidiary from time to time has entered into zero cost collar contracts to hedge the

risk of changes in the functional-currency-equivalent cash flows attributable to currency rate changes on U.S.
dollar denominated revenues.

Details of derivative contracts as of December 31, 2022 are as follows (in thousands):

Date of transaction

Type of derivative

Total notional amount

Month of settlement

January 04, 2022. . . . . . . .
March 07, 2022. . . . . . . . .
April 27, 2022. . . . . . . . . .

Zero cost collar
Zero cost collar
Zero cost collar

$30,000
$24,000
$42,000

January 2023 to June 2023
July 2023 to December 2023
January 2023 to December 2023

Details of derivative contracts as of December 31, 2021 are as follows (in thousands):

Date of transaction

Type of derivative

Total notional amount

Month of settlement

May 13, 2021 . . . . . . . . . .
August 13, 2021 . . . . . . . .

Zero cost collar
Zero cost collar

$39,000
$48,000

January 2022 to September 2022
January 2022 to December 2022

The zero cost collar contracts qualify as cash flow hedges under ASC 815, ‘‘Derivatives and Hedging,’’
since at both the inception of the contracts and on an ongoing basis, the hedging relationship was and is expected
to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the
contracts.

The fair values of the Company’s outstanding zero cost collar contracts recorded as liabilities as of

December 31, 2022 and 2021 are as follows (in thousands):

Derivatives designated as hedging instruments:

Liability Derivatives:

December 31,
2021
2022

Zero cost collars . . . . . . . . . . . . . . . . . . . .

Other current liabilities

$2,015 $2,020

Offsetting of derivative liabilities as of December 31, 2022 is as follows (in thousands):

Gross amounts of
recognized
liabilities

Gross amounts
offset in the
balance sheets

Net amounts of
liabilities
presented in the
balance sheets

Gross amounts not offset
in the balance sheets

Financial
instruments

Cash collateral
pledged

Net amount

As of December 31, 2022

Liability Derivatives:

Zero cost collars . . . . . . . .

$2,015

$—

$2,015

$—

$(1,940)

$75

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

Offsetting of derivative liabilities as of December 31, 2021 is as follows (in thousands):

Gross amounts of
recognized
liabilities

Gross amounts
offset in the
balance sheets

Net amounts of
liabilities
presented in the
balance sheets

Gross amounts not offset
in the balance sheets

Financial
instruments

Cash collateral
pledged

Net amount

As of December 31, 2021

Liability Derivatives:

Zero cost collars . . . . . . . .

$2,020

$—

$2,020

$—

$(2,060)

$(40)

For derivative instruments that are designated and qualify as cash flow hedges, gains or losses on the
derivative aside from components excluded from the assessment of effectiveness are reported as a component of
accumulated other comprehensive income or loss (‘‘AOCI’’) and reclassified into earnings in the same period or
periods during which the hedged transaction affects earnings. Gains and losses on the derivative, representing
hedge components excluded from the assessment of effectiveness, are recognized in current earnings.

The following table summarizes the impact of derivative instruments on the consolidated statements of

operations for the years ended December 31, 2022 and 2021. (in thousands):

Derivatives in
ASC 815
Cash Flow
Hedging
Relationships

Amount of Loss
Recognized in
AOCI on
Derivatives

2022

2021

Location/Amount of Loss
Reclassified from AOCI Into
Statement of Operations

Location/Amount of Gain
Recognized in
Statement of Operations on
Derivatives

2022

2021

2022

2021

Zero cost collars. . . . . .

$(8,273) $(4,665) Net sales

$(8,514) $(819) Other income, net

$135

$123

As of December 31, 2022, the amount expected to be reclassified from accumulated other comprehensive

loss into loss within the next twelve months is $1,225 thousand.

The Company set aside cash deposits to the counterparties, Nomura Financial Investment (Korea) Co., Ltd.

(‘‘NFIK’’) and Standard Chartered Bank Korea Limited (‘‘SC’’), as required for the zero cost collar contracts.
These cash deposits are recorded as hedge collateral on the consolidated balance sheets. Cash deposits as of
December 31, 2022 and 2021 are as follows (in thousands):

Counterparty

SC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2022

2021

$1,000

The Company is required to deposit additional cash collateral with NFIK and SC for any exposure in excess

of $500 thousand. As of December 31, 2022, $1,840 thousand and $100 thousand of additional cash collateral
were required by NFIK and SC, respectively, and recorded as hedge collateral on the consolidated balance sheet.
As of December 31, 2021, $760 thousand and $1,300 thousand of additional cash collateral were required by
NFIK and SC, respectively, and recorded as hedge collateral on the consolidated balance sheet.

These zero cost collar contracts may be terminated by the counterparties if the Company’s total cash and

cash equivalents is less than $30,000 thousand at the end of a fiscal quarter, unless a waiver is obtained.

11. Borrowings

5.0% Exchangeable Senior Notes

On January 17, 2017, MagnaChip Semiconductor S.A. closed the Exchangeable Notes Offering of

$86,250 thousand aggregate principal amount of 5.0% Exchangeable Notes. Interest on the Exchangeable Notes
accrued at a rate of 5.0% per annum, payable semi-annually on March 1 and September 1 of each year,
beginning on March 1, 2017. The Exchangeable Notes matured on March 1, 2021, unless they were earlier
repurchased or converted. Holders had the right to convert their notes at their option at any time prior to the

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

close of business on the business day immediately preceding the stated maturity date. Interest expense related to
the Exchangeable Notes for the years ended December 31, 2021 and 2020 were $958 thousand and
$5,708 thousand, respectively.

Prior to the March 1, 2021 maturity of the Exchangeable Notes, holders elected to exchange all outstanding

Exchangeable Notes for an aggregate of 10,144,131 shares of the Company’s common stock in satisfaction in
full of the outstanding obligations under the Exchangeable Notes. Upon exchange, the Company delivered for
each $1,000 principal amount of exchanged Exchangeable Notes a number of shares equal to the exchange rate
of 121.1387 shares of common stock per $1,000 principal amount of Exchangeable Notes, which was equivalent
to an exchange price of approximately $8.26 per share of common stock. In connection with the exchanges, the
fractional shares were paid in cash. Following March 1, 2021, the Company does not have any Exchangeable
Notes outstanding.

6.625% Senior Notes

On July 18, 2013, the Company issued a $225,000 thousand aggregate principal amount of the 2021 Notes

at a price of 99.5%. Interest on the 2021 Notes accrued at a rate of 6.625% per annum, payable semi-annually on
January 15 and July 15 of each year, beginning on January 15, 2014. Interest expense related to the 2021 Notes
for the year ended December 31, 2020 was $11,926 thousand.

The Company completed the full redemption of the remaining outstanding 2021 Notes on October 2, 2020.
The Company paid approximately $227,428 thousand to fully redeem all of the outstanding $224,250 thousand
aggregate principal amount of the 2021 Notes at a redemption price equal to the sum of 100% of the principal
amount of the 2021 Notes, plus accrued and unpaid interest thereon through, but excluding, the Redemption
Date. In connection with the redemption of the 2021 Notes, the Company recorded a $766 thousand as loss on
early extinguishment of borrowings related to the remaining unamortized debt discount and debt issuance costs.

12. Accrued Severance Benefits

The majority of accrued severance benefits are for employees in the Company’s Korean subsidiary. Pursuant

to Employee Retirement Benefit Security Act of Korea, eligible employees and executive officers with one or
more years of service are entitled to severance benefits upon the termination of their employment based on their
length of service and rate of pay. As of December 31, 2022, 97% of all employees of the Company were eligible
for severance benefits.

Changes in accrued severance benefits are as follows (in thousands):

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: Cumulative contributions to severance insurance deposit accounts . . . . . . . . . . .
The National Pension Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Group severance insurance plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2022

2021

$ 51,567
6,289
(6,012)
(3,348)

48,496
(25,149)
(41)
(185)

$ 54,452
8,282
(6,679)
(4,488)

51,567
(18,250)
(53)
(200)

Accrued severance benefits, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 23,121

$ 33,064

The severance benefits funded through the Company’s National Pension Fund and group severance

insurance plan will be used exclusively for payment of severance benefits to eligible employees. These amounts
have been deducted from the accrued severance benefit balance.

Beginning in July 2018, the Company contributes to certain severance insurance deposit accounts a certain
percentage of severance benefits that are accrued for eligible employees for their services from January 1, 2018

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

pursuant to Employee Retirement Benefit Security Act of Korea. These accounts consist of time deposits and
other guaranteed principal and interest, and are maintained at insurance companies, banks or security companies
for the benefit of employees. The Company deducts the contributions made to these severance insurance deposit
accounts from its accrued severance benefits.

The Company is liable to pay the following future benefits to its non-executive employees upon their

normal retirement age (in thousands):

2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 – 2032 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Severance
Benefit

618
862
1,431
1,782
1,622
19,305

The above amounts were determined based on the non-executive employees’ current salary rates and the
number of service years that will be accumulated upon their retirement dates. These amounts do not include
amounts that might be paid to non-executive employees that will cease working with the Company before their
normal retirement ages.

Korea’s mandatory retirement age is 60 years of age or older under the Employment Promotion for the

Aged Act. The Company sets the retirement age of employees at 60.

13. Stockholders’ Equity and Stock-Based Compensation

Stock Repurchases

On December 21, 2021, the Board of Directors authorized the Company to repurchase up to

$75,000 thousand of the Company’s outstanding common stock and the Company entered into an accelerated
stock repurchase agreement (the ‘‘ASR Agreement’’) with JPMorgan Chase Bank, National Association (‘‘JPM’’)
to repurchase an aggregate of $37,500 thousand of the Company’s common stock.

Pursuant to the terms of the ASR Agreement dated December 21, 2021, the Company paid to JPM
$37,500 thousand in cash and received an initial delivery of 994,695 shares of its common stock in the open
market for an aggregate purchase price of $20,073 thousand and a price per share of $20.18 on December 22,
2021.

As of December 31, 2021, the Company accounted for the remaining portion of the ASR Agreement as a
forward contract indexed to its own common stock and recorded $17,427 thousand in additional paid-in capital in
stockholders’ equity in its consolidated balance sheets.

In March 2022, the previously announced repurchase of $37,500 thousand of the Company’s common stock

was completed pursuant to the ASR Agreement, and as a result, the Company additionally received
1,031,576 shares of its common stock for an aggregate purchase price of $ 17,217 thousand at a price per share
of $16.69, which was reclassified as treasury stock from additional paid-in capital in stockholder’s equity in the
Company’s consolidated balance sheets.

On August 31, 2022, the Board of Directors has authorized an expansion of the Company’s previously

announced stock repurchase program from $75,000 thousand to $87,500 thousand of the Company’s common
stock. The remaining $50,000 thousand of the expanded $87,500 thousand program was planned to be
repurchased in the open market or through privately negotiated transactions. In connection with the repurchase
program, the Company has established a stock trading plan with Oppenheimer & Co. Inc. in accordance with
Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

From September 2022 to December 2022, the Company repurchased 1,235,650 shares of its common stock

in the open market for an aggregate purchase price of $12,511 thousand and a price per share of $10.13 under
the stock repurchase program.

Equity Incentive Plans

The Company adopted its 2009 Common Unit Plan, or the 2009 Plan, effective December 8, 2009, which is

administered by the Compensation Committee of the Company’s Board of Directors (the ‘‘Compensation
Committee’’). The 2009 Plan terminated in connection with the Company’s initial public offering in March 2011,
and no additional options or other equity awards may be granted under the 2009 Plan. The Company adopted its
2011 Equity Incentive Plan, or the 2011 Plan, in March 2010. The Company amended and restated the 2011 Plan
in February 2011, and the Company’s stockholders approved the amendment in March 2011 to reflect that it
became effective in 2011 in connection with the Company’s initial public offering in March 2011. The 2011 Plan
was amended on October 23, 2017, to revise the clawback policy of the 2011 Plan. The 2011 Plan was amended
on April 26, 2018 to amend the tax withholding provisions as they relate to directed sales of shares. At the 2020
Annual Meeting of Stockholders, the Company’s stockholders approved its 2020 Equity and Incentive
Compensation Plan, or the 2020 Plan, which is administered by the Compensation Committee. Following the
adoption of the 2020 Plan, no further awards may be issued under the 2011 Plan.

Awards may be granted under the 2020 Plan to the Company’s employees, officers, directors, or certain

consultants or those of any subsidiary of the Company. While the Company may grant incentive stock options
only to employees, the Company may grant non-statutory stock options, stock appreciation rights, restricted
stock, restricted stock units, performance shares, performance units, dividend equivalents and cash-based awards
or other stock-based awards to any eligible participant, subject to terms and conditions determined by the
Compensation Committee. The term of any options granted under the 2020 Plan shall not exceed ten years from
the date of grant. As of December 31, 2022 an aggregate maximum of 11,352,919 shares were authorized and
1,351,913 shares were reserved for all future grants.

Stock options and stock appreciation rights must have exercise prices at least equal to the fair market value
of the stock at the time of their grant pursuant to the 2011 Plan and 2020 Plan. Stock options typically vest over
one to three years following grant, subject to the participant’s continued service through the applicable vesting
dates. As of December 31, 2022, no stock options or stock appreciation rights had been granted under 2020 Plan.

Restricted stock units granted under the 2011 Plan and 2020 Plan represent a right to receive shares of the
Company’s common stock when the restricted stock unit vests. No monetary payment (other than applicable tax
withholding) shall be required as a condition of receiving shares pursuant to a restricted stock unit, the
consideration for which shall be services actually rendered to a participating company or for its benefit. Stock
issued pursuant to any restricted stock unit may (but need not) be made subject to vesting conditions based upon
the satisfaction of such service requirements, conditions, restrictions or performance criteria as shall be
established by the Compensation Committee and set forth in the award agreement evidencing such award.

Restricted stock units typically vest over one to three years following grant, subject to the participant’s

continued service through the applicable vesting dates.

Restricted stock constitutes an immediate transfer of the ownership of shares of the Company’s common

stock to the participant in consideration of the performance of services, entitling such participant to voting,
dividend and other ownership rights, subject to the substantial risk of forfeiture and restrictions on transfer
determined by the Compensation Committee for a period of time determined by the Compensation Committee or
until certain management objectives specified by the Compensation Committee are achieved. Each grant of
restricted stock may be made without additional consideration or in consideration of a payment by the participant
that is less than the fair market value per share of common stock on the grant date. Stock issued pursuant to any
restricted stock award may (but need not) be made subject to vesting conditions based upon the satisfaction of
such service requirements, conditions, restrictions or performance criteria as shall be established by the
Compensation Committee and set forth in the award agreement evidencing such award. A grant of restricted
stock may require that any and all dividends and distributions paid on restricted stock that remains subject to a

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

substantial risk of forfeiture be automatically deferred and/or reinvested in additional restricted stock, which will
be subject to the same restrictions as the underlying restricted stock, but any such dividends or other distributions
on restricted stock must be deferred until, and paid contingent upon, the vesting of such restricted stock.

The following summarizes restricted stock unit activities for the year ended December 31, 2022.

Outstanding at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Restricted
Stock Units

833,961
726,000
(374,803)
(369,751)

Outstanding at December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

815,407

Weighted
Average
Grant-Date
Fair Value of
Restricted
Stock Units

$14.33
17.41
16.99
17.61

$14.36

Total compensation expenses recorded for the restricted stock units were $6,037 thousand, $7,704 thousand
and $6,311 thousand for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31,
2022, there was $4,036 thousand of total unrecognized compensation cost related to unvested restricted stock
units, which is expected to be recognized over a weighted average future period of 0.7 year. Total fair value of
restricted stock units vested were $6,369 thousand, $5,788 thousand and $3,839 thousand for the years ended
December 31, 2022, 2021 and 2020, respectively.

The following summarizes stock option activities for the year ended December 31, 2022. At the date of
grant, all options had an exercise price not less than the fair value of common stock (aggregate intrinsic value in
thousands):

Outstanding at January 1, 2022 . . . . . . . . . . . . . . . . . . . . . .
Expired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Options

1,297,877
(7,993)
(152,326)

Outstanding at December 31, 2022 . . . . . . . . . . . . . . . . . . .

1,137,558

Vested and Exercisable at December 31, 2022 . . . . . . . . . .

1,137,558

Weighted
Average
Exercise
Price of
Stock
Options

$10.78
12.81
11.73

$10.64

Aggregate
Intrinsic
Value of
Stock
Options

$13,262
—
$ 1,187

$ 1,702

Weighted
Average
Remaining
Contractual
Life of
Stock
Options

3.1 years
—
—

2.3 years

There were no compensation expenses recorded for the stock options for the years ended December 31,

2022, 2021 and 2020.

14. Early termination and other charges, net

For the year ended December 31, 2022, the Company recorded in its consolidated statement of operations
$2,821 thousand of one-time employee incentives, and professional service fees and expenses of $1,014 thousand
incurred in connection with certain strategic evaluations. During the same period, the Company also recorded
$537 thousand gain on sale of certain legacy equipment of the closed back-end line in the Company’s fabrication
facility in Gumi (which was closed during the year ended December 31, 2018).

For the year ended December 31, 2021, the Company recorded in its consolidated statement of operations

$3,430 thousand of non-recurring professional service fees and expenses incurred in connection with the

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

regulatory requests, and recorded $1,419 thousand gain on sale of certain legacy equipment of the closed
back-end line in the Company’s fabrication facility in Gumi.

For the year ended December 31, 2020, the Company recorded in its consolidated statement of operations

$4,422 thousand of early termination and other charges, net in connection with the headcount reduction program
offered and paid to the employees during the fourth quarter of 2020. During the same period, the Company also
recorded $554 thousand of non-recurring professional service fees and expenses incurred in connection with
certain treasury and finance initiatives.

15. Foreign Currency Loss, Net

Net foreign currency gain or loss includes non-cash translation gain or loss associated with intercompany
balances. A substantial portion of the Company’s net foreign currency gain or loss is non-cash translation gain or
loss associated with intercompany long-term loans to the Company’s Korean subsidiary. The loans are
denominated in U.S. dollars and are affected by changes in the exchange rate between the Korean won and the
U.S. dollar. As of December 31, 2022, 2021 and 2020, the outstanding intercompany loan balances including
accrued interest between the Korean subsidiary and the Dutch subsidiary were $310,988 thousand,
$344,411 thousand and $378,852 thousand, respectively. The Korean won to U.S. dollar exchange rates were
1,267.3:1, 1,185.5:1 and 1,088.0:1 using the first base rate as of December 31, 2022, 2021 and 2020,
respectively, as quoted by the KEB Hana Bank.

16. Income Taxes

The Company’s income tax expense (benefit) is composed of domestic and foreign income taxes depending
on the relevant tax jurisdictions. Domestic income (loss) from continuing operations before income tax expense
(benefit) and income tax expense (benefit) are generated or incurred in the U.S, where the parent company
resides.

The components of income tax expense (benefit) attributable to income (loss) from continuing operations

are as follows (in thousands):

Year Ended December 31,
2021

2020

2022

Income (loss) from continuing operations before income tax expense (benefit)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current income tax expense (benefit)

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax position liability (foreign) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred income tax expense (benefit)

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(1,955)
(924)

$41,566
32,403

$(12,305)
23,136

(2,879)

73,969

10,831

639
4,297
(33)

4,903

(1,264)
1,518

254

6,876
9,415
(35)

16,256

1
(2,264)
(20)

(2,283)

1,314
(309)

1,005

(4,461)
(39,484)

(43,945)

Total income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5,157

$17,261

$(46,228)

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

The provision for domestic and foreign income taxes (benefit) incurred is different from the amount
calculated by applying the statutory tax rates to the income (loss) from continuing operations before income tax
expense (benefit). The significant items causing this difference are as follows (in thousands):

Provision computed at statutory rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal effect . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in statutory tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Difference in foreign tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent differences

Derivative assets adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TPECs, hybrid and other interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thin capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent foreign currency gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
Penalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GILTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany debt restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Withholding tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State net operating loss write off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits claimed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in net operating loss carry-forwards . . . . . . . . . . . . . . . . . . . . . . . .
Foreign local taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,
2021

2020

2022

$ (605)
—
2,006
302

$ 15,533
—
(259)
2,820

$ 2,274
730
5,735
1,077

(62)
(2,096)
—
(241)
1,676
75
8,187
8,061
72
(2,031)
—
(4,582)
(5,658)
(33)
(145)
919
(688)

(23)
(3,400)
—
(802)
1,888
427
6,156
971
(767)
2,060
9,844
(13,803)
(5,508)
(35)
621
723
815

56
(2,722)
339
(73)
(1,813)
176
24,224
11,137
1,335
2,291
—
(75,452)
(12,397)
(20)
(3,314)
43
146

Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5,157

$ 17,261

$(46,228)

For the year ended December 31, 2022, a permanent difference of $8,187 thousand was included as Global

intangible low-taxed income (‘‘GILTI’’) in the U.S., which was primarily attributable to the income earned by
certain foreign subsidiaries of the Company, including its Korean subsidiary. The permanent tax expense of
$8,061 thousand related to intercompany debt restructuring recorded for the year ended December 31, 2022 was
derived from the waiver and release of unpaid interests of the intercompany loans granted to the Korean
subsidiary by the Dutch subsidiary. In connection with the waiver of unpaid interests, the related withholding tax
was reversed, resulting in the recognition of income tax benefit of $2,031 thousand.

The income tax benefit of $4,582 thousand was due to the changes in valuation allowances during the year
ended December 31, 2022, of which $2,670 thousand related to the release of valuation allowances related to the
U.S parent company’s current year earnings, which was mainly driven by GILTI inclusion. The remaining
$1,912 thousand represented the release of valuation allowances based on the realizability of the related deferred
tax assets in future years.

Of the income tax benefit of $13,803 thousand attributable to the change in valuation allowances during the

year ended December 31, 2021, $9,844 thousand related to the release of the valuation allowance established
against the deferred tax assets associated in the U.S. entity due to the dissolution of the Company’s domestic
subsidiary in 2021 subsequent to the sale of the Foundry Services Group business and Fab 4. The offsetting
expense of $9,844 thousand was included in the state net operating loss write-off in 2021, resulting in no income

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

tax effect in the year. The Company’s parent entity in the U.S. is no longer subject to state income taxes in 2022
and thereafter. The remaining $3,959 thousand represented the release of valuation allowances based on the
assessment of the realizability of the related deferred tax assets in future tax years.

For the year ended December 31, 2020, a permanent difference of $24,224 thousand was included as GILTI
in the U.S., and was primarily attributable to the income earned by certain foreign subsidiaries of the Company,
including its Korean subsidiary, from the sale of the Foundry Services Group business and Fab 4.

The income tax benefit of $75,452 thousand was due to the changes in valuation allowances during the year

ended December 31, 2020, of which $31,578 thousand related to the release of valuation allowances related to
the Company’s current year earnings, which were mainly driven by GILTI inclusion at the U.S. parent company.
The remaining $43,874 thousand represented the release of valuation allowances based on the realizability of the
related deferred tax assets in future years. The Company’s operating subsidiary in Korea had generated
three years of cumulative profits adjusted for permanent differences and anticipated to generate taxable basis for
the subsequent years. As a result, $39,413 thousand of valuation allowances, established against the Korean
subsidiary’s deferred tax assets, were released as of December 31, 2020.

Of the permanent tax expense of $11,137 thousand related to intercompany debt restructuring recorded for

the year ended December 31, 2020, $11,890 thousand related to the waiver and release of unpaid interests of the
intercompany loans granted to the Korean subsidiary by the Dutch subsidiary. This transaction created taxable
income for the Korean subsidiary, but did not result in a liability because of the utilization of loss carryforwards,
which were used against income from cancellation of intercompany loans.

A summary of the composition of net deferred income tax assets (liabilities) as of December 31, 2022 and

2021 are as follows (in thousands):

Deferred tax assets
Inventory reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated severance benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right-of-use liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOL carry-forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carry-forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense deduction limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax liabilities
Prepaid expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance benefit deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right-of-use assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2022

2021

3,108
1,668
2,685
10,269
1,098
22,272
78,698
13,337
4,005
91
427
1,394
139,052
(84,563)
54,489

3,065
5,364
1,051
5,621
1,064
16,165
$ 38,324

1,313
3,084
3,119
11,842
899
17,280
87,636
14,164
2,457
4,731
463
1,610
148,598
(94,212)
54,386

2,300
4,227
899
5,139
726
13,291
$ 41,095

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

The Company has not recognized a deferred tax liability related to outside basis differences inherent in its

foreign subsidiaries because the investments in those foreign subsidiaries within the group are essentially
permanent in duration or earnings in foreign subsidiaries are intended to be indefinitely reinvested. It is not
practicable to estimate the amount of deferred income taxes not recorded that are associated with those outside
basis differences. If circumstances change and it becomes apparent that the undistributed earnings from foreign
subsidiaries will be remitted or the parent entity will dispose of its interest in the subsidiaries in the foreseeable
future, and related income taxes have not been recognized by the parent entity, the parent entity will accrue as an
expense of the current period income taxes attributable to that remittance or disposition.

Changes in valuation allowance for deferred tax assets of continuing operations and discontinued operations

for the years ended December 31, 2022, 2021 and 2020 are as follows (in thousands):

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes relating to the discontinued operations . . . . . . . . . . . . . . . . . . .
NOL/tax credit claimed/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,
2021

2020

2022

$94,212
(4,582)
—
—
(5,067)

$84,563

$115,636
(13,803)
—
—
(7,621)

$246,224
(75,452)
(67,484)
3,686
8,662

$ 94,212

$115,636

As of December 31, 2022, 2021 and 2020, respectively, the Company recorded a valuation allowance of

$84,563 thousand, $94,212 thousand and $115,636 thousand on its deferred tax assets related to temporary
differences, net operating loss carry-forwards and tax credits of domestic and foreign subsidiaries.

The Company has recorded a full valuation allowance against certain foreign subsidiaries’ deferred tax
assets pertaining to its related tax loss carry-forwards that are not anticipated to generate a tax benefit. The
valuation allowances at December 31, 2022, 2021 and 2020 were primarily attributable to its Luxembourg
subsidiary.

The net operating loss carry-forwards balance as of December 31, 2022, 2021 and 2020 are as follows (in

thousands):

Year Ended December 31,
2021

2020

2022

NOL carry-forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$324,134

$502,511

$604,977

As of December 31, 2022, the Company had $324,134 thousand of net operating loss carry-forwards

available to offset future taxable income, of which $271,753 thousand is associated with the Company’s
Luxembourg subsidiary, mainly attributable to certain expenses incurred in connection with its shareholding in
the Company’s Dutch subsidiary. Of the $271,753 thousand net operating loss carry-forwards, $263,506 thousand
is carried forward indefinitely and the remaining $8,247 thousand expires from 2034 through 2039. The net
operating loss carry-forwards retained by the Company’s U.S. parent amounts to $50,522 thousand, which
expires at various dates through 2037.

The Company utilized net operating loss of $19,900 thousand, $70,672 thousand and $169,600 thousand for

the years ended December 31, 2022, 2021 and 2020, respectively. The Company also has Dutch tax credit
carry-forwards of $13,337 thousand as of December 31, 2022. The Dutch tax credits are carried forward to be
used for an indefinite period of time.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

Uncertainty in Income Taxes

The Company and its subsidiaries file income tax returns in Korea, Japan, Taiwan, and the U.S and in
various other jurisdictions. The Company is subject to income- or non-income tax examinations by tax authorities
of these jurisdictions for all open tax years.

As of December 31, 2022, 2021 and 2020, the Company recorded $316 thousand, $386 thousand and

$414 thousand of unrecognized tax benefits, respectively.

A tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of each

period is as follows (in thousands):

Unrecognized tax benefits, balance at the beginning . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unrecognized tax benefits, balance at the ending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,
2020
2021
2022

$386
40
—
(73)
(37)

$316

$414
44
—
(79)
7

$386

$445
48
(34)
(76)
31

$414

No interest and penalties related to unrecognized tax benefits were recognized as of December 31, 2022,

2021 and 2020.

The Company is currently unaware of any uncertain tax positions that could result in significant additional

payments, accruals, or other material deviations from this estimate over the next 12 months.

The IRA

On August 16, 2022, the IRA was signed into law, which imposes a 15% alternative minimum tax on the

adjusted financial statement income of large corporations with average annual financial income exceeding
$1 billion and a 1% excise tax on net stock repurchases by publicly traded U.S. corporations for tax years
beginning after December 31, 2022. The IRA did not have any impact on the Company’s income tax for the year
ended December 31, 2022 and the Company will continue to evaluate the impact this might have in future
periods.

17. Geographic and Other Information

The following sets forth information relating to the single continuing operating segment (in thousands):

Year Ended December 31,
2021

2020

2022

Revenues

Standard products business

Display Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Power Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total standard products business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transitional Fab 3 foundry services. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross Profit

Standard products business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transitional Fab 3 foundry services. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 71,432
230,464
301,896
35,762
$337,658

$ 99,549
1,715
$101,264

$205,322
227,777
433,099
41,131
$474,230

$149,596
3,947
$153,543

$299,057
166,462
465,519
41,540
$507,059

$127,099
1,218
$128,317

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

The following is a summary of net sales—standard products business (which does not include the
Transitional Fab 3 Foundry Services) by geographic region, based on the location to which the products are
billed (in thousands):

Year Ended December 31,
2021

2020

2022

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific (other than Korea) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$105,285
179,555
10,369
6,687
—

$301,896

$113,776
306,333
6,052
5,698
1,240

$433,099

$106,415
347,597
5,147
4,317
2,043

$465,519

For the years ended December 31, 2022, 2021 and 2020, of the Company’s net sales—standard products

business in Asia Pacific (other than Korea), net sales—standard products business in Greater China (China and
Hong Kong) represented 68.5%, 65.8% and 82.0%, respectively, and net sales—standard products business in
Vietnam represented 13.6%, 26.4% and 14.4%, respectively.

Net sales from the Company’s top ten largest customers in the standard products business (which does not

include the Transitional Fab 3 Foundry Services) accounted for 69%, 80% and 88% for the years ended
December 31, 2022, 2021 and 2020, respectively.

For the year ended December 31, 2022, the Company had two customers that represented 19.0% and 13.8%

of its net sales—standard products business, and for the year ended December 31, 2021, the Company had
two customers that represented 42.5% and 10.4% of its net sales—standard products business, and for the year
ended December 31, 2020, the Company had one customer that represented 56.2% of its net sales—standard
products business.

As of December 31, 2022, two customers of the Company’s standard products business accounted for 25.1%
and 15.2% of its accounts receivable – standard products business (which does not include the Transitional Fab 3
Foundry Services), respectively. As of December 31, 2021, two customers of the Company’s standard products
business accounted for 30.3% and 15.5% of its accounts receivable – standard products business (which does not
include the Transitional Fab 3 Foundry Services), respectively.

99% of the Company’s property, plant and equipment are located in Korea as of December 31, 2022.

18. Merger Agreement

On March 25, 2021, the Company, South Dearborn Limited, an exempted company incorporated in the
Cayman Islands with limited liability (‘‘Holdco’’), formed by an affiliate of Wise Road Capital LTD (‘‘Wise
Road’’), and Michigan Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Holdco
(‘‘Merger Sub’’), entered into an Agreement and Plan of Merger (as amended, the ‘‘Merger Agreement’’),
providing for, among other things and subject to the terms and conditions thereof, the merger of Merger Sub with
and into the Company (the ‘‘Merger’’), with the Company surviving the Merger as a wholly owned subsidiary of
Holdco.

The closing of the Merger was subject to certain conditions, including clearance by the Committee on
Foreign Investment in the United States (‘‘CFIUS’’) under the Defense Production Act of 1950, as amended. The
Company and Holdco were advised that CFIUS clearance of the Merger would not be forthcoming and received
permission from CFIUS to withdraw their joint filing. In connection therewith, the Company and Holdco entered
into a Termination and Settlement Agreement, dated December 13, 2021 (the ‘‘Termination Agreement’’),
pursuant to which Holdco agreed to pay $70,200 thousand (the ‘‘Termination Fee’’) to the Company on the terms
specified in the Termination Agreement in satisfaction of Holdco’s obligation to pay a termination fee in
connection with the termination of the Merger Agreement. On December 20, 2021, the Merger Agreement was

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

terminated pursuant to the Termination Agreement after the Company’s receipt of a fee of $51,000 thousand from
Holdco and a standby letter of credit, which secures a deferred fee of $19,200 thousand from Holdco due on or
before March 31, 2022. As of December 31, 2021, of the Termination Fee, $19,200 thousand deferred fee was
recorded as other receivables. In connection therewith, the Company, Holdco and Wise Road entered into a
First Amendment to the Termination Agreement, dated April 4, 2022, pursuant to which Holdco paid
$14,400 thousand on April 4, 2022, with $4,800 thousand remaining outstanding. The Company, Holdco and
Wise Road entered into a Second Amendment to the Termination Agreement, dated August 5, 2022 pursuant to
which Holdco paid $3,000 thousand on August 5, 2022, of the deferred fee and payment of the remaining
$1,800 thousand was due on or before October 31, 2022. The Company, Holdco and Wise Road entered into a
Letter Agreement, dated October 28, 2022 pursuant to which the parties agreed to defer the remaining
$1,800 thousand due on or before December 23, 2022. The Company, Holdco and Wise Road entered into an
additional Letter Agreement, dated January 31, 2023 pursuant to which the parties agreed to defer the remaining
$1,800 thousand due on or before February 28, 2023. As of December 31, 2022, the remaining fee of
$1,800 thousand was recorded as other receivables. Other than in respect of this receivable, the Company has no
further relationship with Holdco.

For the years ended December 31, 2021 and 2020, the Company incurred $34,673 thousand and

$653 thousand, respectively, of professional fees and certain transaction related-expenses incurred in connection
with the Merger, which were recognized in merger-related costs, net in the consolidated statements of operations.

19. Commitments and Contingencies

COVID-19 Pandemic

In December 2019, a strain of coronavirus causing a disease known as COVID-19 surfaced in Wuhan,
China, resulting in significant disruptions among Chinese manufacturing and other facilities and travel throughout
China. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.
Governmental authorities throughout the world have implemented numerous containment measures, including
travel bans and restrictions, quarantines, shelter-in-place orders, and business restrictions and shutdowns, resulting
in rapidly changing market and economic conditions. Although some of these restrictions and other containment
measures have since been lifted or scaled back, ongoing surges of COVID-19 have in some cases resulted in the
re-imposition of certain restrictions and containment measures, and may continue to lead to other restrictions
being re-implemented in the foreseeable future in response to efforts to reduce the rapid spread of COVID-19.

The Company experienced some minor disruption in its Power Solutions business from assembly and test
subcontractors located in China in the first quarter of 2020 as a result of the COVID-19 pandemic. To date, its
external Display Solutions business contractors and sub-contractors have not been materially impacted by the
COVID-19 pandemic. The Company is, however, unable to accurately predict the full impact that the COVID-19
pandemic will have on its future results of operations due to numerous uncertainties. The extent to which the
COVID-19 pandemic impacts the Company’s business, results of operations and financial condition will depend
on future developments, which, despite progress in vaccination efforts, are highly uncertain and cannot be
predicted with confidence, including the duration of the outbreak, new information that may emerge concerning
the severity of the COVID-19 pandemic, such as new strains of the virus that may emerge, which may impact
rates of infection and vaccination efforts, developments or perceptions regarding the safety of vaccines and the
extent and effectiveness of actions to contain the COVID-19 pandemic or treat its impact, including vaccination
campaigns and lockdown measures, among others. In addition, recurrences or additional waves of COVID-19
cases could cause other widespread or more severe impacts depending on where infection rates are highest. The
Company cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but
if the Company or any of its customers and suppliers were to experience prolonged business shutdowns or other
disruptions, its ability to conduct its business could be materially and negatively affected, which could have a
material adverse impact on its business, results of operations and financial condition.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

The Company continues to closely monitor and evaluate the nature and scope of the impact of the
COVID-19 pandemic to its business, consolidated results of operations, and financial condition, and may take
further actions altering its business operations and managing its costs and liquidity that the Company deems
necessary or appropriate to respond to this ongoing and uncertain global health crisis and the resulting global
economic consequences.

20. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following at December 31, 2022 and 2021,

respectively (in thousands):

Year Ended
December 31,

2022

2021

Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(11,328)
(1,225)

$ (770)
(1,460)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(12,553)

$(2,230)

Changes in accumulated other comprehensive income (loss) for the years ended December 31, 2022, 2021

and 2020 are as follows (in thousands):

Year Ended December 31, 2022

Foreign
currency
translation
adjustments

Derivative
adjustments

Total

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(770)

$(1,460)

$ (2,230)

Other comprehensive loss before reclassifications . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other comprehensive loss . .

Net current-period other comprehensive income (loss) . . . . . . . . . . . . .

(10,558)
—

(10,558)

(8,279)
8,514

235

(18,837)
8,514

(10,323)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(11,328)

$(1,225)

$(12,553)

Year Ended December 31, 2021

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss before reclassifications . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other comprehensive loss . .
Net current-period other comprehensive loss . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31, 2020

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income before reclassifications . . . . . . . . . . . .
Amounts reclassified from accumulated other comprehensive

income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net current-period other comprehensive income. . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign
currency
translation
adjustments

$ 2,069
(2,839)
—
(2,839)
$ (770)

Foreign
currency
translation
adjustments

$(4,205)
6,274

—
6,274
$ 2,069

Derivative
adjustments

$ 1,634
(3,913)
819
(3,094)
$(1,460)

Derivative
adjustments

$ 1,545
1,452

(1,363)
89
$ 1,634

Total

$ 3,703
(6,752)
819
(5,933)
$(2,230)

Total

$(2,660)
7,726

(1,363)
6,363
$ 3,703

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

There was an income tax expense of $6 thousand related to changes in accumulated other comprehensive

loss for the year ended December 31, 2022. There was an income tax benefit of $752 thousand related to
changes in accumulated other comprehensive loss for the year ended December 31, 2021. There was an income
tax expense of $316 thousand related to changes in accumulated other comprehensive income for the year ended
December 31, 2020.

21. Earnings (Loss) Per Share

The following table illustrates the computation of basic and diluted earnings (loss) per common share for

the years ended December 31, 2022, 2021 and 2020:

Year Ended December 31,
2021
(In thousands of U.S. dollars, except share data)

2020

2022

Basic earnings (loss) per share
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Basic weighted average common stock outstanding . . . . . . . . . . .
Basic earnings (loss) per common share
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings (loss) per share
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . .
Add back: Interest expense on Exchangeable Notes . . . . . . . . . . .

Income (loss) from continuing operations allocated to common

stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . . . . . . .

Net income (loss) allocated to common stockholders . . . . . . . . . .

Basic weighted average common stock outstanding . . . . . . . . . . .
Net effect of dilutive equity awards. . . . . . . . . . . . . . . . . . . . . . . .
Net effect of assumed conversion of 5.0% Exchangeable Notes

(8,036)
—

(8,036)

56,708
—

56,708

57,059
287,906

344,965

44,850,791

44,879,412

35,213,525

(0.18)
—

(0.18)

(8,036)
—

(8,036)

1.26
—

1.26

56,708
959

57,667
—

57,667

1.62
8.18

9.80

57,059
5,708

62,767
287,906

350,673

44,850,791
—

44,879,412
1,403,789

35,213,525
1,145,906

to common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

1,426,172

10,144,155

Diluted weighted average common stock outstanding . . . . . . . . .
Diluted earnings (loss) per common share
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44,850,791

47,709,373

46,503,586

(0.18)
—

(0.18)

1.21
—

1.21

1.35
6.19

7.54

Diluted earnings (loss) per share adjusts basic earnings (loss) per share for the potentially dilutive impact of

stock options. As the Company has reported loss for the year ended December 31, 2022, all potentially dilutive
securities, including stock options, are antidilutive and accordingly not considered, therefore basic net loss per
share equals diluted net loss per share.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

The following outstanding instruments were excluded from the computation of diluted earnings (loss) per

share, as they have an anti-dilutive effect on the calculation:

Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted Stock Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,137,558
815,407

50,000
—

651,417
—

Year Ended December 31,
2021

2022

2020

Rights Plan

The Company entered into a Rights Agreement, dated as of December 13, 2021, between the Company and

American Stock Transfer & Trust Company, LLC, as rights agent (the ‘‘Rights Agreement’’), and the Board of
Directors of the Company authorized and declared a dividend of one preferred stock purchase right (a ‘‘Right’’
and collectively, the ‘‘Rights’’) for each share of the Company’s common stock, par value $0.01 per share,
outstanding at the close of business on December 23, 2021. Each Right, once exercisable, will entitle the
registered holder to purchase from the Company one one-thousandth of a share of Series A-1 Junior Participating
Preferred Stock, par value $0.01 per share, at a purchase price of $80, subject to adjustment (the ‘‘Purchase
Price’’). The Rights are not presently exercisable and remain attached to the shares of common stock unless and
until the occurrence of the earlier of the following (the ‘‘Distribution Date’’): (i) the tenth day after the public
announcement or disclosure by the Company or any person or group of affiliated or associated persons that any
person or group of affiliated or associated persons has become an ‘‘Acquiring Person’’ by obtaining beneficial
ownership of 12.5% (or 20% in the case of a ‘‘passive institutional investor,’’ which is defined generally as any
person who has reported beneficial ownership of shares of common stock on Schedule 13G under the Securities
Exchange Act of 1934, as amended) or more of the Company’s outstanding common stock, subject to certain
exceptions; or (ii) the tenth business day (or such later date as the Company’s Board of Directors may designate
before a person or group of affiliated or associated persons becomes an Acquiring Person) after (and not
including) the commencement of, or first public announcement of the intent of any person to commence, a tender
or exchange offer by any person or group of affiliated or associated persons, which would, if consummated,
result in such person or group becoming an Acquiring Person. The Board of Directors could redeem all of the
Rights for $0.001 per Right at any time before any person or group of affiliated or associated persons becomes
an Acquiring Person. In addition, at any time on or after any person or group of affiliated or associated persons
becomes an Acquiring Person (but before any person or group of affiliated or associated persons becomes the
owner of 50% or more of the Company’s outstanding common stock), the Board of Directors may exchange all
or part of the Rights (other than the Rights beneficially owned by the Acquiring Person and certain affiliated
persons) for shares of common stock at an exchange ratio of one share of common stock per Right. The Rights
expired at the close of business on December 12, 2022.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be
disclosed in our periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Executive Officer (‘‘Principal Executive
Officer’’) and Chief Financial Officer (‘‘Principal Financial Officer’’), as appropriate, to allow for timely
decisions regarding required disclosure.

Management of the Company, with the participation of our Principal Executive Officer and our Principal

Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the
Exchange Act, as of December 31, 2022. Based on this evaluation, our Principal Executive Officer and our
Principal Financial Officer have concluded that our disclosure controls and procedures were effective as of
December 31, 2022.

(b) Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is a process designed under the supervision of our Principal Executive Officer and our
Principal Financial Officer, and effected by our Board, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our Principal Executive Officer and our Principal
Financial Officer, we conducted an evaluation of the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2022, based on the criteria set forth in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(‘‘COSO’’). Based on our assessment, we concluded that our internal control over financial reporting was
effective as of December 31, 2022.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 has
been audited by Samil PricewaterhouseCoopers, an independent registered public accounting firm, as stated in
their report which appears in Item 8 of this Report.

There were no changes in internal control over financial reporting during the quarter ended December 31,
2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

Item 9B. Other Information

Not Applicable.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item relating to our executive officers is included in ‘‘Item 1.

Business—Executive Officers of the Company.’’ The other information required by this item is incorporated by
reference to our definitive proxy statement relating to our 2023 annual meeting of stockholders or will be
included by amendment to this Report within 120 days after the end of the fiscal year to which this Report
relates.

Item 11.

Executive Compensation

The information required by this item is incorporated by reference to our definitive proxy statement relating

to our 2023 annual meeting of stockholders or will be included by amendment to this Report within 120 days
after the end of the fiscal year to which this Report relates.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters

The information required by this item is incorporated by reference to our definitive proxy statement relating

to our 2023 annual meeting of stockholders or will be included by amendment to this Report within 120 days
after the end of the fiscal year to which this Report relates.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference to our definitive proxy statement relating

to our 2023 annual meeting of stockholders or will be included by amendment to this Report within 120 days
after the end of the fiscal year to which this Report relates.

Item 14.

Principal Accounting Fees and Services.

The information required by this item is incorporated by reference to our definitive proxy statement relating

to our 2023 annual meeting of stockholders or will be included by amendment to this Report within 120 days
after the end of the fiscal year to which this Report relates.

Item 15.

Exhibits and Financial Statement Schedules

Financial Statements

PART IV

The information required by this item is included in Item 8 of Part II of this Report.

Financial Statement Schedules

Financial Statement Schedules are omitted because of the absence of the conditions under which they are

required or because the information required by such omitted schedules is set forth in the financial statements or
the notes thereto.

Exhibits

Exhibit
No.

2.1

2.2-1

2.2-2

2.2-3

2.2-4

2.2-5

2.2-6

3.1

3.2

3.3

Business Transfer Agreement, dated as of March 31, 2020 among by and among Magnus
Semiconductor, LLC, MagnaChip Semiconductor S.A. and MagnaChip Semiconductor, Ltd.
(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on March 31, 2020)

Exhibit Description

Agreement and Plan of Merger, dated as of March 25, 2021, by and among South Dearborn Limited,
Michigan Merger Sub, Inc., and Magnachip Semiconductor Corporation (incorporated by reference to
Exhibit 2.1 to our Current Report on Form 8-K filed on March 29, 2021).

Letter Agreement, dated as of June 11, 2021, by and among Magnachip Semiconductor Corporation,
South Dearborn Limited and Michigan Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to our
Current Report on Form 8-K filed on June 14, 2021).

Letter Agreement, dated as of August 23, 2021, by and among Magnachip Semiconductor Corporation,
South Dearborn Limited and Michigan Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to our
Current Report on Form 8-K filed on August 23, 2021)

Termination and Settlement Agreement, dated December 13, 2021 by and between Magnachip
Semiconductor Corporation and South Dearborn Limited (incorporated by reference to Exhibit 10.1 to
our Current Report on Form 8-K on December 13, 2021)

First Amendment to Termination and Settlement Agreement, dated as of April 4, 2022, by and between
Magnachip Semiconductor Corporation, South Dearborn Limited and Wise Road Capital LTD.
(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 6, 2022).

Second Amendment to Termination and Settlement Agreement, dated as of August 5, 2022, by and
between Magnachip Semiconductor Corporation, South Dearborn Limited and Wise Road Capital LTD.
(incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q filed on November 4,
2022)

Certificate of Conversion of MagnaChip Semiconductor LLC (incorporated by reference to Exhibit 3.1
to our Current Report on Form 8-K filed on March 11, 2011).

Certificate of Incorporation of MagnaChip Semiconductor Corporation (incorporated by reference to
Exhibit 3.2 to our Current Report on Form 8-K filed on March 11, 2011).

Certificate of Amendment to the Certificate of Incorporation of Magnachip Semiconductor Corporation
(incorporated by reference to Exhibit 3.1 to our Current report on Form 8-K filed on December 30,
2020)

Exhibit
No.

Exhibit Description

3.4

3.5

3.6

3.7

4.1#

10.1

10.2*

10.3*

10.4*

10.5*

10.6*

10.6-1*

10.6-2*

Amended and Restated Bylaws of MagnaChip Semiconductor Corporation (incorporated by
reference to Exhibit 3.1 to our Current Report on Form 8-K filed on May 6, 2016).

Form of Plan of Conversion of MagnaChip Semiconductor LLC (incorporated by reference to
Exhibit 3.6 to our Amendment No. 2 to Registration Statement on Form S-1 filed on May 11, 2010
(Registration No. 333-165467)).

Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock
of MagnaChip Semiconductor Corporation, as filed with the Secretary of the State of Delaware on
March 6, 2015 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed
on March 6, 2015).

Certificate of Designation of Series A-1, Junior Participating Preferred Stock of Magnachip
Semiconductor Corporation, as filed with the Secretary of State of Delaware on December 13,
2021.

Description of Securities

Intellectual Property License Agreement, dated as of October 6, 2004, by and between Hynix
Semiconductor Inc. and MagnaChip Semiconductor, Ltd. (Korea) (incorporated by reference to
Exhibit 10.2 to our Amendment No. 1 to Registration Statement on Form S-1 filed on April 20,
2010 (Registration No. 333-165467)).

MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan (as amended on April 26,
2018) (incorporated by reference to Exhibit 10.24 to our Annual Report on Form 10-K filed on
February 22, 2019).

MagnaChip Semiconductor Corporation 2020 Equity and Incentive Compensation Plan
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on
June 17, 2020).

MagnaChip Semiconductor Corporation 2011 Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.26 to our Amendment No 9 to the Registration Statement on Form S-1 filed
on February 18, 2011 (Registration No. 333-165467)).

MagnaChip Semiconductor Corporation Form of Indemnification Agreement with Directors and
Officers (incorporated by reference to Exhibit 10.49 to our Registration Statement on Form S-1
filed on March 15, 2010 (Registration No. 333-165467)).

Offer Letter, dated as of April 15, 2013, by and between MagnaChip Semiconductor, Ltd. (Korea)
and Young-Joon Kim (incorporated by reference to Exhibit 10.36 to our Annual Report on
Form 10-K filed on February 12, 2015).

Amendment of Offer Letter, dated July 27, 2015, from MagnaChip Semiconductor, Ltd. (Korea) to
Young-Joon Kim (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q
filed on November 6, 2015).

Severance Agreement, dated November 3, 2015, from MagnaChip Semiconductor, Ltd. (Korea) and
MagnaChip Semiconductor Corporation to Young-Joon Kim (incorporated by reference to
Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on November 6, 2015).

Exhibit
No.

10.6-3*

10.6-4*

10.7*

10.7-1*

10.7-2*

10.8*

10.8-1*

10.8-2*

10.9*

10.10*

10.11*

10.12*

10.13*

Employment Agreement, dated as of April 26, 2018, by and between MagnaChip Semiconductor
Corporation and Young Joon Kim (incorporated by reference to Exhibit 10.1 to our Current Report
on Form 8-K filed on April 27, 2018).

Exhibit Description

Amendment to Employment Agreement by and between MagnaChip Semiconductor Corporation
and Young Joon Kim, dated as of September 3, 2018 (incorporated by reference to Exhibit 10.29-4
to our Annual Report on Form 10-K filed on February 22, 2019).

Offer Letter, dated as of September 27, 2013, by and between MagnaChip Semiconductor, Ltd.
(Korea) and Theodore Kim (incorporated by reference to Exhibit 10.37 to our Annual Report on
Form 10-K filed on February 12, 2015).

Severance Agreement, dated November 3, 2015, from MagnaChip Semiconductor, Ltd. (Korea) and
MagnaChip Semiconductor Corporation to Theodore S. Kim (incorporated by reference to
Exhibit 10.4 to our Quarterly Report on Form 10-Q filed on November 6, 2015).

Employment Agreement, dated as of October 22, 2018, by and between MagnaChip Semiconductor
Corporation and Theodore Kim (incorporated by reference to Exhibit 10.1 to our Current Report on
Form 8-K filed on October 26, 2018).

Offer Letter, dated as of October 16, 2013, by and between MagnaChip Semiconductor, Ltd.
(Korea) and Woung Moo Lee (incorporated by reference to Exhibit 10.36 to our Annual Report on
Form 10-K filed on February 22, 2016).

Severance Agreement, dated November 3, 2015, from MagnaChip Semiconductor, Ltd. (Korea) and
MagnaChip Semiconductor Corporation to Woung Moo Lee (incorporated by reference to
Exhibit 10.6 to our Quarterly Report on Form 10-Q filed on November 6, 2015).

Employment Agreement, dated as of October 22, 2018, by and between MagnaChip Semiconductor
Corporation and Woung Moo Lee (incorporated by reference to Exhibit 10.2 to our Current Report
on Form 8-K filed on October 26, 2018).

Executive Service Agreement, dated as of June 1, 2020, by and between Chan Ho Park,
MagnaChip Semiconductor Corporation and MagnaChip Semiconductor, Ltd. (incorporated by
reference to Exhibit 10.9 to our Quarterly Report on Form 10-Q filed on August 7, 2020)

Executive Service Agreement, effective as of February 23, 2022, by and between Shin Young Park,
Magnachip Semiconductor Corporation and Magnachip Semiconductor, Ltd. (incorporated by
reference to Exhibit 10.30 to our Annual Report on Form 10-K filed on February 23, 2022)

MagnaChip Semiconductor LLC Profit Sharing Plan as adopted on December 31, 2009 and
amended on February 15, 2010 (incorporated by reference to Exhibit 10.54 to our Quarterly Report
on Form 10-Q filed on August 5, 2011).

MagnaChip Semiconductor Corporation 2011 Form of Stock Option Agreement (U.S. Participants)
(incorporated by reference to Exhibit 10.55 to our Amendment No 9 to the Registration Statement
on Form S-1 filed on February 18, 2011 (Registration No. 333-165467)).

MagnaChip Semiconductor Corporation 2011 Form of Stock Option Agreement
(Non-U.S. Participants) (incorporated by reference to Exhibit 10.56 to our Amendment No 9 to the
Registration Statement on Form S-1 filed on February 18, 2011 (Registration No. 333-165467)).

100

Exhibit
No.

10.14*

MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Units Agreement
(U.S. Participants) (incorporated by reference to Exhibit 10.57 to our Amendment No 9 to the
Registration Statement on Form S-1 filed on February 18, 2011 (Registration No. 333-165467)).

Exhibit Description

10.15*

10.16*

10.17*

10.18*

10.19*

10.20*

10.21*

10.22*

10.23*

10.24*

10.25*

10.26*

MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Units Agreement
(Non-U.S. Participants) (incorporated by reference to Exhibit 10.58 to our Amendment No 9 to the
Registration Statement on Form S-1 filed on February 18, 2011 (Registration No. 333-165467)).

MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Agreement
(U.S. Participants) (incorporated by reference to Exhibit 10.59 to our Amendment No 9 to the
Registration Statement on Form S-1 filed on February 18, 2011 (Registration No. 333-165467)).

MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Agreement
(Non-U.S. Participants) (incorporated by reference to Exhibit 10.60 to our Amendment No 9 to the
Registration Statement on Form S-1 filed on February 18, 2011 (Registration No. 333-165467)).

MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Units Agreement
(Nonemployee Director) (incorporated by reference to Exhibit 10.1 to our Quarterly Report on
Form 10-Q filed on May 6, 2016).

Form of Restricted Stock Units Agreement (incorporated by reference to Exhibit 10.3 to our
Current Report on Form 8-K filed on October 26, 2018).

Form of Restricted Stock Units Agreement (TSR Performance) (incorporated by reference to
Exhibit 10.4 to our Current Report on Form 8-K filed on October 26, 2018).

Form of Restricted Stock Units Agreement (AOP Performance) (incorporated by reference to
Exhibit 10.5 to our Current Report on Form 8-K filed on October 26, 2018).

MagnaChip Semiconductor Corporation 2020 Form of Restricted Stock Units Agreement
(Non-employee Directors) (incorporated by reference to Exhibit 99.2 to our Registration Statement
on Form S-8 filed on July 15, 2020)

MagnaChip Semiconductor Corporation 2020 Form of Restricted Stock Units Agreement
(Section 16 Officers) (incorporated by reference to Exhibit 99.3 to our Registration Statement on
Form S-8 filed on July 15, 2020).

MagnaChip Semiconductor Corporation 2020 Form of Restricted Stock Units
Agreement—Financial Performance (CEO) (incorporated by reference to Exhibit 99.4 to our
Registration Statement on Form S-8 filed on July 15, 2020).

MagnaChip Semiconductor Corporation 2020 Form of Restricted Stock Units
Agreement—Financial Performance (Non-CEO Section 16 Officers) (incorporated by reference to
Exhibit 99.5 to our Registration Statement on Form S-8 filed on July 15, 2020).

MagnaChip Semiconductor Corporation 2020 Form of Restricted Stock Units Agreement—TSR
Performance (CEO) (incorporated by reference to Exhibit 99.6 to our Registration Statement on
Form S-8 filed on July 15, 2020).

101

Exhibit
No.

10.27*

10.28*

10.29*

10.30*

10.31*

10.32*

10.33*

10.34*

10.35*

MagnaChip Semiconductor Corporation 2020 Form of Restricted Stock Units Agreement—TSR
Performance (Non-CEO Section 16 Officers) (incorporated by reference to Exhibit 99.7 to our
Registration Statement on Form S-8 filed on July 15, 2020).

Exhibit Description

Patent Cross-License Agreement, with an effective date as of June 15, 2017, by and between
Infineon Technologies AG and Magnachip Semiconductor, Ltd. (incorporated by reference to
Exhibit 10.8 to our Quarterly Report on Form 10-Q filed on November 4, 2022)

First Amendment to the Patent Cross-License Agreement, with an effective date as of January 1,
2022, by and between Infineon Technologies AG and Magnachip Semiconductor, Ltd. (incorporated
by reference to Exhibit 10.9 to our Quarterly Report on Form 10-Q filed on November 4, 2022)

Form of 2020 Plan Restricted Stock Units Agreement (Non-employee Directors) (incorporated by
reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 4, 2022)

Form of 2020 Plan Restricted Stock Units Agreement (CEO and other Section 16 Officers)
(incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on
November 4, 2022)

Form of 2020 Plan Restricted Stock Units Agreement—Financial Performance (CEO) (incorporated
by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed on November 4, 2022)

Form of 2020 Plan Restricted Stock Units Agreement—Financial Performance (Non-CEO
Section 16 Officers) (incorporated by reference to Exhibit 10.4 to our Quarterly Report on
Form 10-Q filed on November 4, 2022)

Form of 2020 Plan Restricted Stock Units Agreement—TSR Performance (CEO) (incorporated by
reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q filed on November 4, 2022)

Form of 2020 Plan Restricted Stock Units Agreement—TSR Performance (Non-CEO Section 16
Officers) (incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q filed on
November 4, 2022)

21.1

Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to our Annual Report on
Form 10-K filed on March 9, 2021)

23.1#

Consent of Samil PricewaterhouseCoopers

31.1#

31.2#

32.1†

32.2†

Certification of Chief Executive Officer required by Rule 13(a)-14(a), as adopted pursuant to § 302
of the Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer required by Rule 13(a)-14(a), as adopted pursuant to § 302
of the Sarbanes-Oxley Act of 2002

Certification of Chief Executive Officer required by 18 U.S.C § 1350, as adopted pursuant to § 906
of the Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer required by 18 U.S.C. § 1350, as adopted pursuant to § 906
of the Sarbanes-Oxley Act of 2002

101.INS#

Inline XBRL Instance Document

102

Exhibit
No.

Exhibit Description

101.SCH#

Inline XBRL Taxonomy Extension Schema Document

101.CAL#

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF#

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB#

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE#

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Footnotes:

(1) Certain portions of this document have been omitted pursuant to a grant of confidential treatment by the SEC.

†

Management contract, compensatory plan or arrangement

Filed herewith

Furnished herewith

Item 16.

Form 10-K Summary

None.

103

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant

has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

MAGNACHIP SEMICONDUCTOR CORPORATION

By:

/s/ Young-Joon Kim

Name: Young-Joon Kim
Title:
Date:

Chief Executive Officer and Director
February 22, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Young-Joon Kim

Young-Joon Kim, Chief Executive Officer and Director
(Principal Executive Officer)

Date

February 22, 2023

/s/ Shin Young Park

February 22, 2023

Shin Young Park, Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

/s/ Melvin Keating

Melvin Keating, Director

/s/ Ilbok Lee

Ilbok Lee, Director

/s/ Camillo Martino

Camillo Martino, Non-Executive Chairman of the Board of Directors

/s/ Gary Tanner

Gary Tanner, Director

/s/ Liz Chung

Liz Chung, Director

February 22, 2023

104