MX 10-K & 10-Q changes, risk factors and insider trading

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. Current global macroeconomic conditions, including higher inflation and interest rates and uncertainty caused by the Russian-Ukraine war, Israel-Hamas war, sustained military action and conflict in the RedMiddle Sea,East, including the escalation of hostilities resulting from the recent strikes by Israel and the United States on Iran and retaliatory strikes related thereto, and trade tensions between the U.S., China and other countries have led to weaker end-market demand and unstable supply chain. 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 may fail to realize all of the anticipated benefits of our operational initiatives, including our transition to a pure-play Power company and the strategicexit options for exitingfrom our Display business, or those benefits may take longer to realize or be more expensive than expected.business.

On March 12, 2025, we announced that we are executing aour strategy to transform Magnachipthe Company into a pure-play Power company. There can be no assurance that the exploration of strategic options for its Display business, which is to be classified as discontinued operations when the Company reports first fiscal quarter 2025 results of operations, will result in a transaction on terms acceptable to us or other outcome that achieves our objectives. Even if a transaction or series of transactions or corporate actions were completed to exit the Display business, there can be no assurance as to the timing of completing these activities. Moreover, weWe may not realize any or all of the anticipated benefits from our pursuit of strategic options for our Display business, or the anticipated benefits from transitioning to a pure-play Power company, and such actions could in fact adversely affect our business. Our ability to realize the anticipated benefits of our strategy will depend, to a large extent, on our ability to continue to focus on Power discreteAnalog Solutions and Power IC products and to achieve expected growth in the absence of the Display businesses.business. Some of the anticipated benefits may not occur for a significant period of time. In addition, we may retain certain liabilities or obligations related to our Display business or incur certain costs in connection with executing on these strategic options,business, some of which may be material. The focus on becoming a pure-play Power company and the related strategic options for our Display business may not enhance long-term stockholder value as anticipated. Further, our strategic actions could result in near term restructuring charges and a material impairment of our goodwill and/or intangible assets, among other things.

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, 20242025 and 2023,2024, our ten largest customers accounted for 74.1%74.3% and 69.2%73.4% of net sales from our standardPower productsSolutions business, respectively. For the year ended December 31, 2025, sales to SAMT represented 29.7% of net sales from our Power Solutions business. For the year ended December 31, 2024, sales to SAMT represented 21.4%25.4% of net sales from our standardPower products business, and Samsung Display represented 14.7% of net sales from our standard products business. For the year ended December 31, 2023, sales to SAMT represented 16.7% of net sales from our standard products business, and Samsung Display represented 13.4% of net sales from our standard productsSolutions business. Significant reductions in sales to any of these customers, especially our few largest customers,customer, the loss of any other major customerscustomers, or a general curtailment in orders for our high-volume products within a short period of time could adversely affect our business.

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,smartphones, mobile PCsphones, wearable devices, and digitalother cameras,consumer applications 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.

Our growth strategy is to leverage our advanced analog and mixed-signal power 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.

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 a favorable impact on our reported profit margins and operating income from operations for the fiscal yearyears ended December 31, 20242025 and 20232024 due to a relatively weaker Korean won during the periods. 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 asincluding athose substantialrelated portion of non-cash translation gain or loss is associated withto the intercompany long-term loans to one of our Korean subsidiaries,subsidiary, Magnachip Semiconductor, Ltd., or MSK, which is denominated in U.S. dollars. As of December 31, 2024,2025, the outstanding intercompany loan balance including accrued interests between MSK and our Dutch subsidiary was $257.7$75.1 million. Our Dutch subsidiary usesWhile the U.S.intercompany dollarloan asbalance theirincluding functionalaccrued currency.interest has decreased compared to prior periods, changes in exchange rates could continue to affect our reported foreign currency gain or loss. 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.

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 or other disease 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),issues, or decrease the capacity of their operations available to us, our operating results could be adversely affected.

We cooperate with an independent foundriesfoundry to produce certain Mixed-SignalPower SolutionsIC products, and the failure of such independent foundriesfoundry to satisfy our demand could materially disrupt our business.

We use independent foundry services for certain of our Mixed-SignalPower SolutionsIC products. Silicon wafer production at thesethe facilitiesexternal foundry is allocated solely by ourthe vendorsvendor and beyond our direct control. Therefore, any disruption in wafer supply from thesethe vendorsvendor could have a material impact on our revenue and results of operations.

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 theseThese requirements and other government regulations 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 thethese regulations and 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.

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 netthe repurchase of corporate stock repurchasesby certain corporations 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 minimum effective tax rate of 15% on multinational enterprise (“MNE”) groups with consolidated revenues of at least EUR 750 million during two of the four preceding fiscal years, which willbecame beeffective for fiscal years beginning January 1, 2024, in many jurisdictions worldwide. Additionally, South Korea has enacted legislation implementing global minimum tax rules, including an income inclusion rule generally effective for fiscal years beginning on or after January 1, 2024.2024 Additionally,and an undertaxed profits rule generally effective for fiscal years beginning on or after January 1, 2025. South Korea becamehas onealso enacted a qualified domestic minimum top-up tax generally effective for fiscal years beginning on or after January 1, 2026. Our company is monitoring the implementation of the firstPillar countries2 toand enactthe globalresulting minimumlegislation taxin rules.jurisdictions Atwhere thisit time,operates. weBased doon our assessment, the company does not anticipate that changes in the tax laws will haveexpect a material impact tofrom ourPillar consolidated2 taxtop-up provisiontaxes foras the yearcompany endingis Decemberbelow 31,the 2024EUR or750 Decembermillion 31,revenue 2025.threshold. We will continue to monitor as new information and guidance becomes available.

We are also subject to regular reviews, examinations and audits by the Internal Revenue Service (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 South Korea may limit our ability to sell to certain customers or engage in any potential strategic opportunities.

Under the ITA,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 National Core Technology (“NCT”) by the MOTIEKorean Ministry of Trade, Industry and Resources (the “MOTIR”) requires the filing of a prior-report with, and the acceptance of the same by, the MOTIE.MOTIR. Under the Act on Special Act,Measures for Strengthening and Protecting the Competitiveness of the National High-Tech Strategic Industry (the “Special Act”), any export of National High-Tech Strategic Technology (“NHST”) requires prior approval from the MOTIE.MOTIR. Any such export of NCT or NHST without the acceptance of the prior-report with the MOTIEMOTIR or the prior approval from the MOTIR may be subject to corrective orders by the relevant authorities, and failure to comply with such corrective orders may potentially result in criminal liabilities. Any such export of NHST without the prior approval from the MOTIE may be subject to corrective orders by the relevant authoritiesMOTIR and may also be subject to criminal sanctions.

The Notification Regarding Designation of National Core Technologies issued by the MOTIEMOTIR was amended on July 14, 2021 to add certain technologies to the list of National Core TechnologyNCT designated by the MOTIE,MOTIR, and the amended list includes the OLED DDI design technology for driving display panels. OnThe June 2, 2023, the MOTIEMOTIR designated 17certain technologies, including the OLED DDI design technology for driving display panels, as NHST under the Special Act. In the ordinary course of business, our Korean subsidiary, Magnachip Mixed-Signal, Ltd. (“MMS”), 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 both NCT and NHST restrictions, and therefore the MOTIE’s acceptance of prior reports and prior approval. Since the amendment of the foregoing NCT list in July 2021, we have filed prior-reports and applications for prior approval 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 and applications have thus far been accepted and approved by the MOTIE.

In addition, in the event that there is any M&A transaction with respect to MMSMSK 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 MOTIEMOTIR is required under the ITA and a prior approval from the MOTIEMOTIR is required under the Special Act. There is no assurance that any report for an M&A transaction involving non-Korean acquirers or investors will be accepted by the MOTIE,MOTIR, nor we can assure approval for the M&A transaction from the MOTIEMOTIR when such transaction is pursued in the future.

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. The return of the Trump Administration and itsAdministration's recent imposition of additional tariffs on a number of countries in 2025 and 2026, and threat of trade wars against foreign countries/regions have created even more uncertainties in international trade which may affect our business. These include semiconductor-specific tariffs, which the Trump Administration intends to materially increase over time, and historically elevated baseline and country-specific tariffs. The Trump Administration’s international trade policy and its implementation of tariffs continues to evolve in light of U.S. judicial decisions and negotiations with international trading partners. For example, the 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.

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, severalsome 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 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 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 becomesbecame effective on November 27, 2020, certain environmental offenses such as illegally emitting specified hazardous air pollutants or emitting air pollutants without necessary permits will beare 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 subsidiariessubsidiary havehas 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 subsidiariessubsidiary havehas 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 subsidiariessubsidiary werewas allocated a certain amount of emissions allowance in accordance with the National Allocation Plan prepared by the Korean government, and are required to meet their 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 subsidiariessubsidiary havehas 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 subsidiariessubsidiary exceedexceeds 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. Based on that, on April 11, 2023, the Korean government published the 1st National Basic Plan for Carbon Neutrality and Green Growth (the “Basic Plan”). The Basic Plan is a national plan for responding to the climate crisis and sustainable development. Including annual reduction goals and implementation measures for each sector (e.g., industry and transportation), the Basic Plan will be updated every five years over the next 20 years between 2023 and 2042. It is anticipated that the Carbon Neutrality Framework Act and the Basic Plan, 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. Meanwhile, on August 29, 2024, the Constitutional Court of Korea (the “Constitutional Court”) held that Article 8, Paragraph 1 of the Carbon Neutrality Framework Act is unconstitutional. This provision mandates the government to establish a national mid- to long-term target for reducing greenhouse gas emissions by at least 35% from 2018 levels by 2030 which is prescribed by presidential decree. The Constitutional Court ruled that this provision is indeed in violation of the Constitution because it fails to specify any emissions reduction targets beyond 2031, thereby infringing upon the petitioners’ right to clean environment. Considering that the extensive legislative authority to determine reduction targets during the period from 2031 to 2049, the Constitutional Court held that the provision would remain in effect until a legislative amendment is enacted, with a deadline set for February 28, 2026. Reflecting the ruling of the Constitutional Court, the government determined in November 2025 to set the 2035 Nationally Determined Contribution (NDC) at a reduction target of 53% to 61% compared to 2018 net emissions levels.

Enacted on January 26, 2021 and effective as of January 27, 2022 in Korea, the SAPA will imposeimposes 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 subsidiariessubsidiary becomeis subject to the law after the effective date.law. 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, and 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 1 billion (in case of death, a fine up to KRW 5 billion) under joint penalty provisions. Relevant responsible management personnel willare 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 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 or other disease 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.

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. We have reclassified certain prior year amounts to conform to the current year’s presentation for discontinued operations, reflecting the shutdown of the Display business and transition into a pure-play Power company. Unless otherwise stated, information in this section relates to our continuing operations. The consolidated statements of cash flows have not been adjusted to separately disclose cash flows related to discontinued operations.

We are a designer and manufacturer of analog and mixed-signal power semiconductor platform solutions for various applications, including industrial, automotive, communication, Internet of Things (“IoT”), consumer, computing, industrialconsumer and automotive applications.computing. We have a proven record with about 45 years of operating history, a portfolio of approximatelymore 1,000than 950 registered patents and pending applications and extensive engineering and manufacturing process expertise.

OurWe PAS business line produces power management semiconductor products, including power discrete solutions for power management in communication, consumer, computing, servers, automotivedevelop and industrialmanufacture applications.Power TheseAnalog Solutions products and develop Power integrated circuit (“IC”) products. Power Analog Solutions products include metal oxide semiconductor field effect transistors (“MOSFETs”) and insulated-gate bipolar transistors (“IGBTs”) for a range of devices, including televisions, smartphones, mobile phones, wearable devices, desktop PCs, notebook PCs, tablet PCs, home appliance, other consumer electronics, as well as automotive and industrial applications such as power suppliers, e-bikes, solarphotovoltaic inverters, LED lighting and motor drives.

Our wide variety of analog and mixed-signal power 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 in Korea and substantial global 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 display driver IC and Power IC products are produced using an external foundries.foundry. Through strategic cooperation with an external foundry, we seek to ensure we outsource wafers at competitive prices and produce quality products.

Demand for our products and services is driven by overall demand for industrial, automotive, communication, IoT, consumer, industrialconsumer and automotivecomputing 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 standardPower Analog Solutions and Power IC products business are driven by design wins in which we are selected by an electronics original equipment manufacturer (“OEM”) or other potential customers 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.

Our standardPower productsAnalog businessSolutions requiresand Power IC businesses require 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 Power IC products which do require advanced technology and 12-inch and 8-inch wafer capacity, such as OLED display driver IC and Power IC products.capacity. 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 ICs and Power ICsIC products after the sale of our fabrication facility located in Cheongju, Korea in 2020. This additional source of manufacturing has been an important part of our supply chain management. By outsourcing manufacturing of OLED display driver IC and Power IC products to an external foundries,foundry, we have been able to adapt dynamically to changing customer requirements and address growing markets without substantial capital investments by us. However, relying on the external foundriesfoundry exposes us to the risk of being unable to secure manufacturing capacity, particularly during the global shortageshortages of foundry services. Although we work strategically with the external foundriesfoundry to ensure long-term wafer capacity, if these efforts are at any time 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.

On December 16, 2024, Magnachip Semiconductor, Ltd., a Korean limited liability company (“MSK”) and indirect wholly owned subsidiary of the Company, executed a Standard Credit Agreement (as amended) (together with its General Terms and Conditions, the “Equipment Financing Credit Agreement”) with Korea Development Bank (“KDB”). In connection with the Equipment Financing Credit Agreement, on December 16,8, 2024, MSK alsoamended entered into athe Kun-Pledge Agreement (the “Equipment Pledge Agreement”) with KDBKDB, withoriginally respectexecuted on or about March 26, 2024, to increase the pledgemaximum bysecured MSKamount inand favorto expand the scope of KDBcollateral ofto include certain machinery and equipment currently owned by MSK, which are located in its fabrication facility located in Gumi, Korea (“Fab 3 machinery and equipment”).

The Equipment Financing Credit Agreement provides for loans for MSK’s capital expenditures (the “CAPEX Loans”) up to an aggregate of KRW 38,000,000,000 ($26.5 million based on the KRW/USD exchange rate of 1,432.7:1 as of December 16, 2024 as quoted by KEB Hana Bank), which have been and will be funded directly to capital expenditure supply vendors by KDB upon the submission of a request form by MSK with the necessary evidence such as purchase agreement, invoice and other documentation, as applicable.

The CAPEX Loans will bear interest at a variable rate equal to the 3-month CDfixed rate quoted by KDB,the plustreasury 0.68%,bond whichmarket yield (a six-year Korea treasury bill rate is adjusted quarterly. The initial interest rate on CAPEX Loans was 3.97% per annum.). CAPEX Loans mature in 10ten years from the initial loan disbursement date, with an initial 2-yeartwo-year (measured from the first loan disbursement date) interest-only payment period during which only interest is paid monthly, followed by 8eight years of amortizing payments where the principal is repaid in equal installments every 3three months and interest is paid monthly. The Equipment Financing Credit Agreement contains customary representations of MSK in connection with the execution of the agreement and with each borrowing of CAPEX Loans and customary terms and conditions for a secured equipment financing loan of this type in Korea. All obligations of MSK under the Equipment Financing Credit Agreement and CAPEX Loans are secured by certain Fab 3 machinery and equipment pursuant to the Equipment Pledge Agreement.

The semiconductor industry continues to face a number of macroeconomic challenges, including rising inflation, increased interest rates, supply chain disruptions, inventory corrections, shifting customer and end-user demand, fluctuations in currency rates, and geopolitical tensions, including without limitation ongoing conflicts involving Russia and Ukraine, sustained military action and conflicts in the Middle East, and potentialtrade conflicts or trade conflicts,wars (especially those between the United States and China) including those arising directly or indirectly from tariffs recently imposed by the United States, any one or more of which may cause (if they have not already caused) volatility and unpredictability in the supply chain or market for semiconductor products and end-user demand. The length and severity of these macroeconomic events and their overall impact on our business, results of operations and financial condition remain uncertain.

On October 7, 2022, the Bureau of Industry and Security (BIS) 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, BIS 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. More recently, on October 25, 2023, BIS published additional rules, which went into effect on November 17, 2023 to expand, clarify, and correct the rules published in October 2022. A further corrected and clarified version of these rules went into effect on April 4, 2024. On January 16, 2025, BIS published amendments and clarifications of the U.S. Export Regulations which further tightened controls of advanced computing items. On September 30, 2025, BIS published an “Affiliates Rule” to expand end-user controls to cover certain affiliates of entities designated on BIS Entity List or Military End User List or designated on the Specially Designated Nationals and Blocked Persons (SDN) List administered by the U.S. Department of the Treasury, Office of Foreign Assets Control. BIS subsequently delayed enforcement of the Affiliates Rule until November 2026. Based on our understanding of the U.S. Export Regulations and related rules currently in effect, we expect to invest additional resources and efforts in the screening of prospects, customers, and end-users in order to comply with the new Affiliates Rule; while we do not anticipate that theythe rest of the rules will have a material impact on our current business, but we will continue reviewing and assessing these rules and regulations and their potential impact on our business. BIS has altered aspects of its semiconductor licensing policies to a case-by-case review, taking into account requirements such as export volume thresholds and third party testing requirements. Additional changes to the U.S. Export Regulations are expected, such as recently proposed rule changes that may expand restrictions on export transactions involving end users or end uses with military connections; but the scope or timing of such changes is uncertain. 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.

We use the terms Adjusted EBITDA, Adjusted Operating Income (Loss) and Adjusted Net Income (Loss) (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 (gain),loss, net, (iii) derivative valuation loss (gain), net,and (iv) impairmentearly termination and other charges and (v) early termination charges. EBITDA for the periods indicated is defined as net income(loss) before interest income, interest expense, income tax benefit, net and depreciation and amortization.

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 (income) 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 (loss) from continuing operations 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 loss to Adjusted EBITDA from continuing operations is as follows:

Adjusted Operating Income (Loss) is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to operating income (loss) 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 (Loss) differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Operating Income (Loss), you should be aware that in the future we may incur expenses (income) similar to the adjustments in this presentation. We define Adjusted Operating Income (Loss) for the periods indicated as operating income (loss) adjusted to exclude (i) equity-based compensation expense, (ii) impairment and other chargesexpense and (iiiii) early termination and other charges.

In addition to the other information contained in this Report and the other reports and materials the Company files with the Securities and Exchange Commission, investors should carefully consider the risk factors disclosed in Part I, Item 1A of our 2025 Form 10-K10-K, Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2026, as well as in our subsequent filings with the Securities and Exchange Commission. The risks described herein and therein are not the only ones we face.

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, including trends and cyclicality in the semiconductor industry, which are influenced by broader macroeconomic conditions, including inflation, interest rates, geopolitical developments and global trade policies. For example, certain shipments to customers with operations in or exposure to China or the United States or China are subject to heightened risks and uncertainties relatedarising tofrom trade and export control policies, including the imposition of new tariffs ortariffs, increases in existing tariffs.tariffs, or other export control measures implemented by the United States, China, or other governmental authorities. Furthermore, ongoing geopolitical tensions, including conflicts and instability in the Middle East, such as athe potentialmilitary escalationconflict involving the United States, Israel, and Iran, as well as tensions between China and Taiwan, may contribute to increased volatility in global markets and increased costs, as well as disruptions in supply chains and impacts to customer demand. 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.

Demand for our products and services is driven by overall demand for industrial, automotive, communication, consumer and computing products and can be adversely affected byby, among others, periods of weak consumer and enterprise spending, changes in global trade conditions, export controls, tariffs, geopolitical uncertainty, or by market share losses by our customers. Macroeconomic conditions, including inflation, increased energy costs and supply chain constraints, have contributed to increased logistics and input costs across the supply chain, and such costs may remain elevated. We continue to monitor for potential disruptions or cost increases resulting from geopolitical tensions, including in the Middle East and Eastern Europe, as well as evolving global trade policies. 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.

A planned upgrade to the electrical substation in our Gumi fabrication facility by a thirdthird-party partyowner of the substation is currently expected to temporarilytake impact our fabrication operationsplace during the third quarter of 2026.2026 and will temporarily impact operations at our Gumi facility. To help mitigate potential customer supply disruptions, we currently plan to increaseincreased inventory production during the second quarter and a portion of the third quarter of 2026 in advance of the electrical substation upgrade being carried out by a third party owner of the substation.upgrade. As a result, we expect our factory utilization rate to be somewhatwas higher in the second quarter of 2026, followed by lower utilization in the third quarter. Accordingly, we expect higher utilization to have a favorable impact on gross profit margin in the second quarter, while utilization is expected to be lower utilization in the third quarter is expected to adversely affect gross profit margins induring the thirdplanned and fourth quarters.upgrade.

We use the terms Adjusted EBITDA, Adjusted Operating Income (Loss) and Adjusted Net Income (Loss) (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-basedstock-based compensation expense, (ii) foreign currency loss,loss net(gain), andnet, (iii) derivative valuation loss (gain), net.net and (iv) other charges. EBITDA for the periods indicated is defined as net income(loss) from continuing operations before interest income, interest expense, income tax benefit, net and depreciation and amortization.

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 (income) 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 income (loss) from continuing operations 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 income (loss) from continuing operations to Adjusted EBITDA from continuing operations is as follows:

This adjustment eliminates the impact of non-cash equity-basedstock-based compensation expenses. Although we expect to incur non-cash equity-basedstock-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.

Adjusted EBITDA does not consider the potentially dilutive impact of issuing equity-basedstock-based compensation to our management team and employees;

We present Adjusted Operating Income (Loss) as supplemental measures of our performance. We prepare Adjusted Operating Income (Loss) by adjusting operating income (loss) to eliminate the impact of equity-basedstock-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 (Loss) 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 (loss) from ongoing business operations.

Adjusted Operating Income (Loss) is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to operating income (loss) 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 (Loss) differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Operating Income (Loss), you should be aware that in the future we may incur expenses (income) similar to the adjustments in this presentation. We define Adjusted Operating Income (Loss) for the periods indicated as operating income (loss) adjusted to exclude equity-based(i) stock-based compensation expense.expense and (ii) other charges.

This adjustment eliminates the impact of non-cash equity-basedstock-based compensation expenses. Although we expect to incur non-cash equity-basedstock-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.

We present Adjusted Net Income (Loss) (including on a per share basis) as a further supplemental measure of our performance. We prepare Adjusted Net Income (Loss) (including on a per share basis) by adjusting net income (loss) from continuing operations 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 (Loss) (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 (Loss) (including on a per share basis) for a number of reasons, including:

Adjusted Net Income (Loss) (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 income (loss) from continuing operations 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 (Loss) (including on a per share basis) differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Net Income (Loss) (including on a per share basis), you should be aware that in the future we may incur expenses (income) similar to the adjustments in this presentation. We define Adjusted Net Income (Loss) (including on a per share basis); for the periods indicated as net income (loss), from continuing operations, adjusted to exclude (i) equity-basedstock-based compensation expense, (ii) foreign currency loss,loss (gain), net, (iii) derivative valuation loss (gain), netnet, (iv) other charges and (ivv) income tax effect on non-GAAP adjustments.

The following table summarizes the adjustments to income (loss) from continuing operations that we make in order to calculate Adjusted Loss (including on a per share basis) from continuing operations for the periods indicated:

This adjustment eliminates the impact of non-cash equity-basedstock-based compensation expenses. Although we expect to incur non-cash equity-basedstock-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.

For the three and six months ended MarchJune 31,30, 2026 and 2025, income tax effect on non-GAAP adjustments werewas calculated by calculatingcomparing the tax expense of each jurisdiction with orand without the non-GAAP adjustments.

We believe that all adjustments to income (loss) from continuing operations used to calculate Adjusted Net Income (Loss) from continuing operations waswere applied consistently to the periods presented.

Adjusted Net Income (Loss) does not consider the potentially dilutive impact of issuing equity-basedstock-based compensation to our management team and employees;

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 threesix months ended MarchJune 31,30, 2026 and 2025, our products were sold to 143160 and 140163 end customers, respectively, and our net sales to our ten largest customers represented 73.4%73.2% and 75.4%74.0% of our net sales, respectively.

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 MarchJune 31,30, 2026, 97% of our employees were eligible for severance benefits.

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 may be affected by changes in the exchange rate between the Korean won and the U.S. dollar, including those related to the intercompany long-term loans to our Korean subsidiary, Magnachip Semiconductor, Ltd. or MSK, which is denominated in U.S. dollars. As of MarchJune 31,30, 2026, the outstanding intercompany loan balance including accrued interest between MSK and our Dutch subsidiary was $76.0$76.9 million. While the intercompany loan balance including accrued interest has decreased compared to prior periods, changes in exchange rates could continue to affect our reported foreign currency gain or loss. As a result of such foreign currency exchange rate 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.

Results of Operations – Comparison of Three Months Ended MarchJune 31,30, 2026 and 2025

The following table sets forth consolidated results of operations for the three months ended MarchJune 31,30, 2026 and 2025:

The Power Solutions business. Net Sales from Power Solutions business were $46.2 million for the three months ended March 31, 2026, a $1.5 million, or 3.3%, increase compared to $44.7 million for the three months ended MarchJune 31,30, 2026, a $2.9 million, or 6.1%, decrease compared to $47.6 million for the three months ended June 30, 2025. This increasedecrease was primarily due to an increase in revenue related to our Power Analog Solutions business, which was offset in part by a decrease in revenue from both our Power Analog Solutions and Power IC businessbusinesses, as described below.

Net sales from Power Analog Solutions business were $41.6$40.6 million for the three months ended MarchJune 31,30, 2026, a $1.8$1.7 million, or 4.5%,4.0%, increasedecrease compared to $39.9$42.3 million for the three months ended MarchJune 31,30, 2025. The increasedecrease in net sales from our Power Analog Solutions business line was primarily attributable to weaker demand for our older generation products resulting from intensified pricing competition, which was offset in part by a higher demand for power products such as MOSFETs in the computing application, and IGBTs in the industrial application, particularly solar inverters.applications.

Net sales from Power IC business were $4.6$4.1 million for the three months ended MarchJune 31,30, 2026, a $0.3$1.2 million, or 6.2%,23.0%, decrease compared to $4.9$5.4 million for the three months ended MarchJune 31,30, 2025. The decrease in net sales from our Power IC business line was primarily attributable to a decrease in sales of certainour Power IC products, primarily for LED televisions and OLED IT devices.

The Power Solutions business. Gross profit from our Power Solutions business was $7.2$8.6 million for the three months ended MarchJune 31,30, 2026, which represented a $2.2$1.1 million, or 23.2%,11.0%, decrease from gross profit of $9.4$9.7 million for the three months ended MarchJune 31,30, 2025. Gross profit as a percentage of net sales for the three months ended MarchJune 31,30, 2026 decreased to 15.6%19.3% compared to 20.9%20.4% for the three months ended MarchJune 31,30, 2025. The year-over-year decrease in gross profit and gross profit as a percentage of net sales was primarily attributable to an unfavorable product mix, driven by ASP erosion resulting from increased competitive pricing pressure on our older generation products, particularly in China.

We report net sales by geographic region based on the location to which the products are billed. The following table sets forth our net sales by geographic region and the percentage of total net sales represented by each geographic region for the three months ended MarchJune 31,30, 2026 and 2025:

Net sales in Korea decreased from $21.7$22.7 million for the three months ended MarchJune 31,30, 2025 to $20.7$18.8 million for the three months ended MarchJune 31,30, 2026, or by $1.1$3.9 million, or 4.8%,17.1%, primarily due to a decreaseddecrease in revenue resulting from the competitive pricing pressure on our older generation products in consumer applications,applications whichand was offset in part by an increased demand for power products such as low-voltage MOSFETs in communication applications. Aa lower demand for our Power IC products, primarily for LED televisions and OLED IT devices, also had an unfavorable impact on net sales.devices.

Net sales in the Asia Pacific (other than Korea) increased from $21.0$22.4 million for the three months ended MarchJune 31,30, 2025 to $23.6$24.0 million for the three months ended MarchJune 31,30, 2026, or by $2.6$1.6 million, or 12.4%,7.0%, primarily due to a higher demand for power products such as MOSFETs and high-end MOSFETs in computing and industrial applications, and IGBTs primarily for solar inverters.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $7.7$8.7 million, or 16.6%19.6% of net salessales, for the three months ended MarchJune 31,30, 2026, compared to $9.2$9.0 million, or 20.6%18.8% of net salessales, for the three months ended MarchJune 31,30, 2025. The decrease of $1.5$0.2 million, or 16.7%,2.6%, was primarily attributable to a decrease in employee compensation, driven mainly by the execution of the voluntary resignation program primarily for shared function employees and separation of certain executive officers in 2025, as well as a decrease in professional fees mainly comprised of legal and consulting fees.2025.

Research and Development Expenses. Research and development expenses were $6.7$7.9 million, or 14.5%17.7% of net sales, for the three months ended MarchJune 31,30, 2026, compared to $5.4$6.5 million, or 12.2%13.6% of net sales, for the three months ended MarchJune 31,30, 2025. The increase of $1.3$1.4 million, or 23.2%,21.7%, was primarily attributable to higher personnel costs resulting from the increased headcount in research and development, andas anwell increaseas the timing of continued investment in development activities forour new generation powerproduct products.development activities.

As a result of the foregoing, operating loss of $7.2$10.0 million was recorded for the three months ended MarchJune 31,30, 2026 compared to an operating loss of $5.3$6.6 million for the three months ended MarchJune 31,30, 2025. As discussed above, the increase in operating loss of $1.9$3.4 million resulted primarily from a $2.2 million decrease in gross profit and a $1.3$1.4 million increase in research and development expenses, whicha was$1.1 offsetmillion increase in partother bycharges and a $1.5$1.1 million decrease in selling,gross general and administrative expenses.profit.

Interest Income. Interest income was $1.1$0.9 million and $1.5$1.3 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively.

Interest Expense. Interest expense was $0.3 million and $0.4 million for each of the three months ended MarchJune 31,30, 2026 and 2025.2025, respectively.

Foreign Currency Loss,Gain (Loss), Net. Net foreign currency loss for the three months ended MarchJune 31,30, 2026 was $0.1$0.5 million compared to a net foreign currency lossgain of $0.4$10.8 million for the three months ended MarchJune 31,30, 2025. The net foreign currency loss for the three months ended MarchJune 31,30, 2026 and 2025 was due to the depreciation in value of the Korean won relative to the U.S. dollar during the period. The net foreign currency gain for the three months ended June 30, 2025 was due to the appreciation in value of the Korean won relative to the U.S. dollar during the period.

A substantial portion of our net foreign currency gain or loss is a 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 MarchJune 31,30, 2026 and MarchJune 31,30, 2025, the outstanding intercompany loan balancebalances including accrued interest between our Korean subsidiary, Magnachip Semiconductor, Ltd., and our Dutch subsidiary were $76.0$76.9 million and $260.7$241.7 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.

Income tax benefit was $2.0 million for the three months ended MarchJune 31,30, 20262026, and 2025which was $1.9 million and $0.4 million, respectively, primarily relatedattributable to our primary operating entity in Korea, based on the estimated taxable loss in our Korean subsidiary for eachthe respective period.

Income (Loss) from Continuing Operations

Loss from continuing operations for the three months ended MarchJune 31,30, 2026 was $4.7$7.6 million compared to lossincome from continuing operations of $4.1$9.2 million for the three months ended MarchJune 31,30, 2025. The $0.6$16.8 million increase in loss from continuing operations was primarily attributable to an $11.3 million increase in net foreign currency loss, a $1.9$3.4 million increase in operating loss and a $0.5$2.2 million decrease in interest income, which was offset by a $1.5 million increase in income tax benefit and a $0.3 million improvement in net foreign currency loss.benefit.

Income from discontinued operations, net of tax for the three months ended MarchJune 31,30, 2026 was $0.1$2.8 million compared to a loss from discontinued operations, net of tax of $4.8$8.9 million for the three months ended MarchJune 31,30, 2025. The $4.9$11.7 million improvement in loss from discontinued operations, net of tax primarily resulted from athe $6.1absence of $7.4 million decreaseof impairment charges, primarily related to certain design tool software contracts and $1.6 million of early termination charges incurred in researchthe andprior-year development expense and $1.4 million decrease in selling, general and administrative expenses, which was offset in part by a $2.6 million decrease in gross profit and a $0.2 million increase in income tax expense.period.