Magnachip Semiconductor Corp (MX) 2012 Q4 法說會逐字稿

Good afternoon. My name is Hope, and I will be your conference operator today. At this time, I would like to welcome everyone to the MagnaChip Semiconductor's Fourth Quarter 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

(Operator Instructions)

Thank you. Mr. Robert Purcel, you may begin your conference.

Thank you, Hope. Good afternoon and thank you for joining us for MagnaChip's Fourth Quarter 2012 Earnings Conference Call. A copy of the press release issued today is available on our Investor Relations website. A seventy-two hour telephone replay will be available shortly after today's call, and this webcast will be archived on the company website for one year. Access information is provided in today's press release.

Joining us today are Sang Park, MagnaChip Chairman and CEO, and Margaret Sakai, Executive Vice President and Chief Financial Officer. Sang will begin the call with an overview of our fourth quarter business highlights, and Margaret will discuss our financial results. Following Margaret's financial discussion, Sang will provide our first quarter guidance, after which we'll open the call for questions.

During the course of this conference call, we may make forward-looking statements about MagnaChip's business outlook, including statements regarding our expectations for revenue, target growth and operating margins, as well as cost savings for 2013 and beyond. Our forward-looking statements and all other statements that are not historical facts reflect our beliefs and predictions as of today, and therefore are subject to risks and uncertainties, as described in the Safe Harbor discussion found in today's press release.

During the call, we will also discuss non-GAAP financial measures. The non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's press release.

I would now like to turn the call over to Sang Park for a review of our fourth quarter business. Sang.

Thank you, Robert. I'm very pleased that we ended 2012 with a revenue $819.6 million, up 6.1% from 2011, and outpacing the semiconductor industry, which declined 3% this year. While the macro environment maintained weak, we have successfully aligned with the growing smartphone and tablet PC market, leveraged our strong relationship with our blue-chip customers, and delivered 30% more new product in 2012 than the previous year. I believe that this will help differentiate us from our competitor, and allow us to perform better than 2012.

For 2012, gross margin improved 190% -- 190 basis points over 2011 as a result of our mixed business model. This hybrid model allows us to pull multiple levers to maximize fab utilization, which averaged over 90% during 2012.

During 2012, our power solution segment grew 34.8%, and our foundry segment grew 15.2%. With our strong position in AMOLED display driver IC at the leading Korean smartphone maker, we expect our display solutions segment will grow this year.

Our transition to these high-growth products was part of the business transformation that began over three years ago. Revenue from the smartphone and tablet grew a nearly 30% of the total revenue in 2012 with the over 50 products being shipped to nearly 30 different customers. In addition, this year we have extended a range of products, and diversity of applications. We are delivering the leading -- we are delivering to the leading Korean maker. This expansion will help us to manage any potential changes in the smartphone market landscape.

Looking at the quarter, revenue of $218.1 million declined 1.7%, and gross margin 30.1% was down 40 basis points compared to the previous quarter. But both were better than mid-point of our Q4 guidance range. Compared to the same quarter last year, Q4 revenue is up 20.6%, and gross margin improved 560 basis points due to the successful product and customer shift to growing markets.

Our revenue and margin performance this quarter represent the eighth consecutive quarter of meeting or exceeding guidance.

As we look ahead, we are well-positioned for profitable growth. We are adding new product lines for the power for continued growth. We are ramping up touch solutions for the new Korean foundry customers, and we are focusing to become one of the leading supplier of AMOLED display driver IC for the next platform smartphone at the major Korean OEM.

Also, we have seen continued weakness in the notebook market, and some uncertainties in the consumer market. We are confident that we can continue to execute and deliver growth that outpaces semiconductor industry in 2013. Because we are seeing a return to normal seasonality, we anticipate revenue for the Q1 to be down sequentially. Looking ahead based on current inventory correction cycle, and customer loading forecast, we expect a return to seasonal growth from Q2 and beyond.

Now, let me discuss the highlights of our three business segments. For power solutions, fourth quarter revenue was $31.9 million, down 5.6% sequentially, and up 45% year-over-year. 2012 power revenue was $124.7 million, up 34.8% compared to 2011 for the full year. Our road map for the continued growth in power is through our new product targeted at expanding markets and applications.

The number of power products shipped in 2012 increased by 91%, and our power management IC revenue grew by 340%. We are expanding our PMIC product offerings by dedicating 40% of our development resources of power division. Since our first design win for a LED backlight controller at the leading Korean TV maker, we have continued to win this socket and subsequent TV models for three years now, and we have the major market share of this device at this customer.

With this success, we are entering into new PMIC product for the smartphone in the form of AMOLED DC to DC, RF power amplifier DC to DC, and LED backlight units. We received a design spec for the AMOLED DC to DC from the leading Korean smartphone maker, and will be submitting a working sample in the first year of this year -- first half of this year.

Also, we are working with a Korean DRAM maker for a PMIC for SSD, solid state drive, and expect to deliver a working sample in the second half of this year.

For the LED lighting market, we will be making our LED driver working sample available to the open market in the second quarter.

We are developing and enhancing our super junction MOSFET product portfolio, and have design wins at the top tier customer for their smartphone and tablet adapter, TV, and PC [and the server]. We expect these new products will contribute to power revenue in Q2.

For display solutions, fourth quarter revenue was $72.8 million, up 4.5% sequentially as a result of expansion of AMOLED products at the major Korean smartphone maker. For 2012, display revenue was $302.2 million, down 10.8% compared to 2011 because of product shift strategy, moving away form low-margin DDI product.

We are well-aligned with a leading global AMOLED maker by renting our display driver for the current smartphone model, and are going through the last stage of qualification for the next platform smartphone at this leading smartphone maker. We expect this product line will help us to grow our display business in 2013.

For the growing tablet market, we have under development or are in production with a display solution for five different models of tablet PCs for the leading Korean maker. We have also been working closely with top two TV makers in Korea on their OLED TVs, and have our display drivers designed into a current mass production model as a sole source supplier.

Our relationship with LG display and Samsung have continued to remain strong with our design wins increased 16% at these two customers, and design win momentum grew by 42% in 2012.

And for our foundry segment, fourth quarter revenue was $112.7 million, down 4.5% sequentially, and up 65.7% year-over-year. 2012 revenue was $389.8 million, up 15.2% compared to 2011, and outpacing foundry industry's 9.4% growth rate.

Revenue from the smartphone and tablet PC almost tripled in 2012 from 2011 as we expanded our product offerings to top two OEMs.

The number of products we shipped to the top two smartphone tablet makers through our foundry customers increased by 33% from Q4 2011 to Q4 of 2012. Also, designing activity grew by over 70% in 2012 for the smartphone and tablet PC applications, which we believe will contribute to revenue growth into 2013 and beyond.

Revenue from U.S. and European customers increased by over 60% in 2012 by aligning our foundry services to their smartphone and tablet PC application requirements. With our strong pipeline of new designs, we have now shipping 37 different products to 16 customers in the smartphone and tablet PC market.

We also continue to enhance our process technology to meet the needs of our smartphone and tablet PC customers with a new technology that includes .13 micron EEPROM for touch controller IC and MCUs, .18 micron [tallboards], EBCD for high-output audio amplifiers, [10 pullum nitride] register for audio amplifiers, and .25 micron SOS process used in RF switches for the next generation smartphones and tablet PCs.

In addition, we are continuing to expand our technology offerings by developing IP with our flagship Korean automotive company, and enhancing our process technology with a best-in-class Rsp performance in .18 and .35 micron 30-volts BCD.

Now, Margaret will discuss our financial highlights. Margaret.

Thank you, Sang. Let me provide some financial highlight, and a brief review of our statement of operations. Fourth quarter revenue of $218.1 million and the gross margin of 34.1% represented the eighth consecutive quarter we met or exceeded our financial guidelines.

For the full year 2012, revenue grew 6.1% to $819.6 million from $772.8 million in 2011. Power solutions revenue increased by 34.8% to $124.7 million in 2012, compared to $92.5 million in 2011.

Gross margin for 2012 increased by 190 basis points to 32.2% of revenue from 30.6% of revenue in 2011. Our gross margin improvement was a result of our mix to business model, higher than industry average fab utilization rates and a very strict cost controls.

GAAP net income for the full year 2012 was $193.3 million, or $5.16 per diluted share, compared to $21.8 million, or $0.55 per diluted share for 2011.

Adjusted EPS of $2.23 per diluted shares for the full year of 2012, a non-GAAP measurement was 33.5% higher than $1.67 for diluted shares in 2011. A reconciliation of our non-GAAP financial measures to GAAP measures can be found in today's press release.

As a result of our continued strong financial performance, we purchased 406,000 shares of our common stock during the fourth quarter, and 4 million shares since the beginning of the common stock repurchase program. The total amount of our repurchase is, since we initiated our buyback, is 39.9 million.

Now turning to our statement of operations. Revenue for the fourth quarter was $218.1 million and within our guidance range, for a decrease of 1.7% sequentially, and increase of 20.6% year-over-year.

For 2012, revenue was $819.6 million, up 6.1% from 2011. Revenue by business segments for the fourth quarter was $112.7 million for foundry services, $72.8 million for display solutions, and $71.9 million for power solutions.

Display solutions revenue increased by 4.9% due to strong AMOLED demand, while foundry services and power solutions revenue decreased as we anticipated.

For the full year, foundry services was $389.8 million, growing 15.2% compared to 2011. Display solutions was $302.2 million, a decrease of 10.8% compared to 2011, and the power solutions was $124.7 million, which was 34.8% higher than 2011.

Gross margin was $74.3 million, or 34.1% for the fourth quarter, and $263.5 million, or 32.2% for 2012. For the full year, gross margin improved 190 basis points compared to 2011 as a result of higher revenue and the fab utilization, along with our ongoing cost management programs.

Total operating expense for the fourth quarter was $38.9 million, or 17.9% of revenue, which was in line with the prior quarter, and $157.7 million, or 19.2% of revenue for the full year.

Operating income was $35.3 million, or 16.2% of revenue for the fourth quarter, and $105.8 million or 12.9% for the year. Net interest expense was $5.7 million for the fourth quarter, consistent with the last quarter, and $22.6 million for the full year.

GAAP net income for the fourth quarter was $125.3 million, or $3.38 per diluted share. This compares to $48.4 million, or $1.30 per diluted share for the prior quarter. GAAP net income was primarily impacted by the recognition of deferred tax assets of $64.7 million, and the foreign currency translation gains of $33.7 million in the current quarter, compared to $21.8 million of translation gains in the the third quarter.

Our deferred tax asset recognizes the portion of our NOL, which will be utilized going forward based on our past three years of profit generation and expected future profitability. This is a non-cash tax item, therefore we anticipate our cash tax expenses to remain at between $10 million to $15 million per year until the NOL is expired.

Depreciation was $6.3 million, and amortization was $2.2 million for the fourth quarter, which is the same as the prior quarter, and for the full year depreciation was $23.3 million, and amortization was $9 million. Adjusted net income, a non-GAAP measurement for the fourth quarter was $28.7 million, or $0.77 per diluted share, and $83.5 million, or $2.23 per diluted share for 2012.

Turning to the balance sheet, total combined cash balance, cash and cash equivalents plus restricted cash was $182.4 million at the end of the fourth quarter, compared to $165.8 million at the end of the third quarter.

Cash provided from operations for the fourth quarter totaled approximately $31.5 million, compared to $23 million for the prior quarter. Cash provided from operations for the full year of 2012 was $121.1 million, compared to $104.5 million in 2011.

Accounts receivable net over reserves was $143.3 million, compared to $148.5 million last quarter. Days of sales outstanding was 60, down from 62 last quarter, and within our target range of 55 to 65 days.

Net inventory was $89.4 million, while 57 days of inventory, which was up from 47 days last quarter, primarily due to a combination of increased manufacturing cycle time for smartphone, tablet PC, and the new PMIC product that required 10% to 15% additional photo layers; significant ramp of AMOLED drivers in the display solutions segment, which also required longer front-end processing and back-end testing; introduction of new power modules in first quarter driving higher inventory procurement levels ahead of anticipated first quarter sales. We are currently evaluating our days of inventory target range based on our growing mix of new products.

Capital expenditures was $4.9 million in the fourth quarter, and $62.4 million for the full year. Now, let me turn the call over to Sang for our first guidance.

Thank you, Margaret. For our Q1 guidance, when we look at the normal seasonality of our business, and the current macro environment, we expect our revenue will be in the range of $201 million to $209 million.

Based on this revenue level, and our wafer loading forecast, we anticipate our gross margin will be in the range of 31% to 33%.

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

(Operator Instructions). Our first question comes from Terence Whalen, Citigroup.

Hi, good afternoon, and thanks for taking the question. This one is a higher level question on gross margin. Obviously, we've made very good progress over the past couple of years with gross margin. We saw a 2 point increase in 2012.

My question is, as we look forward to 2013, what are the key swing factors that would determine whether gross margin goes up maybe a point, or two points? What are the different puts and takes that you see influencing gross margin most significantly across utilization, products mix, and anything else? Thanks.

Terence, we don't provide guidance for the 2013, but that is our goal, 1% to 2% gross margin improvement every year. And now, really up to two things you spelled out, which is definitely utilization of our fab, and number two, is our product mix.

I don't think there is anything else. I mean, there are a lot of minor things influencing to this number, but I think those are the two major points.

Okay, terrific. Then my follow up is on the power business. It sounds like some, some modest softness in the PC area of the power business. Can you refresh us on understanding the components of the power business, and even though PC is soft right now, can you let us know whether you're seeing any sort of a cyclical improvement from maybe the Chinese industrial market? Thank you.

As of now, let me divide into two categories. One is power MOSFET and takes up about 61%, and 18% is PMIC, and the rest of them are module. And just looking into the biggest market today is Korea. They are more consumer related. And then second biggest, that probably 40% to 45%, and China is a number two, and that's maybe about between 35% to 40%, and is a more industrial. And Taiwan, which is only now just below 20% is a notebook.

Thanks, I'll re-queue. Thank you.

You're welcome, Terence.

You next question comes from Raji Gill, Needham & Company.

Yes, thanks for taking my question and congrats on solid results. Sang, you talked about kind of returning to kind of some normal seasonal patterns kind of Q2, and for the rest of the year. Perhaps, if you could remind us kind of what is kind of your normal historical seasonal patterns by quarter to give us some sense of kind of the cadence of the numbers.

Right, the -- even though we align with the smartphones and tablets, and more than 60% of other revenue coming from so-called wide range of consumer products, and typically these products lower in the first quarter, and grow second, peak at third quarter, and slightly down fourth quarter. And that's our seasonality. Last few years there's a lot of unusual patterns in electronic business. So, you're going to go back 5, 6 years of this company, and just looking at the history, and that's the pattern. Did that answer?

In the guidance for Q1, could you provide a little bit of color on the specific segments, kind o what are you seeing for display, power, and manufacturing services?

The power will be flat, and display solutions slightly up, and foundry slightly down.

On the foundry side, could you maybe talk a little about if you're experiencing any volatility related to kind of Apple procurement cycle at all, any volatility on the foundry customer side in Q4 and Q1?

Again, we're not free from that. Obviously, that showed inventory correction took off -- took out all my upside. But because of we are well-diversified, and we're able to meet the market expectations, and just remind that compared to fourth quarter of -- I mean, let's say that the first quarter of 2011, and compared to our mid-point of our Q1 guidance, we still grow 16%. So, there is -- and gross margin improved 380 basis points.

That said, we are fundamentally restructured company, and we are aligned well, but we could do better if there was no short-term inventory correction. So, that has an impact. But we are well-diversified as we say that to the market a number of times.

Got it. And just last question. The OpEx was down nicely in Q4, around $39 million. How should we be looking at the OpEx going forward? Thank you.

[I see] OpEx is going forward where we -- [as you notice], we expect between $42 million to $45 million per quarter, which is depending on number of new R&D project.

Thank you.

Thank, Raji.

Your next question comes from Ross Seymore, Deutsche Bank.

Hi, this is Mike Chou for Ross. Congratulations on a great quarter, and I just had a question about the inventories. You did explain why it went up in the quarter. Do you expect that to stay at those higher levels in 1Q, or do you expect inventory to come down in the first quarter?

In the further most year, I said depending on the product mix that is right now, then for the first quarter, we are expecting pretty much the same levels, and then as we are currently evaluating our days of inventory target range.

But as Margaret explained, we're selling more of AMOLED DDI, probably this number stay high because of longer manufacturing cycle time, but as we do more foundry, probably this number is coming down a little bit.

Okay, and as a follow up, just wondering if you could provide us some guidance on CapEx on 2013, and even 2014 if you have it.

[Interesting] as we showed in our (inaudible) business model, our CapEx expectation, annual basis, is between $50 million to $60 million every year, which include a $5 million to $10 million maintenance CapEx.

And we can sure let it grow if the market supports.

Okay, and I guess my final question, could you just remind us on your debt on your balance sheet, if you have any calls, or when that debt matures, and if there's any way you could actually repay that debt earlier than when it's due in 2018?

That is our standing is $205 million, and the maturity is in 2018. We're doing a non-call for four years.

Okay, so there's no way to repay that earlier than the call date.

2014. So, we issue in 2010, so 2014 is the earliest year we can consider.

Okay, great. Thank you.

Thanks, Mike.

Your next question comes from C. J. Muse, Barclays.

Good afternoon. Thank you for taking my question. I guess first question, specific to your foundry business, can you talk about, I guess, the visibility you have today to your customer demands, and how that will factor into how you run your utilization in Q1, Q2?

Q4 was slightly higher than 90%, and Q1 we expect just below that number. And obviously, we do have 12 months rolling forecast from customer, but also that's subject to change. We're looking at year-to-year, and it look pretty healthy.

Got you. Very helpful. As a follow up, I guess a question on your prepared remarks. I believe I heard you talk about top two mobility customers growing 35% year-over-year in Q4, and I guess I'm trying to understand, the foundry business was up 65% year-over-year, and so I guess are you including display within the number as well? Any clarity there would be helpful.

So any display related foundry, it show up in our display solution business.

Okay, so the number you were quoting was an aggregate. Okay.

Yes.

Great. Very helpful.

Thank you, C. J.

Your next question comes from Nick Gaudois, UBS.

If -- hi, Sang. Just a little bit for a power one. When [we should apply five], how should we look at direct and indirect (inaudible) to Samsung and Apple, respectively, and how this is balancing. I mean, my guess would be that that mix has changed from last year, in particular, as your AMOLED presence has gone up, so any clarity there would be very useful, and then I've got two follow ups. Thank you.

So, Nick, you're asking us what is our direct and indirect exposure to Samsung and Apple, and --

Right. You said before it was 40% or so, right. So, how has that changed? How do we look at Apple versus Samsung? Is Samsung bigger considering your ramp up in AMOLED last year? Thank you.

We -- it's over 2,000 talls, maybe, our exposure to company maybe close to 46%, 47%, and what was it, the other question?

Apple versus Samsung mix, has it changed? With the AMOLED is it more Samsung?

That's an interesting question. When you're looking at these two leaders, they're new product introduction is sort of not synchronized, and we really appreciate that. So, two company taking a [con], and bring the new product, that's something that's going to help us, if that is any help for your question.

Okay, and I was (inaudible) to submit to my first follow up, which is your foundry revenue is down as you expressed it in Q1. Actually doesn't necessarily look that bad if we consider that, for instance, UBS forecasts iPhone units down 21% Q-over-Q in the March quarter. What is coming into your foundry products, or new customers, or anything like that, basically, which actually allows you to offset in over what besides Apple really to decline?

We do have definitely the major customer in our foundry business, but also we're still well-diversified, not only smartphone and tablet PC, and therefore, when a customer demand is sort of reduced because of a short inventory correction, and we can use another customer demand, then able to fill the fab. So, that's the company's kind of being diversified.

Okay. And I guess where I was going about is, is any of the Samsung related [explorer] in foundries in Q1 effectively growing and offsetting the Apple related (inaudible) decline?

In the foundry segment, Samsung related business still is a relatively smaller than the other company.

Okay. Great. Perfect.

Actually, it's going to grow second half.

Okay. Got it. And just one point of clarification on what you said before. When you talked basically about your DC to DC extra RF for smartphones at Samsung in H1 2013, that's for AMOLED, right, specifically?

Well, we mentioned that there are also power amplifier in DC, and we are working with them on LED backlight. So, it's more than one product for the Korean company smartphone applications.

Thanks. Okay, thank you very much.

You're welcome.

Thanks, Nick.

(Operator Instructions). You next question comes from Jay Srivatsa, Chardan Capital Markets.

Sang, thanks for taking my questions. Congratulations on the good numbers, Sang and Margaret. The question I had, Sang, your power MOSFET business, it's definitely decline as you increase your exposure to the power -- PMIC business. As you look at fiscal '13, what are your expectations in terms of continued growth in the PMIC side?

Our MOSFET business is not shrinking. We're expecting it will increase into 2013. But, obviously, our expectation is power management IC is going to outflow by far the MOSFET. So, our company commitment to the customer is, we want to maintain MOSFET business, but at the same time, we want to increase power management IC, and in my statement I said that power management IC, in addition to TV backlighting controller, and now we're working with a smartphone application.

Also, we started power management IC for SSD. As you know, it's a humongously big potential market, and we have the two leading DRAM maker. I mean, flash, the flash maker, NAND flash maker in Korea. We have a design in into one, working with that the other one. So, that would be a really good opportunity once we complete it.

And also, LED lighting is continuously -- we had a very sizable revenue second half of 2012, and now we have a product available for the open market, and we expect this can generate additional revenue.

So, it's not just single product in PMIC. It's a multiple market, and multiple applications, and multiple products, and that's why we have our very good hope. And also super junction MOSFET, and we do have a lot of design into Korean markets and Chinese markets. And we're working with a Taiwanese customer. We have a very high expectations, and also our high-power module is going well.

So, all of that up, as a non-MOSFET business, we expect that we're going to have one of the good year for the power in 2013.

Alright. One of the players in your space, Diodes, made an acquisition of a Chinese company in the power management side. What are your thoughts in terms of competitive space in China given that acquisition by Diodes?

We've never done any comparison to BCD. I don't believe we consider them as a competitor. So, in that BCD market, obviously, we have no data that we can share with you, but definitely China is a big market, and we mostly pass right into industrial application customers. I don't believe BCD they have, and so we're not really concerned about Diode acquiring in BCD.

It's of completing our product one time, and bring the [set of going subist] to the customer. That's probably a more challenge for us.

Alright. Last question on the display side. I think, looks like display revenues appear to be doing very well for you, and you've guided for some modest increase. Is it coming off the continued success of some of the products from your large customer in Korea, or some other product that are coming up for launch that I think is expected in the next quarter or so? What is driving your demand for displays in Q1?

It's our AMOLED driver for the cell phone. MOSFET, I should say.

Okay. Thank you.

You're welcome.

Thanks, Jay.

Your next question is a follow up question from Terence Whelan, Citi.

Thank you for taking the follow up. This one is regarding the foundry business. Obviously, had significant success in foundry in 2012. The question is a little bit of a broad-based question. As we look into 2013, will growth in the foundry business be driven by higher volumes at existing customers, or will it be driven by new additional customers? How do you see growth in the foundry business changing in 2013 versus 2012?

What we are looking at, possibly, is growth from existing customers first half compared to 2012. Second half, I expect there are a number of new customers, and it will not be very heavy volume, but it's a sizable volume. But number of customers, that's our expectation for the growth in second half of 2013.

And then, Sang. Can you update us on the success that you've had in terms of migrating some of the newer foundry customers to some of the higher margin processes? Can you give us a feel for how that's progressing? Thanks.

It is a very customer specific question. But, obviously, we are shifting customers more to European and U.S. customer, and that progress is well made.

Terrific. And then my last follow up was on the tax line. Can you help us understand how we should be modeling the GAAP effective tax rate out into 2014? Just trying to understand at what point should be begin stepping that up, and also just in general where we stand with NOL today? Thanks.

Okay. In our [schedule] end of 2012, our NOL balance is approximately around $280 million, and the [fore though you noticed] cash tax expenses is going be still between $10 million to $15 million. [though you not study for a] tax asset is one of a reconciliation item to calculate our adjusted net income. So, no impact on how [you notice] the earning per share, adjusted earning per share, diluted calculation.

So, Terence, the best way to look at it is, if you're looking for a rate to use for modeling purposes, I think Margaret feels comfortable with still going with 10 to 15 per year for taxes.

Into 2014, is that correct?

Yes, correct.

Okay, great. Thank you.

You're welcome.

Your next question is a follow up question from Raji Gill, Needham & Company.

From the taxes, real quick, you're saying, Robert, 10% to 15% tax rate, or $10 million to $15 million of cash taxes per year.

No, no, dollars. There is no tax rate though. $10 million to $15 million.

Okay. Alright. And, Sang, you talked about adding some new foundry services for the touch business, related to some Korean customers. I was wondering if you could maybe elaborate on that, and your kind of your foray into the touch market?

The market expect that there will be solid growth in mid- to low-end of smartphone. And, obviously, Korean company is leading into that market, and worldwide, and obviously, they're looking for the local supplier, and except one, and most of Korean touch, the fabless company using our EEPROM technology, and the forecast we're receiving, and some of them will be successful, and ramping up their volume in the second half. That's what I was referring to.

Okay. Thank you.

You're welcome.

Your next question is a follow up question from C. J. Muse, Barclays.

-- for taking the follow up. I guess, could you provide any granularity in terms of mix wise on the display side between where you were in terms of AMOLED traditional TFT, and maybe quad-HD last year versus what you expect this year.? And then as part of that question, given that mix shift that will likely happen, do you think you can get display gross margins in excess of 30% at some point this year?

Since that customer concentration is there for AMOLED, we're not sharing any gross margin numbers in that area. But obviously it is higher than average TFT gross margin. That's as far as I can say. And what was your first question, C. J.?

Just trying to understand the mix shift between traditional TFT and, I guess, higher quality, higher ASP AMOLED or quad-HD.

Okay. We don't do a whole lot of TFT mobile driver. We only do, now in volume, AMOLED, so which is definitely high-definition. I'm sure they will bring up ultra-high definition smartphone in sometime this year, too. And hope that we will be there with them.

Okay. One last question. Can you talk about the competitive environment on the foundry side, and here I'm particularly interested in your thoughts on SK Hynix talking about becoming a foundry supplier, CMOS image sensors, and other? Is that a threat that, I guess, on the road map, or something that is not concerning?

[That's something] we're not doing any CMOS making sensor foundry. We're completely out of that market a long time ago, and as one of our restructuring. And they're not really an open market, and also, as far as I know, they're more into leading-edge technology, and we are more into analog and mixed signal. So, as of today, there's no crossover.

Very helpful. Thank you.

You're welcome.

Your next question is a follow up question from Jay Srivatsa, Chardan Capital Markets.

Thanks for taking my follow up. Just a couple of housekeeping ones. Were there any 10% customers, and if so, what percentage was it in Q4?

I think that we only -- yes, go ahead.

We do have only one in [SD], the customer that is revenue is 10% greater than -- is 10% of total company revenue.

And they are Korean customer.

And then in terms of stock repurchase looks like you've continued the program in Q4. What are your plans in fiscal '13 in terms of stock repurchase program?

It's still to have those remaining 20 million. You notice the balance that from the already approval. As we did in an ongoing basis, we will you notice to review, and then you notice we do the proper executions.

Okay. Thank you.

Yes, Jay. You're welcome.

Our final question is a follow up question from Ross Seymore, Deutsche Bank.

Hi, again. This is Mike Chou for Ross. Just a quick follow up. For the OpEx guidance, just wanted to clarify. Did you say it was $42 million to $45 million for first quarter, and I'm assuming that includes amortization?

Yes, what I meant was you notice between the $40 million to $45 million depending on the number of our R&D projects for so going forward. And also it is including amortization, too.

Okay. Perfect. Thanks.

Thanks, Mike.

There are no further questions at this time. I would like to turn the call back over to Mr. Robert Pursel.

Okay. Thank you, Hope. So, closing, what I'd like to say is that our next earnings release and conference call is scheduled for April 30, 2013. So, please look for these details and others for the upcoming financial events on MagnaChip's Investor Relations website at www.magnachip.com. So, thank you for joining us today.

This concludes today's conference call. You may now disconnect.