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As filed with the Securities and Exchange Commission on February 18, 2011
Registration No. 333-165467

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 9 to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

MAGNACHIP SEMICONDUCTOR LLC
(to be converted into MagnaChip Semiconductor Corporation)
(Exact name of Registrant as specified in its charter)

Delaware	 	3674	 	26-1815025	
(State or other jurisdiction of incorporation or organization)	 	(Primary Standard Industrial Classification Code Number)	 	(I.R.S. Employer Identification No.)	
c/o MagnaChip Semiconductor S.A.
74, rue de Merl, B.P. 709 L-2146 Luxembourg R.C.S.
Luxembourg B97483
(352) 45-62-62
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

John McFarland
Senior Vice President, General Counsel and Secretary
c/o MagnaChip Semiconductor, Inc.
20400 Stevens Creek Boulevard, Suite 370
Cupertino, CA 95014
Telephone: (408) 625-5999
Fax: (408) 625-5990
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Micheal J. Reagan
Khoa D. Do
W. Stuart Ogg
Jones Day
1755 Embarcadero Road
Palo Alto, California 94303
Telephone: (650) 739-3939
Fax: (650) 739-3900	 	Kirk A. Davenport
Keith Benson
Latham & Watkins LLP
885 Third Avenue
New York, NY 10022-4834
Telephone: (212) 906-1200
Fax: (212) 751-4864	
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:   ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:   ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:   ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨	 	Accelerated filer   ¨	 	Non-accelerated filer  þ	 	Smaller reporting company  ¨	
 	 	 	 	(Do not check if a smaller reporting company)	

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
Subject to Completion. Dated February 18, 2011

MagnaChip Semiconductor Corporation
9,500,000 Depositary Shares
Representing 9,500,000 Shares of Common Stock

This is the initial public offering of common stock of MagnaChip Semiconductor Corporation. MagnaChip Semiconductor Corporation is offering 950,000 shares of common stock. The selling stockholders identified in this prospectus are offering 8,550,000 shares of common stock. We will not receive any of the proceeds from the sale of the shares by the selling stockholders.
All of the shares of common stock sold in this offering will be sold in the form of depositary shares. Each depositary share represents an ownership interest in one share of common stock. On                     , 2011 (45 days after the date of this prospectus), each holder of depositary shares will be credited with a number of shares of common stock equal to the number of depositary shares held by such holder on that date, and the depositary shares will be canceled. Until the cancellation of the depositary shares on                     , 2011, holders of depositary shares will be entitled to all proportional rights and preferences of the shares of common stock.
Prior to this offering, there has been no public market for our depositary shares or our common stock. We currently estimate that the initial public offering price per depositary share will be between $15.00 and $17.00. The depositary shares and the common stock have been approved for listing on the New York Stock Exchange under the symbol “MX” with the listing being only for the depositary shares upon the completion of this offering and only for the common stock following the cancellation of the depositary shares.
See “Risk Factors” beginning on page 14 to read about factors you should consider before buying the depositary shares and shares of the common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 
 	 	 	 	 	 	 	 	 	
 	  	Per
depositary share	 	  	Total	 	
Initial public offering price	  	$	            	  	  	$	            	  	
Underwriting discounts and commissions	  	$	 	  	  	$	 	  	
Proceeds, before expenses to MagnaChip Semiconductor Corporation	  	$	 	  	  	$	 	  	
Proceeds, before expenses to Selling Stockholders	  	$	 	  	  	$	 	  	
To the extent that the underwriters sell more than 9,500,000 depositary shares, the underwriters have the option to purchase up to an additional 142,500 depositary shares from us and up to an additional 1,282,500 depositary shares from the selling stockholders at the initial public offering price less the underwriting discount.
The underwriters expect to deliver the depositary shares against payment in New York, New York on                     , 2011.

Barclays Capital	 	Deutsche Bank Securities	 	Goldman, Sachs & Co.	
 	 	 	
Citi	 	 	 	UBS Investment Bank	

Prospectus dated                     , 2011

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TABLE OF CONTENTS

Prospectus Summary	  	 	1	  	
Risk Factors	  	 	14	  	
Industry and Market Data	  	 	35	  	
Special Cautionary Statement Concerning Forward-Looking Statements	  	 	35	  	
Use of Proceeds	  	 	36	  	
Dividend Policy	  	 	36	  	
Corporate Conversion	  	 	36	  	
Capitalization	  	 	37	  	
Dilution	  	 	38	  	
Selected Historical Consolidated Financial and Operating Data	  	 	40	  	
Unaudited Pro Forma Consolidated Financial Information	  	 	46	  	
Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	50	  	
Business	  	 	93	  	
Management	  	 	109	  	
Principal and Selling Stockholders	  	 	136	  	
Certain Relationships and Related Transactions	  	 	144	  	
Description of Capital Stock	  	 	146	  	
Description of Depositary Shares	  	 	152	  	
Description of Certain Indebtedness	  	 	155	  	
Shares Eligible for Future Sale	  	 	158	  	
Material U.S. Federal Income Tax Consequences	  	 	160	  	
Underwriting	  	 	164	  	
Legal Matters	  	 	169	  	
Experts	  	 	169	  	
Where You Can Find More Information	  	 	169	  	
Index to Consolidated Financial Statements	  	 	F-1	  	

No dealer, salesperson or other person has been authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered by this prospectus, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
“MagnaChip” is a registered trademark of us and our subsidiaries and “MagnaChip Everywhere” is our registered service mark. An application for United States trademark registration of “MagnaChip Everywhere” is pending. All other product, service and company names mentioned in this prospectus are the service marks or trademarks of their respective owners.

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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before deciding to invest in our common stock. You should read this entire prospectus carefully, including the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained in this prospectus and our consolidated financial statements before making an investment decision. In this prospectus, unless the context otherwise requires, the terms “we,” “us,” “our” and “MagnaChip” refer to MagnaChip Semiconductor LLC and its consolidated subsidiaries for the periods prior to the consummation of the corporate conversion (as described below), and such terms refer to MagnaChip Semiconductor Corporation and its consolidated subsidiaries for the periods after the consummation of the corporate conversion. The term “Korea” refers to the Republic of Korea or South Korea. All references to shares of common stock being sold in this offering include shares held in the form of depositary shares, as described under “Description of Depositary Shares.”
Prior to the effectiveness of the registration statement of which this prospectus is a part, we will complete a number of transactions pursuant to which MagnaChip Semiconductor Corporation will succeed to the business of MagnaChip Semiconductor LLC and its consolidated subsidiaries and the members of MagnaChip Semiconductor LLC will become stockholders of MagnaChip Semiconductor Corporation. In this prospectus, we refer to such transactions as the corporate conversion.
Overview
MagnaChip is a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. We believe we have one of the broadest and deepest analog and mixed-signal semiconductor technology platforms in the industry, supported by our 30-year operating history, large portfolio of approximately 2,730 novel registered patents and 760 pending novel patent applications, and extensive engineering and manufacturing process expertise. Our business is comprised of three key segments: Display Solutions, Power Solutions and Semiconductor Manufacturing Services. Our Display Solutions products include display drivers that cover a wide range of flat panel displays and mobile multimedia devices. Our Power Solutions products include discrete and integrated circuit solutions for power management in high-volume consumer applications. Our Semiconductor Manufacturing Services segment provides specialty analog and mixed-signal foundry services for fabless semiconductor companies that serve the consumer, computing and wireless end markets.
Our wide variety of analog and mixed-signal semiconductor products and manufacturing services combined with our deep technology platform allows us to address multiple high-growth end markets and to rapidly develop and introduce new products and services in response to market demands. Our substantial manufacturing operations in Korea and design centers in Korea and Japan place us at the core of the global consumer electronics supply chain. We believe this enables us to quickly and efficiently respond to our customers’ needs and allows us to better service and capture additional demand from existing and new customers.
We have a long history of supplying and collaborating on product and technology development with leading innovators in the consumer electronics market. As a result, we have been able to strengthen our technology platform and develop products and services that are in high demand by our customers and end consumers. We sold over 2,400 and 2,300 distinct products to over 500 and 185 customers for the year ended December 31, 2010 and combined twelve-month period ended December 31, 2009, respectively, with a substantial portion of our revenues derived from a concentrated number of customers. The increase in number of customers is due to the continuing

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growth of our Power Solutions business. Our largest semiconductor manufacturing services customers include some of the fastest growing and leading semiconductor companies that design analog and mixed-signal products for the consumer, computing and wireless end markets.
Our business is largely driven by innovation in the consumer electronics markets and the growing adoption by consumers worldwide of electronic devices for use in their daily lives. The consumer electronics market is large and growing rapidly, largely due to consumers increasingly accessing a wide variety of available rich media content, such as high definition audio and video, mobile television and games on advanced consumer electronic devices. According to Gartner, production of liquid crystal display, or LCD televisions, smartphones, mobile personal computers, or PCs, and media tablets is expected to grow from 2010 to 2013 by a compound annual growth rate of 8%, 39%, 25%, and 99%, respectively. Electronics manufacturers are continuously implementing advanced technologies in new generations of electronic devices using analog and mixed-signal semiconductor components, such as display drivers that enable display of high resolution images, encoding and decoding devices that allow playback of high definition audio and video, and power management semiconductors that increase power efficiency, thereby reducing heat dissipation and extending battery life. According to iSuppli Corporation, in 2009, the display driver semiconductor market was $6.2 billion and the power management semiconductor market was $22.4 billion.
For the year ended December 31, 2010, we generated net sales of $770.4 million, income from continuing operations of $74.1 million, Adjusted EBITDA of $157.9 million and Adjusted Net Income of $89.2 million. See “Prospectus Summary—Summary Historical and Unaudited Pro Forma Consolidated Financial Data,” beginning on page 8 for an explanation of our use of Adjusted EBITDA and Adjusted Net Income.
Our Products and Services
Our Display Solutions products include source and gate drivers and timing controllers that cover a wide range of flat panel displays used in LCD, light emitting diode, or LED, and 3D televisions and displays, mobile PCs and mobile communications and entertainment devices. Our display solutions support the industry’s most advanced display technologies, such as low temperature polysilicon, or LTPS, and active matrix organic light emitting diode, or AMOLED, as well as high-volume display technologies such as thin film transistor, or TFT. Our Display Solutions business represented 39.7%, 50.5% and 50.5% of our net sales for the fiscal years ended December 31, 2010, 2009 (on a combined basis) and 2008, respectively.
We expanded our business and market opportunity by establishing our Power Solutions business in late 2007. We have introduced a number of products for power management applications, including metal oxide semiconductor field effect transistors, or MOSFETs, analog switches, LED drivers, DC-DC converters and linear regulators for a range of devices, including LCD and LED digital televisions, mobile phones, computers and other consumer electronics products. Our Power Solutions business represented 7.4%, 2.2% and 0.9% of our net sales for the fiscal years ended December 31, 2010, 2009 (on a combined basis) and 2008, respectively.
We offer semiconductor manufacturing services to fabless analog and mixed-signal semiconductor companies that require differentiated, specialty analog and mixed-signal process technologies. We believe the majority of our top twenty semiconductor manufacturing services customers use us as their primary manufacturing source for the products that we manufacture for them. Our process technologies are optimized for analog and mixed-signal devices and include standard complementary metal-oxide semiconductor, or CMOS, high voltage CMOS, ultra-low leakage high voltage CMOS and bipolar complementary double-diffused metal oxide semiconductor, or

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BCDMOS, and electronically erasable programmable read only memory, or EEPROM. Our semiconductor manufacturing services customers use us to manufacture a wide range of products, including display drivers, LED drivers, audio encoding and decoding devices, microcontrollers, electronic tags and power management semiconductors. Our Semiconductor Manufacturing Services business represented 52.6%, 46.7% and 47.7% of our net sales for the fiscal years ended December 31, 2010, 2009 (on a combined basis) and 2008, respectively.
We manufacture all of our products at our three fabrication facilities located in Korea. We have approximately 240 proprietary process flows we can utilize for our products and offer to our semiconductor manufacturing services customers. Our manufacturing base serves both our display driver and power management businesses and semiconductor manufacturing services customers, allowing us to optimize our asset utilization and leverage our investments across our product and service offerings. Analog and mixed-signal manufacturing facilities and processes are typically distinguished by design and process implementation expertise rather than the use of the most advanced equipment. 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 does not require substantial investment in leading edge process equipment, allowing us to utilize our facilities and equipment over an extended period of time with moderate required capital investments.
Our Competitive Strengths
We believe our strengths include:
 
 	Ÿ	 	Broad and advanced analog and mixed-signal semiconductor technology and intellectual property platform that allows us to develop new products and meet market demands quickly;	
 
 	Ÿ	 	Established relationships and close collaboration with leading global consumer electronics companies, which enhance our visibility into new product opportunities, markets and technology trends;	
 
 	Ÿ	 	Longstanding presence of our management, personnel and manufacturing base in Asia and proximity to our largest customers and to the core of the global consumer electronics supply chain, which allows us to respond rapidly and efficiently to our customers’ needs;	
 
 	Ÿ	 	Flexible, service-oriented culture and approach to customers;	
 
 	Ÿ	 	Distinctive analog and mixed-signal process technology and manufacturing expertise; and	
 
 	Ÿ	 	Manufacturing facilities with specialty processes and a low-cost operating structure, which allow us to maintain price competitiveness across our product and service offerings.	
Our Strategy
Our objective is to grow our business, our cash flow and profitability and to establish our position as a leading provider of analog and mixed-signal semiconductor products and services for high-volume markets. Our business strategy emphasizes the following key elements:
 
 	Ÿ	 	Leverage our advanced analog and mixed-signal technology platform to continuously innovate and deliver products with high levels of performance and integration, as well as to expand our technology offerings within our target markets, such as our power management products;	
 
 	Ÿ	 	Increase business with our global customer base of leading consumer electronics original equipment manufacturers, or OEMs, and fabless companies by collaborating on critical design,	

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 	product and manufacturing process development and leveraging our deep knowledge of customer needs;	
 
 	Ÿ	 	Broaden our customer base by expanding our global design centers and local application engineering support and sales presence, particularly in China and other high-growth regions;	
 
 	Ÿ	 	Aggressively grow our power management product portfolio business by introducing new products, expanding distribution and cross-selling products to our existing customers;	
 
 	Ÿ	 	Drive execution excellence in new product development, manufacturing efficiency and quality, customer service and personnel development; and	
 
 	Ÿ	 	Optimize asset utilization and return on capital investments by maintaining our focus on specialty process technologies that do not require substantial investment in leading edge process equipment and by utilizing our manufacturing facilities for both our display driver and power management businesses and manufacturing services customers.	
Risks Related to Our Company
Investing in our company entails a high degree of risk, including those summarized below and those more fully described in the “Risk Factors” section beginning on page 14 of this prospectus. You should consider carefully these risks before deciding to invest in our common stock.
 
 	Ÿ	 	We have a history of losses and may not be profitable in the future;	
 
 	Ÿ	 	On June 12, 2009, we filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code and our plan of reorganization became effective on November 9, 2009;	
 
 	Ÿ	 	The cyclical nature of the semiconductor industry may limit our ability to maintain or increase net sales and profit levels during industry downturns;	
 
 	Ÿ	 	If we fail to develop new products and process technologies or enhance our existing products and services in order to react to rapid technological change and market demands, our business will suffer;	
 
 	Ÿ	 	A significant portion of our sales comes from a relatively limited number of customers and the loss of any of such customers or a significant decrease in sales to any of such customers would harm our revenue and gross profit;	
 
 	Ÿ	 	The average selling prices of our semiconductor products have at times declined rapidly and will likely do so in the future, which could harm our revenue and gross profit; and	
 
 	Ÿ	 	Upon completion of this offering, our largest stockholder, consisting of affiliated funds of Avenue Capital Management II, L.P., will control approximately 52.1% of our outstanding common stock, assuming no exercise by the underwriters of their option to purchase additional shares.	
Corporate Information
Prior to the effectiveness of the registration statement of which this prospectus is a part, MagnaChip Semiconductor LLC will convert from a Delaware limited liability company to a Delaware corporation. We refer to this as the corporate conversion. In connection with the corporate conversion, each common unit of MagnaChip Semiconductor LLC will be converted into 0.125 shares of common stock of MagnaChip Semiconductor Corporation, the members of MagnaChip Semiconductor LLC will become stockholders of MagnaChip Semiconductor Corporation and MagnaChip Semiconductor Corporation will succeed to the business of MagnaChip Semiconductor LLC and its consolidated subsidiaries. See “Corporate Conversion” for further information regarding the corporate conversion.

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Our principal executive offices are located at: c/o MagnaChip Semiconductor S.A., 74, rue de Merl, B.P. 709 L-2146 Luxembourg R.C.S., Luxembourg B-97483, and our telephone number is (352) 45-62-62. Our website address is www.magnachip.com . You should not consider the information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock.
Our business was named MagnaChip Semiconductor when it was acquired from Hynix Semiconductor, Inc., or Hynix, in October 2004. We refer to this acquisition as the Original Acquisition.
On June 12, 2009, MagnaChip Semiconductor LLC, along with certain of its subsidiaries, including MagnaChip Semiconductor S.A., filed a voluntary petition for relief in the United States Bankruptcy Court for the District of Delaware under Chapter 11 of the United States Bankruptcy Code, which we refer to as the reorganization proceedings. On November 9, 2009, our plan of reorganization became effective and we emerged from the reorganization proceedings with our management team remaining in place. Our Chapter 11 plan of reorganization implemented a comprehensive financial reorganization that significantly reduced our outstanding indebtedness. Additionally, on that date, a new board of directors of MagnaChip Semiconductor LLC was appointed, MagnaChip Semiconductor LLC’s previously outstanding common and preferred units, and options were cancelled, MagnaChip Semiconductor LLC issued approximately 300 million common units (approximately 37.5 million shares of common stock following the corporate conversion) and warrants to purchase 15 million common units (approximately 1.9 million shares of common stock following the corporate conversion) to two classes of creditors and affiliated funds of Avenue Capital Management II, L.P. became the majority unitholder of MagnaChip Semiconductor LLC.
Avenue Capital Management II, L.P. is a global investment management firm, and it and its affiliated funds specialize in investing in high yield debt, debt of insolvent or financially distressed companies and equity of companies undergoing financial or operational turnarounds or reorganizations. In this prospectus, we refer to funds affiliated with Avenue Capital Management II, L.P. collectively as Avenue. Avenue generally does not manage or operate the companies in which it invests; however, in connection with some of its equity investments, Avenue will appoint one or more representatives to serve on the board of directors. Avenue was a holder of a significant portion of our indebtedness which was outstanding prior to our reorganization proceedings. In connection with our emergence from our reorganization proceedings, Avenue became our majority unitholder as a result of its participation in our rights offering and continued as a lender under our new term loan. In connection with our April 2010 senior notes offering, Avenue purchased notes in the aggregate principal amount of $35.0 million, was repaid $42.8 million in connection with the repayment of our new term loan and received $91.2 million in connection with our distribution to unitholders. Avenue has the right to appoint a majority of our board pursuant to our Fifth Amended and Restated Limited Liability Company Operating Agreement which will terminate upon the completion of the corporate conversion. Following the offering Avenue will continue to be able to elect a majority of our board as long as Avenue continues to hold or control a majority of our outstanding shares. See “Certain Relationships and Related Transactions” for additional information.

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The Offering
 
Shares offered by us	950,000 shares in the form of depositary shares	
 
Shares offered by selling stockholders	8,550,000 shares in the form of depositary shares	
 
Shares offered by us pursuant to the underwriters’ option to purchase additional shares	142,500 shares in the form of depositary shares(1)	
 
Shares offered by the selling stockholders pursuant to the underwriters’ option to purchase additional shares	1,282,500 shares in the form of depositary shares(1)	
 
Shares of common stock to be outstanding after this offering	39,351,985 shares	
 
Use of proceeds	We intend to use the net proceeds received by us in connection with this offering, including any net proceeds received by us in connection with the underwriters’ option to purchase additional shares, to make employee incentive payments. We will not receive any proceeds from the sale of shares of common stock offered by the selling stockholders, including upon the sale of shares if the underwriters exercise their option to purchase additional shares from the selling stockholder in this offering.	
 
Risk factors	See “Risk Factors” beginning on page 14 and the other information included in this prospectus for a discussion of the factors you should consider carefully before deciding to invest in shares of our common stock.	
 
Dividend policy	We do not anticipate paying any cash dividends on our common stock after this offering.	
 
Depositary shares	All of the shares of common stock sold in this offering will be sold in the form of depositary shares. Each depositary share represents an ownership interest in one share of common stock. On                     , 2011 (45 days after the date of this prospectus), each holder of depositary shares will be credited with a number of shares of common stock equal to the number of depositary shares held by such holder on that date, and the depositary shares will be canceled. Until the cancellation of the depositary shares on                     , 2011, holders of depositary shares will be entitled to all proportional rights and preferences of the shares of common stock. This offering has been structured using depositary shares to enable our unitholders to obtain the preferred income tax treatment for the corporate	
 
(1)	We have provided the underwriters an option to purchase up to 142,500 additional depositary shares and the selling stockholders have provided the underwriters an option to purchase up to 1,282,500 additional depositary shares. If the underwriters exercise their option to purchase additional shares, we will not receive any of the proceeds from the additional sale of depositary shares by the selling stockholders.	

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 	conversion. For more information regarding the depositary shares, see “Description of Depositary Shares.”	
 
Depositary	American Stock Transfer & Trust Company, LLC	
 
Proposed New York Stock Exchange symbol	MX with the listing being only for the depositary shares upon the completion of this offering and only for the common stock following the cancellation of the depositary shares.	
The number of shares of our common stock outstanding after this offering is based on common units of MagnaChip Semiconductor LLC outstanding as of the date of this prospectus and:
 
 	Ÿ	 	reflects the consummation of the corporate conversion, pursuant to which all of the outstanding common units of MagnaChip Semiconductor LLC will be automatically converted into shares of our common stock at a ratio of eight-for-one and all of the outstanding options and warrants to purchase common units of MagnaChip Semiconductor LLC will be automatically converted into options and warrants to purchase shares of our common stock;	
 
 	Ÿ	 	excludes 1,875,017 shares of our common stock reserved for issuance upon exercise of warrants outstanding as of December 31, 2010 at a weighted average exercise price of $15.76 per share, assuming the conversion of all such warrants into warrants to purchase shares of our common stock at a ratio of eight-for-one;	
 
 	Ÿ	 	excludes 1,957,760 shares of our common stock reserved for issuance upon exercise of options outstanding as of December 31, 2010 at a weighted average exercise price of $6.33 per share, assuming the conversion of all such options into options to purchase shares of our common stock at a ratio of eight-for-one; and	
 
 	Ÿ	 	excludes 1,680,190 shares of our common stock reserved for issuance following the offering pursuant to future grants under our 2011 Equity Incentive Plan and 2011 Employee Stock Purchase Plan, based in part on the number of shares of common stock reserved for issuance under our 2009 Plan as of December 31, 2010, which does not include the additional shares which may become available for issuance pursuant to the automatic share reserve increase provisions of such plans described below.	
The number of shares authorized for future issuance under our 2011 Equity Incentive Plan and our 2011 Employee Stock Purchase Plan reflected above does not include additional shares that may become available for future issuance pursuant to the automatic share reserve increase provisions of these plans. On January 1 of each year from 2012 through 2021, up to 2% and 1%, respectively, of the shares of our common stock issued and outstanding on the immediately preceding December 31 or, in each case, a lesser amount determined by our board of directors, will be added automatically to the number of shares remaining available for future grants under the 2011 Equity Incentive Plan and the 2011 Employee Stock Purchase Plan.
Unless specifically stated otherwise, the information in this prospectus:
 
 	Ÿ	 	assumes completion of the corporate conversion;	
 
 	Ÿ	 	assumes no exercise of the underwriters’ option to purchase up to 142,500 additional depositary shares from us and up to 1,282,500 additional depositary shares from our selling stockholders; and	
 
 	Ÿ	 	assumes an initial public offering price of $16.00 per depositary share, which is the midpoint of the range set forth on the front cover of this prospectus.	

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Summary Historical and Unaudited Pro Forma Consolidated Financial Data
The following tables set forth summary historical and unaudited pro forma consolidated financial data of MagnaChip Semiconductor LLC (to be converted into MagnaChip Semiconductor Corporation prior to consummation of this offering) on or as of the dates and for the periods indicated. The summary historical and unaudited pro forma consolidated financial data presented below should be read together with “Selected Historical Consolidated Financial and Operating Data,” “Unaudited Pro Forma Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited consolidated financial statements, including the notes to those consolidated financial statements, appearing elsewhere in this prospectus.
We have derived the summary historical consolidated financial data as of December 31, 2010 and 2009, and for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008 from the historical audited consolidated financial statements of MagnaChip Semiconductor Corporation prepared in accordance with generally accepted accounting principles in the United States, or GAAP, included elsewhere in this prospectus. The summary historical financial data for the year ended December 31, 2010 and the two-month period ended December 31, 2009 give retroactive effect to the corporate conversion. The historical results of MagnaChip Semiconductor Corporation for any prior period are not necessarily indicative of the results to be expected in any future period, and financial results for any interim period are not necessarily indicative of results for a full year.
In connection with our emergence from reorganization proceedings, we implemented fresh-start reporting, or fresh-start accounting, in accordance with Accounting Standards Codification 852, or ASC 852, governing reorganizations. We elected to adopt a convenience date of October 25, 2009 (a month end for our financial reporting purposes) for application of fresh-start accounting. In accordance with the ASC 852 rules governing reorganizations, we recorded largely non-cash reorganization income and expense items directly associated with our reorganization proceedings including professional fees, the revaluation of assets, the effects of our reorganization plan and fresh-start accounting and write-off of debt issuance costs. As a result of the application of fresh-start accounting, our financial statements prior to and including October 25, 2009 represent the operations of our pre-reorganization predecessor company and are presented separately from the financial statements of our post-reorganization successor company. As a result of the application of fresh-start accounting, the financial statements prior to and including October 25, 2009 are not fully comparable with the financial statements for periods on or after October 26, 2009.
We have prepared the summary unaudited pro forma financial data as of and for the year ended December 31, 2010 to give pro forma effect to the reorganization proceedings and related events, the corporate conversion and the issuance of $250 million senior notes and the application of the net proceeds therefrom, in each case as if they had occurred at January 1, 2010 with respect to consolidated statement of operations data. The summary unaudited pro forma financial data set forth below are presented for informational purposes only, should not be considered indicative of actual results of operations that would have been achieved had the reorganization proceedings and related events, the corporate conversion and the issuance of $250 million senior notes and the application of the net proceeds therefrom been consummated on the dates indicated, and do not purport to be indicative of our results of operations for any future period.

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 	 	Pro Forma(1)	 	 	Historical	 	 	
 	 	 	 	 	 	 	 	Successor	 	 	 	 	 	Predecessor	 	 	
 	 	Year Ended
December 31,
2010	 	 	 	 	 	Year Ended
December 31,
2010	 	 	Two- Month
Period Ended
December 31,
2009	 	 	 	 	 	Ten- Month
Period
Ended
October 25,
2009	 	 	Year Ended
December  31,
2008	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	(In millions, except per common unit/share data)	 	 	 	 	 	 	
Statements of Operations Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	770.4	  	 	 	 	 	 	$	770.4	  	 	$	111.1	  	 	 	 	 	 	$	449.0	  	 	$	601.7	  	 	 	 	 	 	
Cost of sales	 	 	526.0	  	 	 	 	 	 	 	526.8	  	 	 	90.4	  	 	 	 	 	 	 	311.1	  	 	 	445.3	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	244.4	  	 	 	 	 	 	 	243.6	  	 	 	20.7	  	 	 	 	 	 	 	137.8	  	 	 	156.4	  	 	 	 	 	 	
Selling, general and administrative expenses	 	 	66.6	  	 	 	 	 	 	 	66.6	  	 	 	14.5	  	 	 	 	 	 	 	56.3	  	 	 	81.3	  	 	 	 	 	 	
Research and development expenses	 	 	83.5	  	 	 	 	 	 	 	83.5	  	 	 	14.7	  	 	 	 	 	 	 	56.1	  	 	 	89.5	  	 	 	 	 	 	
Restructuring and impairment charges	 	 	2.0	  	 	 	 	 	 	 	2.0	  	 	 	—	  	 	 	 	 	 	 	0.4	  	 	 	13.4	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss) from continuing operations	 	 	92.3	  	 	 	 	 	 	 	91.4	  	 	 	(8.6	) 	 	 	 	 	 	 	25.0	  	 	 	(27.7	) 	 	 	 	 	 	
Interest expense, net	 	 	(27.9	) 	 	 	 	 	 	 	(22.9	) 	 	 	(1.3	) 	 	 	 	 	 	 	(31.2	) 	 	 	(76.1	) 	 	 	 	 	 	
Foreign currency gain (loss), net	 	 	14.7	  	 	 	 	 	 	 	14.7	  	 	 	9.3	  	 	 	 	 	 	 	43.4	  	 	 	(210.4	) 	 	 	 	 	 	
Reorganization items, net	 	 	—	  	 	 	 	 	 	 	—	  	 	 	—	  	 	 	 	 	 	 	804.6	  	 	 	—	  	 	 	 	 	 	
Others	 	 	(0.7	) 	 	 	 	 	 	 	(0.7	) 	 	 	—	  	 	 	 	 	 	 	—	  	 	 	—	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	(13.9	) 	 	 	 	 	 	 	(8.9	) 	 	 	8.1	  	 	 	 	 	 	 	816.8	  	 	 	(286.5	) 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations before income taxes	 	 	78.4	  	 	 	 	 	 	 	82.5	  	 	 	(0.5	) 	 	 	 	 	 	 	841.8	  	 	 	(314.3	) 	 	 	 	 	 	
Income tax expenses	 	 	12.0	  	 	 	 	 	 	 	8.4	  	 	 	1.9	  	 	 	 	 	 	 	7.3	  	 	 	11.6	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	$	66.4	  	 	 	 	 	 	 	74.1	  	 	 	(2.5	) 	 	 	 	 	 	 	834.5	  	 	 	(325.8	) 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from discontinued operations, net of taxes	 	 	 	 	 	 	 	 	 	 	—	  	 	 	0.5	  	 	 	 	 	 	 	6.6	  	 	 	(91.5	) 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	 	 	 	 	 	 	 	 	$	74.1	  	 	$	(2.0	) 	 	 	 	 	 	$	841.1	  	 	$	(417.3	) 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends accrued on preferred units	 	 	 	 	 	 	 	 	 	 	—	  	 	 	—	  	 	 	 	 	 	 	6.3	  	 	 	13.3	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations attributable to common units/shares	 	 	 	 	 	 	 	 	 	$	74.1	  	 	$	(2.5	) 	 	 	 	 	 	$	828.2	  	 	$	(339.1	) 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Per common unit/share data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from continuing operations per common unit/share—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	1.75	  	 	 	 	 	 	$	1.96	  	 	$	(0.07	) 	 	 	 	 	 	$	15.65	  	 	$	(6.43	) 	 	 	 	 	 	
Diluted	 	$	1.70	  	 	 	 	 	 	$	1.89	  	 	$	(0.07	) 	 	 	 	 	 	$	15.65	  	 	$	(6.43	) 	 	 	 	 	 	
Weighted average number of common units/stock—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	37.836	  	 	 	 	 	 	 	37.836	  	 	 	37.608	  	 	 	 	 	 	 	52.923	  	 	 	52.769	  	 	 	 	 	 	
Diluted	 	 	39.144	  	 	 	 	 	 	 	39.144	  	 	 	37.608	  	 	 	 	 	 	 	52.923	  	 	 	52.769	  	 	 	 	 	 	
Consolidated Balance Sheet Data (at period end):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	 	 	 	 	 	 	 	$	172.2	  	 	$	64.9	  	 	 	 	 	 	 	 	 	 	$	4.0	  	 	 	 	 	 	
Total assets	 	 	 	 	 	 	 	 	 	 	625.7	  	 	 	453.3	  	 	 	 	 	 	 	 	 	 	 	399.2	  	 	 	 	 	 	
Total indebtedness(2)	 	 	 	 	 	 	 	 	 	 	246.9	  	 	 	61.8	  	 	 	 	 	 	 	 	 	 	 	845.0	  	 	 	 	 	 	
Long-term obligations(3)	 	 	 	 	 	 	 	 	 	 	250.0	  	 	 	61.5	  	 	 	 	 	 	 	 	 	 	 	143.2	  	 	 	 	 	 	
Total unitholders’/stockholders’ equity (deficit)	 	 	 	 	 	 	 	 	 	 	162.9	  	 	 	215.7	  	 	 	 	 	 	 	 	 	 	 	(787.8	) 	 	 	 	 	 	
Supplemental Data (unaudited):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted EBITDA(4)	 	$	157.9	  	 	 	 	 	 	$	157.9	  	 	$	22.1	  	 	 	 	 	 	$	76.6	  	 	$	59.8	  	 	 	 	 	 	
Adjusted Net Income (Loss)(5)	 	 	80.6	  	 	 	 	 	 	 	89.2	  	 	 	13.3	  	 	 	 	 	 	 	9.3	  	 	 	(71.7	) 	 	 	 	 	 	
 
(1)	Gives effect to the reorganization proceedings and related events, the corporate conversion and the issuance of $250 million senior notes and the application of the net proceeds therefrom. For details regarding these pro forma adjustments, see the notes to the unaudited pro forma condensed consolidated financial information in “Unaudited Pro Forma Consolidated Financial Information.”	
(2)	Total indebtedness is calculated as long and short-term borrowings, including the current portion of long-term borrowings.	
(3)	Long-term obligations include long-term borrowings, capital leases and redeemable convertible preferred units.	
(4)	We define Adjusted EBITDA as net income (loss) less income (loss) from discontinued operations, net of taxes, adjusted to exclude (i) depreciation and amortization associated with continuing operations, (ii) interest expense, net, (iii) income tax expenses (benefits), (iv) restructuring and impairment charges, (v) other restructuring charges, (vi) abandoned IPO expenses, (vii) reorganization items, net, (viii) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (ix) equity-based compensation expense, (x) foreign currency gain (loss), net and (xi) derivative valuation gain (loss), net. See the footnotes to the table below for further information regarding these items. In the case of pro forma Adjusted EBITDA, we exclude the items above from income (loss) from continuing operations. We present Adjusted EBITDA as a supplemental measure of our performance because:	
 
 	Ÿ	 	Adjusted EBITDA eliminates the impact of a number of items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance;	
 
 	Ÿ	 	we believe that Adjusted EBITDA is an enterprise level performance measure commonly reported and widely used by analysts and investors in our industry;	
 
 	Ÿ	 	we anticipate that our investor and analyst presentations after we are public will include Adjusted EBITDA; and	

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 	Ÿ	 	we believe that Adjusted EBITDA provides investors with a more consistent measurement of period to period performance of our core operations, as well as a comparison of our operating performance to that of other companies in our industry.	
We use Adjusted EBITDA in a number of ways, including:
 
 	Ÿ	 	for planning purposes, including the preparation of our annual operating budget;	
 
 	Ÿ	 	to evaluate the effectiveness of our enterprise level business strategies;	
 
 	Ÿ	 	in communications with our board of directors concerning our consolidated financial performance; and	
 
 	Ÿ	 	in certain of our compensation plans as a performance measure for determining incentive compensation payments.	
We encourage you to evaluate each adjustment and the reasons we consider them appropriate. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Adjusted EBITDA is not a measure defined in accordance with GAAP and should not be construed as an alternative to income from continuing operations, cash flows from operating activities or net income (loss), as determined in accordance with GAAP. A reconciliation of net income (loss) to Adjusted EBITDA is as follows:

 	 	Pro Forma	 	 	Historical	 	 	
 	 	 	 	 	Successor	 	 	 	 	 	Predecessor	 	 	
 	 	Year Ended
December 31,
2010	 	 	Year Ended
December 31,
2010	 	 	Two- Month
Period Ended
December 31,
2009	 	 	 	 	 	Ten- Month
Period
Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	(In millions)	 	 	 	 	 	
Net income (loss)	 	 	 	 	 	$	74.1	  	 	$	(2.0	) 	 	 	 	 	 	$	841.1	  	 	$	(417.3	) 	 	 	 	 	
Less: Income (loss) from discontinued operations, net of taxes	 	 	 	 	 	 	—	  	 	 	0.5	  	 	 	 	 	 	 	6.6	  	 	 	(91.5	) 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	$	66.4	  	 	 	74.1	  	 	 	(2.5	) 	 	 	 	 	 	 	834.5	  	 	 	(325.8	) 	 	 	 	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization associated with continuing operations	 	 	58.4	  	 	 	58.4	  	 	 	11.2	  	 	 	 	 	 	 	37.7	  	 	 	63.8	  	 	 	 	 	
Interest expense, net	 	 	27.9	  	 	 	22.9	  	 	 	1.3	  	 	 	 	 	 	 	31.2	  	 	 	76.1	  	 	 	 	 	
Income tax expenses	 	 	12.0	  	 	 	8.4	  	 	 	1.9	  	 	 	 	 	 	 	7.3	  	 	 	11.6	  	 	 	 	 	
Restructuring and impairment charges(a)	 	 	2.0	  	 	 	2.0	  	 	 	—	  	 	 	 	 	 	 	0.4	  	 	 	13.4	  	 	 	 	 	
Other restructuring charges(b)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	13.3	  	 	 	6.2	  	 	 	 	 	
Abandoned IPO expenses(c)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	—	  	 	 	3.7	  	 	 	 	 	
Reorganization items, net(d)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	(804.6	) 	 	 	—	  	 	 	 	 	
Inventory step-up(e)	 	 	—	  	 	 	0.9	  	 	 	17.2	  	 	 	 	 	 	 	—	  	 	 	—	  	 	 	 	 	
Equity-based compensation expense(f)	 	 	5.2	  	 	 	5.2	  	 	 	2.2	  	 	 	 	 	 	 	0.2	  	 	 	0.5	  	 	 	 	 	
Foreign currency loss (gain), net(g)	 	 	(14.7	) 	 	 	(14.7	) 	 	 	(9.3	) 	 	 	 	 	 	 	(43.4	) 	 	 	210.4	  	 	 	 	 	
Derivative valuation loss, net(h)	 	 	0.7	  	 	 	0.7	  	 	 	—	  	 	 	 	 	 	 	—	  	 	 	—	  	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted EBITDA	 	$	157.9	  	 	$	157.9	  	 	$	22.1	  	 	 	 	 	 	$	76.6	  	 	$	59.8	  	 	 	 	 	

 	(a)	This adjustment is comprised of all items included in the restructuring and impairment charges line item on our consolidated statements of operations, and eliminates the impact of restructuring and impairment charges related to (i) for 2010, impairment charges of $2.0 million recorded, of which $1.6 million of impairment charges were recognized for abandoned in-process research and development projects and $0.4 million of impairment charges were recognized as a result of an annual impairment test of in-process research and development, accounted for as indefinite-lived intangible assets as part of the application of fresh-start accounting, (ii) for 2009, termination benefits and other related costs, for the ten-month period ended October 25, 2009 in connection with the closure of one of our research and development facilities in Japan, and (iii) for 2008, goodwill impairment triggered by the significant adverse change in the revenue of our mobile display solutions, or MDS reporting unit, and a reversal of a portion of the restructuring accrual related to the closure of our Gumi five-inch wafer fabrication facilities in 2007. We do not believe these restructuring and impairment charges are indicative of our core ongoing operating performance because we do not anticipate similar facility closures and market driven events in our ongoing operations, although we cannot guarantee that similar events will not occur in the future.	
 	(b)	This adjustment relates to certain restructuring charges that are not included in the restructuring and impairment charges line item on our consolidated statements of operations. These items are included in selling, general and administrative expenses in our consolidated statements of operations. These charges are comprised of the following: (i) for 2009, a charge of $13.3 million for restructuring-related professional fees and related expenses and (ii) for 2008, a charge of $6.2 million for restructuring-related professional fees and related expenses. We do not believe these other restructuring charges are indicative of our core ongoing operating performance because these charges were related, in significant part, to actions we took in response to the impacts on our business resulting from the global economic recession that persisted through 2008 and 2009. We cannot guarantee that similar charges will not be incurred in the future.	
 	(c)	This adjustment eliminates a $3.7 million charge in 2008 related to expenses incurred in connection with our abandoned initial public offering in 2008. We do not believe that these charges are indicative of our core operating performance. We expect to incur similar costs in connection with this offering.	
 	(d)	This adjustment eliminates the impact of largely non-cash reorganization income and expense items directly associated with our reorganization proceedings from our ongoing operations including, among others, professional fees, the revaluation of assets, the effects of the Chapter 11 reorganization plan and fresh-start accounting principles and the write-off of debt issuance costs. Included in reorganization items, net for the period from January 1 to October 25, 2009 was our predecessor’s gain recognized from the effects of our reorganization proceedings. The gain results from the difference between our predecessor’s carrying	

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 	value of remaining pre-petition liabilities subject to compromise and the amounts to be distributed pursuant to the reorganization proceedings. The gain from the effects of the reorganization proceedings and the application of fresh-start accounting principles is comprised of the discharge of liabilities subject to compromise, net of the issuance of new common units and new warrants and the accrual of amounts to be settled in cash. For details regarding this adjustment, see note 5 to the consolidated financial statements of MagnaChip Semiconductor Corporation included elsewhere in this prospectus. We do not believe these items are indicative of our core ongoing operating performance because they were incurred as a result of our Chapter 11 reorganization.	
 	(e)	This adjustment eliminates the one-time impact on cost of sales associated with the write-up of our inventory in accordance with the principles of fresh-start accounting upon consummation of the Chapter 11 reorganization.	
 	(f)	This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash equity-based compensation expenses in the future, 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.	
 	(g)	This adjustment eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, as supplemental information.	
 	(h)	This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents hedge ineffectiveness or derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in USD, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.	
 
 	    	Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:	
 
 	•	 	Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;	
 
 	•	 	Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;	
 
 	•	 	Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;	
 
 	•	 	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;	
 
 	•	 	Adjusted EBITDA does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;	
 
 	•	 	Adjusted EBITDA does not reflect the costs of holding certain assets and liabilities in foreign currencies; and	
 
 	•	 	other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.	
 
 	    	Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.	
 
(5)	We present Adjusted Net Income as a further supplemental measure of our performance. We prepare Adjusted Net Income by adjusting net income (loss) to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance.	
 
    	We present Adjusted Net Income for a number of reasons, including:	
 
 	Ÿ	 	we use Adjusted Net Income in communications with our board of directors concerning our consolidated financial performance;	
 
 	Ÿ	 	we believe that Adjusted Net Income is an enterprise level performance measure commonly reported and widely used by analysts and investors in our industry; and	
 
 	Ÿ	 	we anticipate that our investor and analyst presentations after we are public will include Adjusted Net Income.	
 
    	Adjusted Net Income is not a measure defined in accordance with GAAP and should not be construed as an alternative to income from continuing operations, cash flows from operating activities or net income (loss), as determined in accordance with GAAP. We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other companies in our industry may calculate Adjusted Net Income differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Net Income, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. We define Adjusted Net Income as net income (loss) less income (loss) from discontinued operations, net of taxes, excluding (i) restructuring and impairment charges, (ii) other restructuring charges, (iii) abandoned IPO expenses, (iv) reorganization items, net, (v) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (vi) equity-based compensation expense, (vii) amortization of intangibles associated with continuing operations, (viii) foreign currency gain (loss), net and (ix) derivative valuation gain (loss), net.	

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The following table summarizes the adjustments to net income (loss) that we make in order to calculate Adjusted Net Income for the periods indicated:

 	 	Pro Forma	 	 	Historical	 	 	
 	 	 	 	 	Successor	 	 	 	 	 	Predecessor	 	 	
 	 	Year Ended
December 31,
2010	 	 	Year Ended
December 31,
2010	 	 	Two- Month
Period Ended
December 31,
2009	 	 	 	 	 	Ten- Month
Period
Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	(In millions)	 	 	 	 	 	
Net income (loss)	 	 	 	 	 	$	74.1	  	 	$	(2.0	) 	 	 	 	 	 	$	841.1	  	 	$	(417.3	) 	 	 	 	 	
Less: Income (loss) from discontinued operations, net of taxes	 	 	 	 	 	 	—	  	 	 	0.5	  	 	 	 	 	 	 	6.6	  	 	 	(91.5	) 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	$	66.4	  	 	 	74.1	  	 	 	(2.5	) 	 	 	 	 	 	 	834.5	  	 	 	(325.8	) 	 	 	 	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restructuring and impairment charges(a)	 	 	2.0	  	 	 	2.0	  	 	 	—	  	 	 	 	 	 	 	0.4	  	 	 	13.4	  	 	 	 	 	
Other restructuring charges(b)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	13.3	  	 	 	6.2	  	 	 	 	 	
Abandoned IPO expenses(c)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	—	  	 	 	3.7	  	 	 	 	 	
Reorganization items, net(d)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	(804.6	) 	 	 	—	  	 	 	 	 	
Inventory step-up(e)	 	 	—	  	 	 	0.9	  	 	 	17.2	  	 	 	 	 	 	 	—	  	 	 	—	  	 	 	 	 	
Equity-based compensation expense(f)	 	 	5.2	  	 	 	5.2	  	 	 	2.2	  	 	 	 	 	 	 	0.2	  	 	 	0.5	  	 	 	 	 	
Amortization of intangibles associated with continuing operations(g)	 	 	21.0	  	 	 	21.0	  	 	 	5.6	  	 	 	 	 	 	 	8.8	  	 	 	20.0	  	 	 	 	 	
Foreign currency loss (gain), net(h)	 	 	(14.7	) 	 	 	(14.7	) 	 	 	(9.3	) 	 	 	 	 	 	 	(43.4	) 	 	 	210.4	  	 	 	 	 	
Derivative valuation loss, net(i)	 	 	0.7	  	 	 	0.7	  	 	 	—	  	 	 	 	 	 	 	—	  	 	 	—	  	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Net income (loss)	 	$	80.6	  	 	$	89.2	  	 	$	13.3	  	 	 	 	 	 	$	9.3	  	 	$	(71.7	) 	 	 	 	 	

(a)	This adjustment is comprised of all items included in the restructuring and impairment charges line item on our consolidated statements of operations, and eliminates the impact of restructuring and impairment charges related to (i) for 2010, impairment charges of $2.0 million recorded, of which $1.6 million of impairment charges were recognized for abandoned in-process research and development projects and $0.4 million of impairment charges were recognized as a result of an annual impairment test of in-process research and development, accounted for as indefinite-lived intangible assets as part of the application of fresh-start accounting, (ii) for 2009, termination benefits and other related costs, for the ten-month period ended October 25, 2009 in connection with the closure of one of our research and development facilities in Japan, and (iii) for 2008, goodwill impairment triggered by the significant adverse change in the revenue of our MDS reporting unit and a reversal of a portion of the restructuring accrual related to the closure of our Gumi five-inch wafer fabrication facilities in 2007. We do not believe these restructuring and impairment charges are indicative of our core ongoing operating performance because we do not anticipate similar facility closures and market driven events in our ongoing operations, although we cannot guarantee that similar events will not occur in the future.	
(b)	This adjustment relates to certain restructuring charges that are not included in the restructuring and impairment charges line item on our consolidated statements of operations. These items are included in selling, general and administrative expenses in our consolidated statements of operations. These charges are comprised of the following: (i) for 2009, a charge of $13.3 million for restructuring-related professional fees and related expenses, and (ii) for 2008, a charge of $6.2 million for restructuring-related professional fees and related expenses. We do not believe these other restructuring charges are indicative of our core ongoing operating performance because these charges were related, in significant part, to actions we took in response to the impacts on our business resulting from the global economic recession that persisted through 2008 and 2009. We cannot guarantee that similar charges will not be incurred in the future.	
(c)	This adjustment eliminates a $3.7 million charge in 2008 related to expenses incurred in connection with our abandoned initial public offering in 2008. We do not believe that these charges are indicative of our core operating performance. We expect to incur similar costs in connection with this offering.	
(d)	This adjustment eliminates the impact of largely non-cash reorganization income and expense items directly associated with our reorganization proceedings from our ongoing operations including, among others, professional fees, the revaluation of assets, the effects of the Chapter 11 reorganization plan and fresh-start accounting principles and the write-off of debt issuance costs. Included in reorganization items, net for the ten-month period ended October 25, 2009 was our predecessor’s gain recognized from the effects of our reorganization proceedings. The gain results from the difference between our predecessor’s carrying value of remaining pre-petition liabilities subject to compromise and the amounts to be distributed pursuant to the reorganization proceedings. The gain from the effects of the reorganization proceedings and the application of fresh-start accounting principles is comprised of the discharge of liabilities subject to compromise, net of the issuance of new common units and new warrants and the accrual of amounts to be settled in cash. For details regarding this adjustment, see note 5 to the consolidated financial statements of MagnaChip Semiconductor Corporation included elsewhere in this prospectus. We do not believe these items are indicative of our core ongoing operating performance because they were incurred as a result of our reorganization proceedings.	
(e)	This adjustment eliminates the one-time impact on cost of sales associated with the write-up of our inventory in accordance with the principles of fresh-start accounting upon consummation of the Chapter 11 reorganization.	
(f)	This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash equity-based compensation expenses in the future, 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.	

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(g)	This adjustment eliminates the non-cash impact of amortization expense for intangible assets created as a result of the purchase accounting treatment of the Original Acquisition and other subsequent acquisitions, and from the application of fresh-start accounting in connection with the reorganization proceedings. We do not believe these non-cash amortization expenses for intangibles are indicative of our core ongoing operating performance because the assets would not have been capitalized on our balance sheet but for the application of acquisition accounting or fresh-start accounting, as applicable.	
(h)	This adjustment eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, as supplemental information.	
(i)	This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents hedge ineffectiveness or derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in USD, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.	
 
    	Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:	
 
 	Ÿ	 	Adjusted Net Income does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;	
 
 	Ÿ	 	Adjusted Net Income does not reflect changes in, or cash requirements for, our working capital needs;	
 
 	Ÿ	 	Adjusted Net Income does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;	
 
 	Ÿ	 	Adjusted Net Income does not reflect the costs of holding certain assets and liabilities in foreign currencies; and	
 
 	Ÿ	 	other companies in our industry may calculate Adjusted Net Income differently than we do, limiting its usefulness as a comparative measure.	
 
    	Because of these limitations, Adjusted Net Income should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted Net Income only supplementally.	

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RISK FACTORS
You should carefully consider the risk factors set forth below as well as the other information contained in this prospectus before investing in our common stock. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. As a result, the price of our common stock could decline and you could lose all or part of your investment in our common stock. Additional risks and uncertainties not currently known to us or those currently viewed by us to be immaterial may also materially and adversely affect our business, financial condition or results of operations.
Risks Related to Our Business
We have a history of losses and may not achieve or sustain profitability in the future.
Since we began operations as a separate entity in 2004, we have not generated a profit for a full fiscal year and have generated significant net losses. As of October 25, 2009, prior to our emergence from reorganization proceedings, we had an accumulated deficit of $964.8 million and negative unitholders’ equity. We may increase spending and we currently expect to incur higher expenses in each of the next several quarters to support increased research and development and sales and marketing efforts. These expenditures may not result in increased revenue or an increase in the number of customers immediately or at all. Because many of our expenses are fixed in the short term, or are incurred in advance of anticipated sales, we may not be able to decrease our expenses in a timely manner to offset any shortfall of sales.
We recently emerged from Chapter 11 reorganization proceedings; because our consolidated financial statements reflect fresh-start accounting adjustments, our future consolidated financial statements will not be comparable in many respects to our financial information from prior periods.
On June 12, 2009, we filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to obtain relief from our debt, which was $845 million as of December 31, 2008. Our plan of reorganization became effective on November 9, 2009. In connection with our emergence from the reorganization proceedings, we implemented fresh-start accounting in accordance with ASC 852 effective from October 25, 2009, which had a material effect on our consolidated financial statements. Thus, our future consolidated financial statements will not be comparable in many respects to our consolidated financial statements for periods prior to our adoption of fresh-start accounting and prior to accounting for the effects of the reorganization proceedings. Our past financial difficulties and bankruptcy filing may have harmed, and may continue to have a negative effect on, our relationships with investors, customers and suppliers.
We operate in the highly cyclical semiconductor industry, which is subject to significant downturns that may negatively impact our results of operations.
The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change and price erosion, evolving technical standards, short product life cycles (for semiconductors and for the end-user products in which they are used) and wide fluctuations in product supply and demand. From time to time, these and other factors, together with changes in general economic conditions, cause significant upturns and downturns in the industry in general and in our business in particular. Periods of industry downturns, including the recent economic downturn, 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.
 
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We base our planned operating expenses in part on our expectations of future revenue, and a significant portion of our expenses is relatively fixed in the short term. If revenue for a particular quarter is lower than we expect, we likely will be unable to proportionately reduce our operating expenses for that quarter, which would harm our operating results for that quarter.
If we fail to develop new products and process technologies or enhance our existing products and services in order to react to rapid technological change and market demands, our business will suffer.
Our industry is subject to constant and rapid technological change and product obsolescence as customers and competitors create new and innovative products and technologies. Products or technologies developed by other companies may render our products or technologies obsolete or noncompetitive, and we may not be able to access advanced process technologies, including smaller geometries, or to license or otherwise obtain essential intellectual property required by our customers.
We must develop new products and services and enhance our existing products and services to meet rapidly evolving customer requirements. We design products for customers who continually require higher performance and functionality at lower costs. We must, therefore, continue to enhance the performance and functionality of our products. The development process for these advancements is lengthy and requires us to accurately anticipate technological changes and market trends. Developing and enhancing these products is uncertain and can be time-consuming, costly and complex. If we do not continue to develop and maintain process technologies that are in demand by our semiconductor manufacturing services customers, we may be unable to maintain existing customers or attract new customers.
Customer and market requirements can change during the development process. There is a risk that these developments and enhancements will be late, fail to meet customer or market specifications or not be competitive with products or services from our competitors that offer comparable or superior performance and functionality. Any new products, such as our new line of power management solutions, which we began marketing in 2008, or product or service enhancements, may not be accepted in new or existing markets. Our business will suffer if we fail to develop and introduce new products and services or product and service enhancements on a timely and cost-effective basis.
We manufacture our products based on our estimates of customer demand, and if our estimates are incorrect our financial results could be negatively impacted.
We make significant decisions, including determining the levels of business that we will seek and accept, production schedules, component procurement commitments, personnel needs and other resource requirements – based on our estimates of customer demand and expected demand for and success of their products. The short-term nature of commitments by many of our customers and the possibility of rapid changes in demand for their products reduces our ability to estimate accurately future customer demand for our products. On occasion, customers may require rapid increases in supply, which can challenge our production resources and reduce margins. We may not have sufficient capacity at any given time to meet our customers’ increased demand for our products. Conversely, downturns in the semiconductor industry have caused and may in the future cause our customers to reduce significantly the amount of products they order from us. Because many of our costs and operating expenses are relatively fixed, a reduction in customer demand would decrease our results of operations, including our gross profit.
 
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Our customers may cancel their orders, reduce quantities or delay production, which would adversely affect our margins and results of operations.
We generally do not obtain firm, long-term purchase commitments from our customers. Customers may cancel their orders, reduce quantities or delay production for a number of reasons. Cancellations, reductions or delays by a significant customer or by a group of customers, which we have experienced as a result of periodic downturns in the semiconductor industry or failure to achieve design wins, have affected and may continue to affect our results of operations adversely. These risks are exacerbated because many of our products are customized, which hampers our ability to sell excess inventory to the general market. We may incur charges resulting from the write-off of obsolete inventory. In addition, while we do not obtain long-term purchase commitments, we generally agree to the pricing of a particular product over a set period of time. If we underestimate our costs when determining pricing, our margins and results of operations would be adversely affected.
We depend on high utilization of our manufacturing capacity, a reduction of which could have a material adverse effect on our business, financial condition and the results of our operations.
An important factor in our success is the extent to which we are able to utilize the available capacity in our fabrication facilities. As many of our costs are fixed, a reduction in capacity utilization, as well as changes in other factors, such as reduced yield or unfavorable product mix, could reduce our profit margins and adversely affect our operating results. A number of factors and circumstances may reduce utilization rates, including periods of industry overcapacity, low levels of customer orders, operating inefficiencies, mechanical failures and disruption of operations due to expansion or relocation of operations, power interruptions and fire, flood or other natural disasters or calamities. The potential delays and costs resulting from these steps could have a material adverse effect on our business, financial condition and results of operations.
A significant portion of our sales comes from a relatively limited number of customers, the loss of which would adversely affect our financial results.
Historically, we have relied on a limited number of customers for a substantial portion of our total revenue. If we were to lose key customers or if customers cease to place orders for our high-volume products or services, our financial results would be adversely affected. Net sales to our ten largest customers represented 63%, 66%, 69% and 63% of our net sales for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008, respectively. LG Display represented 16% and 26% of our net sales and a substantial portion of the net sales generated by our top ten customers for the year ended December 31, 2010 and the combined twelve-month period ended December 31, 2009. Significant reductions in sales to any of these customers, especially our few largest customers, the loss of other major customers or a general curtailment in orders for our high-volume products or services within a short period of time would adversely affect our business.
The average selling prices of our semiconductor products have at times declined rapidly and will likely do so in the future, which could harm our revenue and gross profit.
The semiconductor products we develop and sell are subject to rapid declines in average selling prices. From time to time, we have had to reduce our prices significantly to meet customer requirements, and we may be required to reduce our prices in the future. This would cause our gross profit to decrease. Our financial results will suffer if we are unable to offset any reductions in our average selling prices by increasing our sales volumes, reducing our costs or developing new or enhanced products on a timely basis with higher selling prices or gross profit.
 
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Our industry is highly competitive and our ability to compete could be negatively impacted by a variety of factors.
The semiconductor industry is highly competitive and includes hundreds of companies, a number of which have achieved substantial market share both within our product categories and end markets. Current and prospective customers for our products and services evaluate our capabilities against the merits of our competitors. Some of our competitors are well established as independent companies and have substantially greater market share and manufacturing, financial, research and development and marketing resources than we do. We also compete with emerging companies that are attempting to sell their products in certain of our end markets and with the internal semiconductor design and manufacturing capabilities of many of our significant customers. We expect to experience continuing competitive pressures in our markets from existing competitors and new entrants.
Any consolidation among our competitors could enhance their product offerings and financial resources, further enhancing their competitive position. Our ability to compete will depend on a number of factors, including the following:
 
 	Ÿ	 	our ability to offer cost-effective and high quality products and services on a timely basis using our technologies;	
 
 	Ÿ	 	our ability to accurately identify and respond to emerging technological trends and demand for product features and performance characteristics;	
 
 	Ÿ	 	our ability to continue to rapidly introduce new products that are accepted by the market;	
 
 	Ÿ	 	our ability to adopt or adapt to emerging industry standards;	
 
 	Ÿ	 	the number and nature of our competitors and competitiveness of their products and services in a given market;	
 
 	Ÿ	 	entrance of new competitors into our markets;	
 
 	Ÿ	 	our ability to enter the highly competitive power management market; and	
 
 	Ÿ	 	our ability to continue to offer in demand semiconductor manufacturing services at competitive prices.	
Many of these factors are outside of our control. In the future, our competitors may replace us as a supplier to our existing or potential customers, and our customers may satisfy more of their requirements internally. As a result, we may experience declining revenues and results of operations.
Changes in demand for consumer electronics in our end markets can impact our results of operations.
Demand for our products will depend in part on the demand for various consumer electronics products, in particular, mobile phones and multimedia devices, digital televisions, flat panel displays, mobile PCs and digital cameras, which in turn depends on general economic conditions and other factors beyond our control. If our customers fail to introduce new products that employ our products or component parts, demand for our products will suffer. To the extent that we cannot offset periods of reduced demand that may occur in these markets through greater penetration of these markets or reduction in our production and costs, our sales and gross profit may decline, which would negatively impact our business, financial condition and results of operations.
 
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If we fail to achieve design wins for our semiconductor products, we may lose the opportunity for sales to customers for a significant period of time and be unable to recoup our investments in our products.
We expend considerable resources on winning competitive selection processes, known as design wins, to develop semiconductor products for use in our customers’ products. These selection processes are typically lengthy and can require us to incur significant design and development expenditures. We may not win the competitive selection process and may never generate any revenue despite incurring significant design and development expenditures. Once a customer designs a semiconductor into a product, that customer is likely to continue to use the same semiconductor or enhanced versions of that semiconductor from the same supplier across a number of similar and successor products for a lengthy period of time due to the significant costs associated with qualifying a new supplier and potentially redesigning the product to incorporate a different semiconductor. If we fail to achieve an initial design win in a customer’s qualification process, we may lose the opportunity for significant sales to that customer for a number of products and for a lengthy period of time. This may cause us to be unable to recoup our investments in our semiconductor products, which would harm our business.
We have lengthy and expensive design-to-mass production and manufacturing process development cycles that may cause us to incur significant expenses without realizing meaningful sales, the occurrence of which would harm our business.
The cycle time from the design stage to mass production for some of our products is long and requires the investment of significant resources with many potential customers without any guarantee of sales. Our design-to-mass production cycle typically begins with a three-to-twelve month semiconductor development stage and test period followed by a three-to-twelve month end-product qualification period by our customers. The fairly lengthy front end of our sales cycle creates a risk that we may incur significant expenses but may be unable to realize meaningful sales. Moreover, prior to mass production, customers may decide to cancel their products or change production specifications, resulting in sudden changes in our product specifications, increasing our production time and costs. Failure to meet such specifications may also delay the launch of our products or result in lost sales.
In addition, we collaborate and jointly develop certain process technologies and manufacturing process flows custom to certain of our semiconductor manufacturing services customers. To the extent that our semiconductor manufacturing services customers fail to achieve market acceptance for their products, we may be unable to recoup our engineering resources commitment and our investment in process technology development, which would harm our business.
Research and development investments may not yield profitable and commercially viable product and service offerings and thus will not necessarily result in increases in revenues for us.
We invest significant resources in our research and development. Our research and development efforts, however, may not yield commercially viable products or enhance our semiconductor manufacturing services offerings. During each stage of research and development there is a substantial risk that we will have to abandon a potential product or service offering that is no longer marketable and in which we have invested significant resources. In the event we are able to develop viable new products or service offerings, a significant amount of time will have elapsed between our investment in the necessary research and development effort and the receipt of any related revenues.
 
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We face numerous challenges relating to executing our growth strategy, and if we are unable to execute our growth strategy effectively, our business and financial results could be materially and adversely affected.
Our growth strategy is to leverage our advanced analog and mixed-signal technology platform, continue to innovate and deliver new products and services, increase business with existing customers, broaden our customer base, aggressively grow our power business, drive execution excellence and focus on specialty process technologies. As part of our growth strategy, we began marketing a new line of power management semiconductor products in 2008 and expect to introduce other new products and services in the future. If we are unable to execute our growth strategy effectively, we may not be able to take advantage of market opportunities, execute our business plan or respond to competitive pressures. Moreover, if our allocation of resources does not correspond with future demand for particular products, we could miss market opportunities and our business and financial results could be materially and adversely affected.
We are subject to risks associated with currency fluctuations, and changes in the exchange rates of applicable currencies could impact our results of operations.
Historically, a portion of our revenues and greater than the majority of our operating expenses and costs of sales have been denominated in non-U.S. currencies, principally the Korean won, and we expect that this will remain true in the future. Because we report our results of operations in U.S. dollars, changes in the exchange rate between the Korean won and the U.S. dollar could materially impact our reported results of operations and distort period to period comparisons. In particular, because of the difference in the amount of our consolidated revenues and expenses that are in U.S. dollars relative to Korean won, a depreciation in the U.S. dollar relative to the Korean won could result in a material increase in reported costs relative to revenues, and therefore could cause our profit margins and operating income to appear to decline materially, particularly relative to prior periods. The converse is true if the U.S. dollar were to appreciate relative to the Korean won. Fluctuations in foreign currency exchange rates also impact the reporting of our receivables and payables in non-U.S. currencies. Foreign currency fluctuations had a materially beneficial impact on our results of operations in the fiscal year ended December 31, 2008 relative to the fiscal year ended December 31, 2007, as well as in the combined twelve-month period ended December 31, 2009 relative to the fiscal year ended December 31, 2008. However, foreign currency fluctuation had an unfavorable impact on our reported profit margins and operating income from continuing operations for the year ended December 31, 2010 compared to the combined twelve-month period ended December 31, 2009. 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 stock following the completion of this offering could be adversely affected.
From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. For example, in January 2010 and May 2010 our Korean subsidiary entered into foreign currency option and forward contracts in order to mitigate a portion of the impact of U.S. dollar-Korean won exchange rate fluctuations on our operating results. The January 2010 option and forward contracts require us to sell specified notional amounts in U.S. dollars and provide us the option to sell specified notional amounts in U.S. dollars during each month of 2010 commencing February 2010 to our counterparty, in each case, in exchange for Korean won at specified exchange rates. The May 2010 option and forward contracts require us to sell specified notional amounts in U.S. dollars and provide us the option to sell specified notional amounts in U.S. dollars during the months of January 2011 through June 2011 to our counterparty, in each case, in exchange for Korean won at specified fixed exchange rates. In August 2010 our Korean subsidiary additionally entered into zero cost
 
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collar contracts for the same purpose as the above hedge contracts. The August 2010 zero cost collar contracts require us to sell specified notional amounts in U.S. dollars and provide us the option to sell specified notional amounts in U.S. dollars during the months of July 2011 through December 2011 to our counterparty, in each case, in exchange for Korean won at specified fixed exchange rates. Obligations under these foreign currency option, forward and zero cost collar contracts must be cash collateralized if our exposure exceeds certain specified thresholds. These option, forward and zero cost collar contracts may be terminated by the counterparty in a number of circumstances, including if our long-term debt rating falls below B-/B3 or if our total cash and cash equivalents is less than $30 million at the end of a fiscal quarter. We cannot assure you that any hedging technique we implement will be effective. If our hedging activities are not effective, changes in currency exchange rates may have a more significant impact on our results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting our Results of Operations.”
The global recession and related financial crisis negatively affected our business. Poor economic conditions may negatively affect our future business, results of operations and financial condition.
The global recession and related financial crisis led to slower economic activity, increased unemployment, concerns about inflation and energy costs, decreased business and consumer confidence, reduced corporate profits and capital spending, adverse business conditions and lower levels of liquidity in many financial markets. Consumers and businesses deferred purchases in response to tighter credit and negative financial news, which has in turn negatively affected product demand and other related matters. The global recession led to reduced customer spending in the semiconductor market and in our target markets, made it difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and caused U.S. and foreign businesses to slow spending on our products. Although recently there have been indications of improved economic conditions generally and in the semiconductor industry specifically, we cannot assure you of the extent to which such conditions will continue to improve or whether the improvement will be sustainable. If the global economic recovery is not sustained or the global economy experiences another recession, such adverse economic conditions could lead to the insolvency of key suppliers resulting in product delays, limit the ability of customers to obtain credit to finance purchases of our products, lead to customer insolvencies, and also result in counterparty failures that may negatively impact our treasury operations. As a result, our business, financial condition and result of operations could be materially adversely affected in future periods as a result of economic downturns.
The loss of our key employees would materially adversely affect our business, and we may not be able to attract or retain the technical or management employees necessary to compete in our industry.
Our key executives have substantial experience and have made significant contributions to our business, and our continued success is dependent upon the retention of our key management executives, including our Chief Executive Officer and Chairman, Sang Park. The loss of such key personnel would have a material adverse effect on our business. In addition, our future success depends on our ability to attract and retain skilled technical and managerial personnel. We do not know whether we will be able to retain all of these employees as we continue to pursue our business strategy. The loss of the services of key employees, especially our key design and technical personnel, or our inability to retain, attract and motivate qualified design and technical personnel could have a material adverse effect on our business, financial condition and results of operations. This could hinder our research and product development programs or otherwise have a material adverse effect on our business.
 
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If we encounter future labor problems, we may fail to deliver our products and services in a timely manner, which could adversely affect our revenues and profitability.
As of December 31, 2010, 2,208 employees, or approximately 66.2% of our employees, were represented by the MagnaChip Semiconductor Labor Union, which is a member of the Federation of Korean Metal Workers Trade Unions. We can offer no assurance that issues with the labor union and other employees will be resolved favorably for us in the future, that we will not experience work stoppages or other labor problems in future years or that we will not incur significant expenses related to such issues.
We may incur costs to engage in future business combinations or strategic investments, and we may not realize the anticipated benefits of those transactions.
As part of our business strategy, we may seek to enter into business combinations, investments, joint ventures and other strategic alliances with other companies in order to maintain and grow revenue and market presence as well as to provide us with access to technology, products and services. Any such transaction would be accompanied by risks that may harm our business, such as difficulties in assimilating the operations, personnel and products of an acquired business or in realizing the projected benefits, disruption of our ongoing business, potential increases in our indebtedness and contingent liabilities and charges if the acquired company or assets are later determined to be worth less than the amount paid for them in an earlier original acquisition. In addition, our indebtedness may restrict us from making acquisitions that we may otherwise wish to pursue.
The failure to achieve acceptable manufacturing yields could adversely affect our business.
The manufacture of semiconductors involves highly complex processes that require precision, a highly regulated and sterile environment and specialized equipment. Defects or other difficulties in the manufacturing process can prevent us from achieving acceptable yields in the manufacture of our products or those of our semiconductor manufacturing services customers, which could lead to higher costs, a loss of customers or delay in market acceptance of our products. Slight impurities or defects in the photomasks used to print circuits on a wafer or other factors can cause significant difficulties, particularly in connection with the production of a new product, the adoption of a new manufacturing process or any expansion of our manufacturing capacity and related transitions. We may also experience manufacturing problems in achieving acceptable yields as a result of, among other things, transferring production to other facilities, upgrading or expanding existing facilities or changing our process technologies. Yields below our target levels can negatively impact our gross profit and may cause us to eliminate underperforming products.
We rely on a number of independent subcontractors and the failure of any of these independent subcontractors to perform as required could adversely affect our operating results.
A substantial portion of our net sales are derived from semiconductor devices assembled in packages or on film. The packaging and testing of semiconductors require technical skill and specialized equipment. For the portion of packaging and testing that we outsource, we use subcontractors located in Korea, China, Taiwan, Malaysia and Thailand. We rely on these subcontractors to package and test our devices with acceptable quality and yield levels. We could be adversely affected by political disorders, labor disruptions, and natural disasters where our subcontractors are located. If our semiconductor packagers and test service providers experience problems in packaging and testing our semiconductor devices, experience prolonged quality or yield problems or decrease the capacity available to us, our operating results could be adversely affected.
 
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We depend on successful parts and materials procurement for our manufacturing processes, and a shortage or increase in the price of these materials could interrupt our operations and result in a decline of revenues and results of operations.
We procure materials and electronic and mechanical components from international sources and original equipment manufacturers. We use a wide range of parts and materials in the production of our semiconductors, including silicon, processing chemicals, processing gases, precious metals and electronic and mechanical components, some of which, such as silicon wafers, are specialized raw materials that are generally only available from a limited number of suppliers. We do not have long-term agreements providing for all of these materials, thus, if demand increases or supply decreases, the costs of our raw materials could significantly increase. For example, worldwide supplies of silicon wafers, an important raw material for the semiconductors we manufacture, were constrained in recent years due to an increased demand for silicon. Silicon is also a key raw material for solar cells, the demand for which has increased in recent years. Although supplies of silicon have recently improved due to the entrance of additional suppliers and capacity expansion by existing suppliers, we cannot assure you that such supply increases will match demand increases. If we cannot obtain adequate materials in a timely manner or on favorable terms for the manufacture of our products, revenues and results of operations will decline.
We face warranty claims, product return, litigation and liability risks and the risk of negative publicity if our products fail.
Our semiconductors are incorporated into a number of end products, and our business is exposed to product return, warranty and product liability risk and the risk of negative publicity if our products fail. Although we maintain insurance for product liability claims, the amount and scope of our insurance may not be adequate to cover a product liability claim that is asserted against us. In addition, product liability insurance could become more expensive and difficult to maintain and, in the future, may not be available on commercially reasonable terms, or at all.
In addition, we are exposed to the product liability risk and the risk of negative publicity affecting our customers. Our sales may decline if any of our customers are sued on a product liability claim. We also may suffer a decline in sales from the negative publicity associated with such a lawsuit or with adverse public perceptions in general regarding our customers’ products. Further, if our products are delivered with impurities or defects, we could incur additional development, repair or replacement costs, and our credibility and the market’s acceptance of our products could be harmed.
We could suffer adverse tax and other financial consequences as a result of changes in, or differences in the interpretation of, applicable tax laws.
Our company organizational structure was created in part based on certain interpretations and conclusions regarding various tax laws, including withholding tax and other tax laws of applicable jurisdictions. Our Korean subsidiary, MagnaChip Semiconductor, Ltd., or MagnaChip Korea, was granted a limited tax holiday under Korean law in October 2004. This grant provided for certain tax exemptions for corporate taxes and withholding taxes until December 31, 2008, and for acquisition taxes, property and land use taxes and certain other taxes until December 31, 2013. Our interpretations and conclusions regarding tax laws, however, are not binding on any taxing authority and, if these interpretations and conclusions are incorrect, if our business were to be operated in a way that rendered us ineligible for tax exemptions or caused us to become subject to incremental tax, or if the authorities were to change, modify, or have a different interpretation of the relevant tax laws, we could suffer adverse tax and other financial consequences and the anticipated benefits of our organizational structure could be materially impaired.
 
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Our ability to compete successfully and achieve future growth will depend, in part, on our ability to protect our proprietary technology and know-how, as well as our ability to operate without infringing the proprietary rights of others.
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. 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. We cannot assure you that other countries in which we market our services will protect our intellectual property rights to the same extent as the United States. In particular, the validity, enforceability and scope of protection of intellectual property in China, where we derive a significant portion of our net sales, and certain other countries where we derive net sales, are uncertain and still evolving and historically have not protected and may not protect in the future, intellectual property rights to the same extent as do the laws and enforcement procedures in the United States.
Our ability to compete successfully depends on our ability to operate without infringing the proprietary rights of others. We have no means of knowing what patent applications have been filed in the United States until they are published. In addition, the semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. We may need to file lawsuits to enforce our patents or intellectual property rights, and we may need to defend against claimed infringement of the rights of others. Any litigation could result in substantial costs to us and divert our resources. Despite our efforts in bringing or defending lawsuits, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. In the event of an adverse outcome in any such litigation, we may be required to:
 
 	Ÿ	 	pay substantial damages or indemnify customers or licensees for damages they may suffer if the products they purchase from us or the technology they license from us violate the intellectual property rights of others;	
 
 	Ÿ	 	stop our manufacture, use, sale or importation of infringing products; expend significant resources to develop or acquire non-infringing technologies;	
 
 	Ÿ	 	discontinue processes; or	
 
 	Ÿ	 	obtain licenses to the intellectual property we are found to have infringed.	
There can be no assurance that we would be successful in such development or acquisition or that such licenses would be available under reasonable terms, or at all. The termination of key third party licenses relating to the use of intellectual property in our products and our design processes, such as our agreements with Silicon Works Co., Ltd. and ARM Limited, would materially and adversely affect our business.
Our competitors may develop, patent or gain access to know-how and technology similar to our own. In addition, many of our patents are subject to cross licenses, several of which are with our competitors. The noncompetition arrangement agreed to by Hynix in connection with the Original Acquisition expired on October 1, 2007. Under that arrangement, Hynix retained a perpetual license to use the intellectual property that we acquired from Hynix in the Original Acquisition. Since noncompetition restrictions have expired, Hynix and its subsidiaries are free to develop products that may incorporate or embody intellectual property developed by us prior to October 2004.
 
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Our expenses could increase if Hynix were unwilling or unable to provide certain services related to our shared facilities with Hynix, and if Hynix were to become insolvent, we could lose certain of our leases.
We are party to a land lease and easement agreement with Hynix pursuant to which we lease the land for our facilities in Cheongju, Korea. If this agreement were terminated for any reason, including the insolvency of Hynix, we would have to renegotiate new lease terms with Hynix or the new owner of the land. We cannot assure you that we could negotiate new lease terms on favorable terms or at all. Because we share certain facilities with Hynix, several services that are essential to our business are provided to us by or through Hynix under our general service supply agreement with Hynix. These services include electricity, bulk gases and de-ionized water, campus facilities and housing, wastewater and sewage management, environmental safety and certain utilities and infrastructure support services. If any of our agreements with Hynix were terminated or if Hynix were unwilling or unable to fulfill its obligations to us under the terms of these agreements, we would have to procure these services on our own and as a result may experience an increase in our expenses.
We are subject to many environmental laws and regulations that could affect our operations or result in significant expenses.
We are subject to requirements of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate, governing 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. There can be no assurance that we have been, or will be, in compliance with all such laws and regulations or that we will not incur material costs or liabilities in connection with these laws and regulations in the future. The adoption of new environmental, health and safety laws, the failure to comply with new or existing laws, or issues relating to hazardous substances could subject us to material liability (including substantial fines or penalties), impose the need for additional capital equipment or other process requirements upon us, curtail our operations or restrict our ability to expand operations.
Our Korean subsidiary has been designated as a regulated business under Korean environmental law, and such designation could have an adverse effect on our financial position and results of operations.
In April 2010, the Korean government’s Enforcement Decree to the Framework Act on Low Carbon Green Growth, or the Enforcement Decree, became effective. Businesses that exceed 25,000 tons of greenhouse gas emissions and 100 terajoules of energy consumption for the prior three years will be subject to regulation and will be required to submit plans to reduce greenhouse emissions and energy consumption as well as performance reports and will be subject to government requirements to take further action. Our Korean subsidiary meets the thresholds under the Enforcement Decree and was designated as a regulated business on September 28, 2010. Our Korean subsidiary will have until September 2011 and December 2011 to cooperate and negotiate with Korean governmental authorities to set reduction targets and draft an implementation plan, respectively. If the ultimate implementation plan agreed upon with Korean governmental authorities requires us to reduce our emissions or energy consumption, we could be subject to 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, that could adversely affect our financial position and results of operations.
 
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We will likely need additional capital in the future, and such capital may not be available on acceptable terms or at all, which would have a material adverse effect on our business, financial condition and results of operations.
We will likely require more capital in the future from equity or debt financings to fund operating expenses, such as research and development costs, finance investments in equipment and infrastructure, acquire complementary businesses and technologies, and respond to competitive pressures and potential strategic opportunities. If we raise additional funds through further issuances of equity or other securities convertible into equity, our existing stockholders could suffer significant dilution, and any new shares we issue could have rights, preferences or privileges senior to those of the holders of our common stock, including the shares of common stock sold in this offering. In addition, additional capital may not be available when needed or, if available, may not be available on favorable terms. In addition, our indebtedness limits our ability to incur additional indebtedness under certain circumstances. If we are unable to obtain capital on favorable terms, or if we are unable to obtain capital at all, we may have to reduce our operations or forego opportunities, and this may have a material adverse effect on our business, financial condition and results of operations.
Our business depends on international customers, suppliers and operations in Asia, and as a result we are subject to regulatory, operational, financial and political risks, which could adversely affect our financial results.
We rely on, and expect to continue to rely on, suppliers, subcontractors and operations located primarily in Asia. As a result, we face risks inherent in international operations, such as unexpected changes in regulatory requirements, tariffs and other market barriers, political, social and economic instability, adverse tax consequences, war, civil disturbances and acts of terrorism, 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. Although we do not derive any revenue from, nor sell any products in, North Korea, any future increase in tensions between South Korea and North Korea that may occur, such as an outbreak of military hostilities, would adversely affect our business, financial condition and results of operations.
You may not be able to bring an action or enforce any judgment obtained in United States courts, or bring an action in any other jurisdiction, against us or our subsidiaries or our directors, officers or independent auditors that are organized or residing in jurisdictions other than the United States.
Most of our subsidiaries are organized or incorporated outside of the United States and some of our directors and executive officers as well as our independent auditors are organized or reside outside of the United States. Most of our and our subsidiaries’ assets are located outside of the United States and in particular, in Korea. Accordingly, any judgment obtained in the United States against us or our subsidiaries may not be collectible in the United States. As a result, it may not be possible for you to effect service of process within the United States upon these persons or to enforce against them or us court judgments obtained in the United States that are predicated upon the civil liability provisions of the federal securities laws of the United States or of the securities laws of any state of the United States. In particular, there is doubt as to the enforceability in Korea or any other jurisdictions outside the United States, either in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated on the federal securities laws of the United States or the securities laws of any state of the United States.
 
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Our level of indebtedness is substantial, and we may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. A decline in the ratings of our existing or future indebtedness may make the terms of any new indebtedness we choose to incur more costly.
As of December 31, 2010, our total indebtedness was $246.9 million. Our substantial debt could have important consequences, including:
 
 	Ÿ	 	increasing our vulnerability to general economic and industry conditions;	
 
 	Ÿ	 	requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;	
 
 	Ÿ	 	limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; and	
 
 	Ÿ	 	limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who have less debt.	
Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We cannot assure you that we will generate a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
The credit ratings assigned to our debt reflect each rating agency’s opinion of our ability to make payments on the debt obligations when such payments are due. The current rating of our senior notes is B2 by Moody’s and B+ by Standard and Poors, both of which are below investment grade. A rating may be subject to revision or withdrawal at any time by the assigning rating agency. We may experience downgrades in our debt ratings in the future. Any lowering of our debt ratings would adversely impact our ability to raise additional debt financing and increase the cost of any such financing that is obtained. In the event any ratings downgrades are significant, we may choose not to incur new debt or refinance existing debt if we are unable to incur or refinance such debt at favorable interest rates or on favorable terms.
If our cash flows and capital resources are insufficient to fund our debt service obligations or if we are unable to refinance existing indebtedness on favorable terms, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. The indentures governing our notes restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or be able to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.
We are a holding company and will depend on the business of our subsidiaries to satisfy our obligations under our outstanding notes and other obligations.
Each of MagnaChip Semiconductor LLC, MagnaChip Semiconductor S.A. and MagnaChip Semiconductor B.V. is a holding company with no independent operations of its own. Our subsidiaries, including our principal manufacturing subsidiary, MagnaChip Korea, own all of our operating
 
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businesses. Our subsidiaries will conduct substantially all of the operations necessary to fund payments on our outstanding notes, other debt and any other obligations. Our ability to make payments on the notes and our other obligations will depend on our subsidiaries’ cash flow and their payment of funds to us. Our subsidiaries’ ability to make payments to us will depend on:
 
 	Ÿ	 	their earnings;	
 
 	Ÿ	 	covenants contained in our debt agreements (including the indenture governing the notes) and the debt agreements of our subsidiaries;	
 
 	Ÿ	 	covenants contained in other agreements to which we or our subsidiaries are or may become subject;	
 
 	Ÿ	 	business and tax considerations; and	
 
 	Ÿ	 	applicable law, including any restrictions under Korean law that may be imposed on MagnaChip Korea that would restrict its ability to make payments on intercompany loans from MagnaChip Semiconductor B.V.	
We cannot assure you that the operating results of our subsidiaries at any given time will be sufficient to make distributions or other payments to us or that any distributions or payments will be adequate to pay principal and interest, and any other payments, on our outstanding notes, other debt or any other obligations when due, and the failure to make such payments could have a material adverse effect on our business, financial condition and results of operations.
Restrictions on MagnaChip Korea’s ability to make payments on its intercompany loans from MagnaChip Semiconductor B.V., or on its ability to pay dividends in excess of statutory limitations, could hinder our ability to make payments on our 10.500% senior notes due 2018.
We anticipate that payments under our 10.500% senior notes due 2018 will be funded in part by MagnaChip Korea’s repayment of its existing loans from MagnaChip Semiconductor B.V., with MagnaChip Semiconductor B.V. using such repayments in turn to repay the loans owed to MagnaChip Semiconductor S.A. Under the Korean Foreign Exchange Transaction Act, the minister of the Ministry of Strategy and Finance is authorized to temporarily suspend payments in foreign currencies in the event of natural calamities, wars, conflicts of arms, grave and sudden changes in domestic or foreign economic conditions, or other similar situations. In addition, under the Korean Commercial Code, a Korean company is permitted to make a dividend payment in accordance with the provisions in its articles of incorporation out of retained earnings (as determined in accordance with the Korean Commercial Code and the generally accepted accounting principles in Korea), but no more than twice a year. If MagnaChip Korea is prevented from making payments under its intercompany loans due to restrictions on payments of foreign currency or if it has an insufficient amount of retained earnings under the Korean Commercial Code to make dividend payments to MagnaChip Semiconductor B.V., we may not have sufficient funds to make payments on the notes.
The indenture governing the senior notes contains, and our future debt agreements will likely contain, covenants that significantly restrict our operations.
The indenture governing our outstanding senior notes contains, and our future debt agreements will likely contain, numerous covenants imposing financial and operating restrictions on our business. These restrictions may affect our ability to operate our business, may limit our ability to take advantage of potential business opportunities as they arise and may adversely affect the conduct of our current business, including by restricting our ability to finance future operations and capital needs and by limiting our ability to engage in other business activities. These covenants will place restrictions on our ability and the ability of our operating subsidiaries to, among other things:
 
 	Ÿ	 	pay dividends, redeem shares or make other distributions with respect to equity interests, make payments with respect to subordinated indebtedness or other restricted payments;	
 
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 	Ÿ	 	incur debt or issue preferred stock;	
 
 	Ÿ	 	create liens;	
 
 	Ÿ	 	make certain investments;	
 
 	Ÿ	 	consolidate, merge or dispose of all or substantially all of our assets, taken as a whole;	
 
 	Ÿ	 	sell or otherwise transfer or dispose of assets, including equity interests of our subsidiaries;	
 
 	Ÿ	 	enter into sale-leaseback transactions;	
 
 	Ÿ	 	enter into transactions with our affiliates; and	
 
 	Ÿ	 	designate our subsidiaries as unrestricted subsidiaries.	
In addition, our future debt agreements will likely contain financial ratios and other financial conditions tests. Our ability to meet those financial ratios and tests could be affected by events beyond our control, and we cannot assure you that we will meet those ratios and tests. A breach of any of these covenants could result in a default under such debt agreements. Upon the occurrence of an event of default under such debt agreements, our lenders under such agreements could elect to declare all amounts outstanding under such debt agreements to be immediately due and payable and terminate all commitments to extend further credit.
Investor confidence may be adversely impacted if we fail to achieve and maintain effective internal control over financial reporting or disclosure controls and procedures or are unable to comply with Section 404 of the Sarbanes-Oxley Act of 2002, and as a result, our stock price could decline.
We will be subject to rules adopted by the Securities Exchange Commission, or SEC, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, which requires us to include in our Annual Report on Form 10-K our management’s report on, and assessment of the effectiveness of, our internal control over financial reporting. We may also in the future become subject to the requirement that our independent registered public accounting firm attest to and report on the effectiveness of our internal control over financial reporting.
In connection with audits of our consolidated financial statements for the ten-month period ended October 25, 2009 and two-month period ended December 31, 2009, our independent registered public accounting firm reported two control deficiencies which represented a material weakness in our internal control over financial reporting. The two control deficiencies which represented a material weakness were that we did not have a sufficient number of financial personnel with the requisite financial accounting experience and that our controls over non-routine transactions were not effective to ensure that accounting considerations are identified and appropriately recorded. Based upon the remediation actions taken by us, our management has concluded that these two control deficiencies no longer exist as of December 31, 2010.
We cannot assure you that we will not discover additional material weaknesses in our internal control over financial reporting in the future. If we fail to maintain the adequacy of our internal control over financial reporting, there is a risk that we will have additional material weaknesses in the future. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our consolidated financial statements and could result in investigations or sanctions by the SEC, the New York Stock Exchange, or NYSE, or other regulatory authorities or in stockholder litigation. Any of these factors ultimately could harm our business and could negatively impact the market price of our securities. Ineffective control over financial reporting could also cause investors to lose confidence in our reported financial information, which could adversely affect the trading price of our common stock.
 
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We are also required to periodically assess and report on the adequacy of our disclosure controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Security and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, with the participation of it Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Controls and Procedures.”
We may need to incur impairment and other restructuring charges, which could materially affect our results of operations and financial conditions.
During industry downturns and for other reasons, we may need to record impairment or restructuring charges. From April 4, 2005 through December 31, 2010, we recognized aggregate restructuring and impairment charges of $65.9 million, which consisted of $60.2 million of impairment charges and $5.6 million of restructuring charges. In the future, we may need to record additional impairment charges or to further restructure our business or incur additional restructuring charges, any of which could have a material adverse effect on our results of operations or financial condition.
We are subject to litigation risks, which may be costly to defend and the outcome of which is uncertain.
All industries, including the semiconductor industry, are subject to legal claims, with and without merit, that may be particularly costly and which may divert the attention of our management and our resources in general. We are involved in a variety of legal matters, most of which we consider routine matters that arise in the normal course of business. These routine matters typically fall into broad categories such as those involving customers, employment and labor and intellectual property. Even if the final outcome of these legal claims does not have a material adverse effect on our financial position, results of operations or cash flows, defense and settlement costs can be substantial. Due to the inherent uncertainty of the litigation process, the resolution of any particular legal claim or proceeding could have a material effect on our business, financial condition, results of operations or cash flows.
Risks Related to Our Common Stock
The price of our depositary shares and common stock may be volatile and you may lose all or a part of your investment.
Prior to this offering, there has not been a public market for our depositary shares or common stock. Even though we anticipate that our shares will be quoted on the New York Stock Exchange, an active trading market for our depositary shares or common stock may not develop following this offering. You may not be able to sell your shares quickly or at the current market price if trading in our depositary shares or common stock is not active. The initial public offering price for the shares will be determined by negotiations between the underwriters, the selling stockholders and us, and may not be indicative of prices that will prevail in the trading market.
 
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In addition, the trading price of our depositary shares and common stock might be subject to wide fluctuations. Factors, some of which are beyond our control, that could affect the trading price of our depositary shares or common stock may include:
 
 	Ÿ	 	actual or anticipated variations in our results of operations from quarter to quarter or year to year;	
 
 	Ÿ	 	announcements by us or our competitors of significant agreements, technological innovations or strategic alliances;	
 
 	Ÿ	 	changes in recommendations or estimates by any securities analysts who follow our securities;	
 
 	Ÿ	 	addition or loss of significant customers;	
 
 	Ÿ	 	recruitment or departure of key personnel;	
 
 	Ÿ	 	changes in economic performance or market valuations of competing companies in our industry;	
 
 	Ÿ	 	price and volume fluctuations in the overall stock market;	
 
 	Ÿ	 	market conditions in our industry, end markets and the economy as a whole;	
 
 	Ÿ	 	subsequent sales of stock and other financings;	
 
 	Ÿ	 	litigation, legislation, regulation or technological developments that adversely affect our business; and	
 
 	Ÿ	 	the expiration of contractual lock-up agreements with our executive officers, directors and greater than 1% stockholders.	
In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation often has been instituted against the public company. Regardless of its outcome, this type of litigation could result in substantial costs to us and a likely diversion of our management’s attention. You may not receive a positive return on your investment when you sell your shares, and you could lose some or the entire amount of your investment.
Control by principal stockholders could adversely affect our other stockholders.
Based upon the MagnaChip Semiconductor LLC units outstanding as of December 31, 2010, our executive officers, directors and greater than 5% unitholders collectively beneficially owned approximately 85.8% of the common units of MagnaChip Semiconductor LLC, excluding units issuable upon exercise of outstanding options and warrants, and 86.1% of the common units, including units issuable upon exercise of outstanding options and warrants that are exercisable within sixty days of December 31, 2010. After giving effect to the corporate conversion and the sale of shares in this offering, our executive officers, directors and greater than 5% stockholders, collectively, would have owned approximately 64.3% of our common stock as of December 31, 2010, assuming no exercise of the underwriters’ option to purchase additional shares from us or the selling stockholders. On the same adjusted basis, and assuming exercise of the underwriters’ option to purchase an additional 142,500 shares from us and 1,282,500 shares from the selling stockholders, our executive officers, directors and greater than 5% stockholders, collectively, would have owned approximately 61.1% of our common stock as of December 31, 2010. In the event that we sell less than 9,500,000 shares in this offering, the ownership percentage of our executive officers, directors and greater than 5% stockholders will increase. In addition, Avenue has three designees serving as members of our seven-member board of directors. Therefore, Avenue will continue to have significant influence over our affairs for the foreseeable future, including influence over the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets.
 
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Our concentration of ownership will limit the ability of other stockholders to influence corporate matters and, as a result, we may take actions that our non-sponsor stockholders do not view as beneficial. For example, our concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could cause the market price of our common stock to decline or prevent our stockholders from realizing a premium over the market price for their shares of our common stock.
Under our certificate of incorporation, our non-employee directors and non-employee holders of five percent or more of our outstanding common stock do not have a duty to refrain from engaging in a corporate opportunity in the same or similar activities or lines of business as those engaged in by us, our subsidiaries and other related parties. Also, we have renounced any interest or expectancy in such business opportunities even if the opportunity is one that we might reasonably have pursued or had the ability or desire to pursue if granted an opportunity to do so.
We are controlled by Avenue, whose interests in our business may conflict with yours, and we are a “controlled company” within the meaning of NYSE rules.
Upon completion of this offering, Avenue will beneficially own approximately 20,789,539 shares, or 52.1%, of our outstanding common stock assuming no exercise of the underwriters’ option to purchase additional shares and approximately 49.4% assuming full exercise of the underwriters’ option to purchase additional shares. Accordingly, Avenue will be able to control most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, including mergers and sales of substantially all of our assets. Because of the equity ownership of Avenue, we will be considered a “controlled company” for purposes of the NYSE listing requirements. As such, we will be exempt from the NYSE corporate governance requirements that our board of directors meet the standards of independence established by those corporate governance requirements and exempt from the requirements that we have separate Compensation and Nominating and Corporate Governance Committees made up entirely of directors who meet such independence standards. Although we do not intend to rely upon the exemption available for controlled companies, we may choose to utilize the exemption at any time that we remain a controlled company. The NYSE independence standards are intended to ensure that directors who meet the independence standards are free of any conflicting interest with management that could influence their actions as directors. It is possible that the interests of Avenue may in some circumstances conflict with our interests and the interests of our other stockholders. In the event that Avenue’s ownership falls below 50.1% of our outstanding common stock, including as a result of the exercise in full of the underwriters’ option to purchase additional shares or as a result of an increase in the number of shares sold in this offering, we will no longer be a controlled company or be entitled to the benefits of the exemptions described above.
The future sale of significant amounts of our common stock may negatively affect our stock price, even if our business is doing well.
Sales of substantial amounts of shares of our common stock in the public market, or the prospect of such sales, could adversely affect the market price of our common stock. After giving effect to the corporate conversion and the sale of shares in this offering, we would have had 39,351,985 shares of common stock outstanding as of December 31, 2010, based on the number of MagnaChip Semiconductor LLC units outstanding as of that date. All of the shares outstanding prior to this offering are subject to lock-up agreements under which the holders of such shares have agreed not to sell or otherwise dispose of any of their shares for a period of 180 days after the date of this prospectus without the prior written consent of Barclays Capital Inc. and Deutsche Bank Securities Inc. (or other agreements which impose similar restrictions), other than any shares such holders may sell to the underwriters in this offering after the date of this prospectus pursuant to the underwriters’ option to purchase up to 142,500 additional shares of our common stock from us and 1,282,500 shares from the selling stockholders; provided, that these agreements do not restrict the ability of the stockholders party to the registration rights agreement to cause a resale registration statement to be filed in
 
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accordance with the demand registration rights described under “Description of Capital Stock—Registration Rights.” After the 180-day period, all currently outstanding shares will be eligible for sale from time to time in the future under Rule 144, Rule 701 or Section 4(1) of the Securities Act with respect to shares covered by Section 1145 of the U.S. Bankruptcy Code.
Barclays Capital Inc. and Deutsche Bank Securities Inc. can together waive the restrictions of the lock-up agreements at an earlier time without prior notice or announcement and allow stockholders to sell their shares. As restrictions on resale end, the market price of our common stock could drop significantly if the holders of the restricted shares sell such restricted shares or are perceived by the market as intending to sell such restricted shares.
Provisions in our charter documents and Delaware Law may make it difficult for a third party to acquire us and could depress the price of our common stock.
Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. Among other things, our certificate of incorporation and bylaws:
 
 	Ÿ	 	authorize our board of directors to issue, without stockholder approval, preferred stock with such terms as the board of directors may determine;	
 
 	Ÿ	 	divide our board of directors into three classes so that only approximately one-third of the total number of directors is elected each year;	
 
 	Ÿ	 	permit directors to be removed only for cause by a majority vote;	
 
 	Ÿ	 	prohibit action by written consent of our stockholders;	
 
 	Ÿ	 	prohibit any person other than our board of directors, the chairman of our board of directors, our Chief Executive Officer or holders of at least 25% of the voting power of all then outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors to call a special meeting of our stockholders; and	
 
 	Ÿ	 	specify advance notice requirements for stockholder proposals and director nominations.	
In addition, following this offering, we will be subject to the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, regulating corporate takeovers and which has an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts that might result in a premium over the market price for shares of our common stock. In general, those provisions prohibit a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless:
 
 	Ÿ	 	the transaction is approved by the board of directors before the date the interested stockholder attained that status;	
 
 	Ÿ	 	upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or	
 
 	Ÿ	 	on or after such date, the business combination is approved by the board of directors and authorized at a meeting of stockholders, and not by written consent, by at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.	
In general, Section 203 defines a business combination to include the following:
 
 	Ÿ	 	any merger or consolidation involving the corporation and the interested stockholder;	
 
 	Ÿ	 	any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;	
 
 	Ÿ	 	subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;	
 
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 	Ÿ	 	any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or	
 
 	Ÿ	 	the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.	
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by any such entity or person.
A Delaware corporation may opt out of this provision by express provision in its original certificate of incorporation or by amendment to its certificate of incorporation or bylaws approved by its stockholders. However, we have not opted out of, and do not currently intend to opt out of, this provision.
We may apply the proceeds of this offering to uses that do not improve our operating results or increase the value of your investment.
We intend to use the net proceeds from this offering to pay a portion of certain employee incentive payments payable upon the closing of this offering and to pay certain expenses of this offering. However, we will have broad discretion in how we use the net proceeds of this offering. These proceeds could be applied in ways that do not improve our operating results or increase the value of your investment. Until the net proceeds are used, they may be placed in investments that do not produce income or that lose value.
You will incur immediate and substantial dilution and may experience further dilution immediately upon the sale of our common stock in this offering.
The initial public offering price of our common stock is substantially higher than $3.32, the net tangible book value per share of our common stock as of December 31, 2010, calculated on a pro forma basis for the sale of shares in this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of $12.68 in net tangible book value per share from the price you paid, based on the assumed initial offering price of $16.00 per share. The exercise of outstanding options and warrants to purchase shares of our common stock at a weighted average exercise price of $6.33 and $15.76 per share, respectively (assuming a conversion ratio of eight-for-one between the common units of MagnaChip Semiconductor LLC and our shares of common stock), will result in further dilution.
The U.S. federal income tax consequences of the cancellation of the depositary shares are not specifically addressed by applicable law.
Applicable law does not specifically address, under circumstances comparable to ours, the U.S. federal income tax consequences of cancellation of the depositary shares, and the issuance of a credit for the number of shares of common stock equal to the number of cancelled depositary shares. Further, we have not, and will not, obtain a ruling from the Internal Revenue Service, or IRS, with respect to the U.S. federal income tax consequences of the cancellation of the depositary shares and issuance of a credit for common stock. If the IRS were to conclude that a holder of our depositary shares did not own the underlying shares, the cancellation of the depositary shares might be a taxable transaction to the holder, causing the holder to recognize gain or loss in an amount equal to the difference between the fair market value of the underlying common stock at the time of cancellation of the depositary shares and the holder’s tax basis in the depositary shares.
 
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We will incur increased costs as a result of being a publicly listed company, and these additional costs could harm our business and results of operations.
The Sarbanes-Oxley Act, as well as rules promulgated by the SEC and the NYSE, require us to adopt corporate governance practices applicable to U.S. public companies. These rules and regulations will increase our legal and financial compliance costs and make certain compliance and reporting activities more time-consuming. We also expect it to be more difficult and more expensive for us to obtain and maintain director and officer liability insurance, which may cause us to accept reduced policy limits and reduced coverage or to incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. We cannot predict or estimate the amount of additional costs we may incur, but these additional costs and demands on management time and attention may harm our business and results of operations.
We do not intend to pay dividends for the foreseeable future after this offering, and therefore, investors should rely on sales of their common stock as the only way to realize any future gains on their investments.
We do not intend to pay any cash dividends in the foreseeable future after this offering. The payment of cash dividends on common stock is restricted under the terms of the indenture for our senior notes. We anticipate that we will retain all of our future earnings after this offering for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
 
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INDUSTRY AND MARKET DATA
In this prospectus, we rely on and refer to information regarding the semiconductor market from iSuppli Corporation, or iSuppli, and Gartner, Inc., or Gartner. Market data attributed to iSuppli is from “Display Driver ICs Q3 2010 Market Tracker” and “Power Management Q3 2010 Market Tracker” and market data attributed to Gartner is from “Semiconductor Forecast Worldwide: Forecast Database, 08 Dec 2010.” Although we believe that this information is reliable, we have not independently verified it. We do not have any obligation to announce or otherwise make publicly available updates or revisions to forecasts contained in these documents. In addition, in many cases, we have made statements in this prospectus regarding our industry and our position in the industry based on our experience in the industry and our own investigation of market conditions.
SPECIAL CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Information concerning us and this offering is subject to risks and uncertainties. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements can be identified by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All statements other than statements of historical facts included in this prospectus that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.
These forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this prospectus are not guarantees of future performance, and we cannot assure any reader that those statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” sections and elsewhere in this prospectus.
All forward-looking statements speak only as of the date of this prospectus. We do not intend to publicly update or revise any forward-looking statements as a result of new information or future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
 
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USE OF PROCEEDS
We estimate that the net proceeds from the sale of the common stock that we are offering will be approximately $3.3 million, after deducting the underwriting discounts and commissions and the estimated offering expenses payable by us (assuming an initial public offering price of $16.00 per share, the midpoint of the range set forth on the cover page of this prospectus). We will not receive any of the proceeds from the sale of our common stock by the selling stockholders.
We intend to use the net proceeds to us from this offering to partially fund approximately $12 million in discretionary incentive payments to all of our employees, excluding our executive officers. The remainder of the funds necessary to make our employee incentive payments, if necessary, will be made from cash on hand, and if we raise more or fewer proceeds from this offering than anticipated, the amount required to fund the employee incentive payments from cash on hand will be reduced or increased by a commensurate amount.
Pending such use, we intend to invest the net proceeds of this offering in short-term, investment-grade, interest-bearing securities.
DIVIDEND POLICY
We do not intend to pay any cash dividends on our common stock in the foreseeable future after this offering. We anticipate that we will retain all of our future earnings after this offering for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. The payment of cash dividends on our common stock is restricted under the terms of the indenture governing our senior notes.
On April 19, 2010, we made a $130.7 million cash distribution to our unitholders using proceeds from the sale of our senior notes. The per common unit distribution was $0.4254.
CORPORATE CONVERSION
In connection with this offering, our board of directors and the holders of a majority of our outstanding common units will elect to convert MagnaChip Semiconductor LLC from a Delaware limited liability company to a Delaware corporation. In order to consummate such a conversion, a certificate of conversion will be filed with the Secretary of State of the State of Delaware prior to the effectiveness of the registration statement of which this prospectus is a part. In connection with the corporate conversion, outstanding common units of MagnaChip Semiconductor LLC will be automatically converted into shares of common stock of MagnaChip Semiconductor Corporation, outstanding options to purchase common units of MagnaChip Semiconductor LLC will be automatically converted into options to purchase shares of common stock of MagnaChip Semiconductor Corporation and outstanding warrants to purchase common units of MagnaChip Semiconductor LLC will be automatically converted into warrants to purchase shares of common stock of MagnaChip Semiconductor Corporation, all at a ratio of eight-for-one.
 
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CAPITALIZATION
The following table sets forth the following information:
 
 	Ÿ	 	the actual capitalization of MagnaChip Semiconductor Corporation as of December 31, 2010; and	
 
 	Ÿ	 	our actual capitalization as of December 31, 2010 as adjusted to give effect to the sale by us of 950,000 shares of our common stock in this offering at an initial public offering price of $16.00 per share (the midpoint of the range set forth on the front cover of this prospectus), after the deduction of the underwriting discounts and commissions of $1.1 million and the estimated offering expenses of $10.8 million payable by us, and the application of the related proceeds as described under “Use of Proceeds.”	
This table should be read together with “Use of Proceeds,” “Selected Historical Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

 	  	As of December 31, 2010	 	
 	  	Actual	 	 	As Adjusted (1)	 	
 	  	(in millions)	 	
10.500% senior notes due 2018(2)	  	$	246.9	  	 	$	246.9	  	
Capital lease obligation (including current maturities)	  	 	8.7	  	 	 	8.7	  	
Stockholders’ equity:	  	 	 	 	 	 	 	 	
Common stock, $0.01 par value; 150,000,000 shares authorized, 38,401,985 shares issued and outstanding, actual; and 39,351,985 shares issued and outstanding, as adjusted	  	 	0.4	  	 	 	0.4	  	
Preferred stock, $0.01 par value, no shares authorized, issued and outstanding, actual; 5,000,000 shares authorized, no shares issued and outstanding, as adjusted	  	 	—	  	 	 	—	  	
Additional paid-in capital	  	 	95.6	  	 	 	98.9	  	
Retained earnings	  	 	72.2	  	 	 	72.2	  	
Accumulated other comprehensive loss	  	 	(5.3	) 	 	 	(5.3	) 	
 	  	 	 	 	 	 	 	 	
Total stockholders’ equity	  	 	162.9	  	 	 	166.2	  	
 	  	 	 	 	 	 	 	 	
Total capitalization	  	$	418.4	  	 	$	421.7	  	

(1)	A $1.00 decrease or increase in the assumed initial public offering price would result in approximately a $0.9 million decrease or increase in each of additional paid-in capital, total stockholders’ equity and total capitalization, assuming the total number of shares offered by us remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.	
(2)	Represents principal amount of notes net of original issue discount of $3.1 million.	
 
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DILUTION
Our net tangible book value as of December 31, 2010 was approximately $127.5 million, or $3.32 per share of our common stock. Net tangible book value represents our total tangible assets reduced by our total liabilities as of December 31, 2010. Net tangible book value per share represents net tangible book value divided by the number of shares of common stock outstanding as of December 31, 2010. Dilution in net tangible book value per share represents the difference between the amount per share that you pay in this offering and the net tangible book value per share immediately after this offering.
After giving effect to the receipt of the estimated net proceeds from the sale by us of 950,000 shares, our net tangible book value as of December 31, 2010 would have been $130.8 million, or $3.32 per share of common stock. This represents an immediate decrease in pro forma net tangible book value per share of $12.68 to you. The following table illustrates the dilution.

Assumed initial public offering price per share	  	 	 	 	  	$	16.00	  	
Net tangible book value per share as of December 31, 2010	  	$	3.32	  	  	 	 	 	
Increase in net tangible book value per share attributable to new investors	  	 	0.00	  	  	 	 	 	
Net tangible book value per share after giving effect to this offering	  	 	 	 	  	 	3.32	  	
 	  	 	 	 	  	 	 	 	
Dilution per share to new investors	  	 	 	 	  	$	12.68	  	
 	  	 	 	 	  	 	 	 	
A $1.00 increase or decrease in the assumed initial public offering price of $16.00 per share would increase or decrease the net tangible book value per share after giving effect to this offering by $0.02 per share and would increase or decrease the dilution in net tangible book value per share to investors in this offering by $0.98 per share. This calculation assumes that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and reflects the deduction of the underwriting discounts and commissions and estimated expenses of this offering.
If the underwriters exercise their option to purchase additional shares of our common stock from us in full in this offering, the net tangible book value per share after the offering would be $3.37 per share, the increase in net tangible book value per share to existing stockholders would be $0.05 per share and the dilution to new investors purchasing shares in this offering would be $12.63 per share.
The following table sets forth, as of December 31, 2010, giving effect to this offering, the differences between the amounts paid or to be paid by the groups set forth in the table with respect to the aggregate number of shares of our common stock acquired or to be acquired by each group.

 	  	Shares
Purchased	 	 	Total
Consideration	 	 	Average
Price
Per Share	 	
 	  	Number	 	  	% (2)	 	 	Amount	 	  	%	 	 	 	 	
 	  	(In millions, except share and % data)	 	
Existing stockholders	  	 	29,851,985	  	  	 	75.9	% 	 	$	43.1	  	  	 	22.1	% 	 	$	1.44	  	
New investors(1)	  	 	9,500,000	  	  	 	24.1	  	 	 	152.0	  	  	 	77.9	  	 	 	16.00	  	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total	  	 	39,351,985	  	  	 	100.0	% 	 	$	195.1	  	  	 	100.0	% 	 	$	4.96	  	

(1)	Before deduction of the underwriting discounts and commissions and estimated offering expenses payable by us.	
(2)	Sales by the selling stockholders in this offering will reduce the number of shares held by existing stockholders to 29,851,985, or 75.9% of the total number of shares of our common stock to be outstanding after the offering, and will increase the number of shares held by new investors to 9,500,000, or 24.1% of the total number of shares of our common stock to be outstanding after the offering.	
 
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If the underwriters’ option to purchase additional shares from us and the selling stockholders is exercised in full, the number of shares of common stock held by existing stockholders will be reduced to 28,569,485 shares, or 72.3% of the aggregate number of shares of common stock outstanding after this offering, and the number of shares of common stock held by new investors will be increased to 10,925,000 shares, or 27.7% of the aggregate number of shares of common stock outstanding after this offering. The total consideration paid by our existing stockholders would be $41.3 million, or 19.1%, and the total consideration paid by our new investors would be $174.8 million, or 80.9% and the average price per share paid by our existing stockholders and new investors would be $1.44 and $16.00, respectively.
To the extent that any outstanding options and warrants to purchase shares of our common stock are exercised, investors in this offering will experience further dilution. The table below sets forth the matters described with respect to the table above and assumes the exercise of all options and warrants outstanding or exercisable as of December 31, 2010. Assuming such exercise, the total number of shares purchased would be increased as a result of the additional shares underlying the options and warrants being issued. Therefore the percentage of shares purchased by the existing stockholders and new investors relative to all three groups would be decreased. Similarly, as a result of the option and warrant exercises, the total consideration to be received by us would be increased because of the additional cash received by us from option and warrant exercises. Such increase in total consideration would have the effect of decreasing the percentage of total consideration paid by the existing stockholders and new investors relative to all three groups. The average price per share for the existing stockholders and new investors would remain unchanged.

 	  	Shares
Purchased	 	 	Total
Consideration	 	 	Average
Price
Per Share	 	
 	  	Number	 	  	% (3)	 	 	Amount	 	  	%	 	 	 	 	
 	  	(In millions, except share and % data)	 	
Existing stockholders	  	 	29,851,985	  	  	 	69.1	% 	 	$	43.1	  	  	 	18.2	% 	 	$	1.44	  	
New investors(1)	  	 	9,500,000	  	  	 	22.0	  	 	 	152.0	  	  	 	64.1	  	 	 	16.00	  	
Option and warrant holders(2)	  	 	3,832,777	  	  	 	8.9	  	 	 	41.9	  	  	 	17.7	  	 	 	10.94	  	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total	  	 	43,184,762	  	  	 	100.00	% 	 	$	237.0	  	  	 	100.0	% 	 	$	5.49	  	

(1)	Before deduction of the underwriting discounts and commissions and estimated offering expenses payable by us.	
(2)	Includes shares of common stock issuable upon exercise of options previously granted to our officers, directors and employees and warrants issued in connection with our reorganization proceedings.	
(3)	Sales by the selling stockholders in this offering will reduce the number of shares held by existing stockholders to 29,851,985 , or 69.1% of the total number of shares of our common stock to be outstanding after the offering, and will increase the number of shares held by new investors to 9,500,000, or 22.0% of the total number of shares of our common stock to be outstanding after the offering.	
If the underwriters’ option to purchase additional shares from us and the selling stockholders is exercised in full, the number of shares of common stock held by existing stockholders will be reduced to 28,569,485 shares, or 65.9% of the aggregate number of shares of common stock outstanding after this offering, and the number of shares of common stock held by new investors will be increased to 10,925,000 shares, or 25.2% of the aggregate number of shares of common stock outstanding after this offering. The total consideration paid by our existing stockholders would be $41.3 million, or 16.0%, and the total consideration paid by our new investors would be $174.8 million, or 67.8% and the average price per share paid by our existing stockholders and new investors would be $1.44 and $16.00, respectively.
 
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
The following tables set forth selected historical consolidated financial data of MagnaChip Semiconductor LLC (to be converted into MagnaChip Semiconductor Corporation in connection with this offering) on or as of the dates and for the periods indicated. The selected historical consolidated financial data presented below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the notes to those consolidated financial statements, appearing elsewhere in this prospectus.
We have derived the selected consolidated financial data as of December 31, 2010 and 2009 and for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008 from the historical audited consolidated financial statements of MagnaChip Semiconductor Corporation included elsewhere in this prospectus. We have derived the selected consolidated financial data as of December 31, 2008, 2007 and 2006 and for the years ended December 31, 2007 and 2006 from the historical audited consolidated financial statements of MagnaChip Semiconductor LLC not included in this prospectus. The historical consolidated financial data for the year ended December 31, 2010 and the two-month period ended December 31, 2009 give retroactive effect to the corporate conversion. The historical results of MagnaChip Semiconductor Corporation for any prior period are not necessarily indicative of the results to be expected in any future period.
In connection with our emergence from reorganization proceedings, we implemented fresh-start accounting in accordance with ASC 852 governing reorganizations. We elected to adopt a convenience date of October 25, 2009 (a month end for our financial reporting purposes) for application of fresh-start accounting. In accordance with the ASC 852 governing reorganizations, we recorded largely non-cash reorganization income and expense items directly associated with our reorganization proceedings including professional fees, the revaluation of assets, the effects of our reorganization plan and fresh-start accounting and write-off of debt issuance costs. As a result of the application of fresh-start accounting, our financial statements prior to and including October 25, 2009 represent the operations of our pre-reorganization predecessor company and are presented separately from the financial statements of our post-reorganization successor company. As a result of the application of fresh-start accounting, the financial statements prior to and including October 25, 2009 are not fully comparable with the financial statements for periods after October 25, 2009.
 
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 	 	Successor(1)	 	 	 	 	 	Predecessor	 	 	
 	 	Year Ended
December  31,
2010	 	 	Two- Month
Period Ended
December 31,
2009	 	 	 	 	 	Ten- Month
Period Ended
October 25,
2009	 	 	Years Ended
December 31,	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	2008	 	 	2007	 	 	2006	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	(In millions, except per common unit/share data)	 	 	 	 	 	 	 	 	 	 	 	 	 	
Statements of Operations Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	770.4	  	 	$	111.1	  	 	 	 	 	 	$	449.0	  	 	$	601.7	  	 	$	709.5	  	 	$	683.9	  	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	 	526.8	  	 	 	90.4	  	 	 	 	 	 	 	311.1	  	 	 	445.3	  	 	 	578.9	  	 	 	580.4	  	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	243.6	  	 	 	20.7	  	 	 	 	 	 	 	137.8	  	 	 	156.4	  	 	 	130.7	  	 	 	103.4	  	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	66.6	  	 	 	14.5	  	 	 	 	 	 	 	56.3	  	 	 	81.3	  	 	 	82.7	  	 	 	76.1	  	 	 	 	 	 	 	 	 	 	 	 	 	
Research and development expenses	 	 	83.5	  	 	 	14.7	  	 	 	 	 	 	 	56.1	  	 	 	89.5	  	 	 	90.8	  	 	 	87.2	  	 	 	 	 	 	 	 	 	 	 	 	 	
Restructuring and impairment charges	 	 	2.0	  	 	 	—	  	 	 	 	 	 	 	0.4	  	 	 	13.4	  	 	 	12.1	  	 	 	1.7	  	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss) from continuing operations	 	 	91.4	  	 	 	(8.6	) 	 	 	 	 	 	 	25.0	  	 	 	(27.7	) 	 	 	(54.9	) 	 	 	(61.6	) 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense, net	 	 	(22.9	) 	 	 	(1.3	) 	 	 	 	 	 	 	(31.2	) 	 	 	(76.1	) 	 	 	(60.3	) 	 	 	(57.2	) 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign currency gain (loss), net	 	 	14.7	  	 	 	9.3	  	 	 	 	 	 	 	43.4	  	 	 	(210.4	) 	 	 	(4.7	) 	 	 	50.9	  	 	 	 	 	 	 	 	 	 	 	 	 	
Reorganization items, net	 	 	—	  	 	 	—	  	 	 	 	 	 	 	804.6	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	 	 	 	 	 	 	
Others	 	 	(0.7	) 	 	 	—	  	 	 	 	 	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	(8.9	) 	 	 	8.1	  	 	 	 	 	 	 	816.8	  	 	 	(286.5	) 	 	 	(65.0	) 	 	 	(6.3	) 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations before income taxes	 	 	82.5	  	 	 	(0.5	) 	 	 	 	 	 	 	841.8	  	 	 	(314.3	) 	 	 	(120.0	) 	 	 	(67.9	) 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expenses	 	 	8.4	  	 	 	1.9	  	 	 	 	 	 	 	7.3	  	 	 	11.6	  	 	 	8.8	  	 	 	9.1	  	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	74.1	  	 	 	(2.5	) 	 	 	 	 	 	 	834.5	  	 	 	(325.8	) 	 	 	(128.8	) 	 	 	(76.9	) 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from discontinued operations, net of taxes	 	 	—	  	 	 	0.5	  	 	 	 	 	 	 	6.6	  	 	 	(91.5	) 	 	 	(51.7	) 	 	 	(152.4	) 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	74.1	  	 	$	(2.0	) 	 	 	 	 	 	$	841.1	  	 	$	(417.3	) 	 	$	(180.6	) 	 	$	(229.3	) 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends accrued on preferred units	 	 	—	  	 	 	—	  	 	 	 	 	 	 	6.3	  	 	 	13.3	  	 	 	12.0	  	 	 	10.9	  	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations attributable to common units	 	$	74.1	  	 	$	(2.5	) 	 	 	 	 	 	$	828.2	  	 	$	(339.1	) 	 	$	(140.9	) 	 	$	(87.9	) 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) attributable to common units	 	$	74.1	  	 	$	(2.0	) 	 	 	 	 	 	$	834.8	  	 	$	(430.6	) 	 	$	(192.6	) 	 	$	(240.2	) 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Per unit/share data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from continuing operations per common unit/share—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	1.96	  	 	$	(0.07	) 	 	 	 	 	 	$	15.65	  	 	$	(6.43	) 	 	$	(2.69	) 	 	$	(1.66	) 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	1.89	  	 	$	(0.07	) 	 	 	 	 	 	$	15.65	  	 	$	(6.43	) 	 	$	(2.69	) 	 	$	(1.66	) 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from discontinued operations per common unit/share—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted	 	$	—	  	 	$	0.02	  	 	 	 	 	 	$	0.12	  	 	$	(1.73	) 	 	$	(0.99	) 	 	$	(2.88	) 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) per common unit/share—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	1.96	  	 	$	(0.05	) 	 	 	 	 	 	$	15.77	  	 	$	(8.16	) 	 	$	(3.68	) 	 	$	(4.54	) 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	1.89	  	 	$	(0.05	) 	 	 	 	 	 	$	15.77	  	 	$	(8.16	) 	 	$	(3.68	) 	 	$	(4.54	) 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of common units/stock	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	37.836	  	 	 	37.608	  	 	 	 	 	 	 	52.923	  	 	 	52.769	  	 	 	52.297	  	 	 	52.912	  	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	 	39.144	  	 	 	37.608	  	 	 	 	 	 	 	52.923	  	 	 	52.769	  	 	 	52.297	  	 	 	52.912	  	 	 	 	 	 	 	 	 	 	 	 	 	
Balance Sheet Data (at period end):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	172.2	  	 	$	64.9	  	 	 	 	 	 	 	 	 	 	$	4.0	  	 	$	64.3	  	 	$	89.2	  	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	 	625.7	  	 	 	453.3	  	 	 	 	 	 	 	 	 	 	 	399.2	  	 	 	707.9	  	 	 	770.1	  	 	 	 	 	 	 	 	 	 	 	 	 	
Total indebtedness(2)	 	 	246.9	  	 	 	61.8	  	 	 	 	 	 	 	 	 	 	 	845.0	  	 	 	830.0	  	 	 	750.0	  	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term obligations(3)	 	 	250.0	  	 	 	61.5	  	 	 	 	 	 	 	 	 	 	 	143.2	  	 	 	879.4	  	 	 	867.4	  	 	 	 	 	 	 	 	 	 	 	 	 	
Stockholders’/Unitholders’ equity	 	 	162.9	  	 	 	215.7	  	 	 	 	 	 	 	 	 	 	 	(787.8	) 	 	 	(477.5	) 	 	 	(284.5	) 	 	 	 	 	 	 	 	 	 	 	 	 	
Supplemental Data (unaudited):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted EBITDA(4)	 	$	157.9	  	 	$	22.1	  	 	 	 	 	 	$	76.6	  	 	$	59.8	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Net Income (Loss)(5)	 	 	89.2	  	 	 	13.3	  	 	 	 	 	 	 	9.3	  	 	 	(71.7	) 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 
(1)	As of October 25, 2009, the fresh-start adoption date, we adopted fresh-start accounting for our consolidated financial statements. Because of the emergence from reorganization proceedings and adoption of fresh-start accounting, the historical financial information for periods after October 25, 2009 is not fully comparable to periods before October 25, 2009. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Changes to Our Business.”	
(2)	Total indebtedness is calculated as long and short-term borrowings, including the current portion of long-term borrowings.	
(3)	Long-term obligations include long-term borrowings, capital leases and redeemable convertible preferred units.	
(4)	We define Adjusted EBITDA as net income (loss) less income (loss) from discontinued operations, net of taxes, adjusted to exclude (i) depreciation and amortization associated with continuing operations, (ii) interest expense, net, (iii) income tax expenses (benefits), (iv) restructuring and impairment charges, (v) other restructuring charges, (vi) abandoned IPO expenses, (vii) reorganization items, net, (viii) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (ix) equity-based compensation expense, (x) foreign currency gain (loss), net and (xi) derivative valuation gain (loss), net. See the footnotes to the table below for further information regarding these items. We present Adjusted EBITDA as a supplemental measure of our performance because:	
 
 	Ÿ	 	Adjusted EBITDA eliminates the impact of a number of items that may be either one time or recurring items that we do not consider to be indicative of our core ongoing operating performance;	
 
 	Ÿ	 	we believe that Adjusted EBITDA is an enterprise level performance measure commonly reported and widely used by analysts and investors in our industry;	
 
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 	Ÿ	 	we anticipate that our investor and analyst presentations after we are public will include Adjusted EBITDA; and	
 
 	Ÿ	 	we believe that Adjusted EBITDA provides investors with a more consistent measurement of period to period performance of our core operations, as well as a comparison of our operating performance to that of other companies in our industry.	
 
    	We use Adjusted EBITDA in a number of ways, including:	
 
 	Ÿ	 	for planning purposes, including the preparation of our annual operating budget;	
 
 	Ÿ	 	to evaluate the effectiveness of our enterprise level business strategies;	
 
 	Ÿ	 	in communications with our board of directors concerning our consolidated financial performance; and	
 
 	Ÿ	 	in certain of our compensation plans as a performance measure for determining incentive compensation payments.	
 
    	We encourage you to evaluate each adjustment and the reasons we consider them appropriate. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Adjusted EBITDA is not a measure defined in accordance with GAAP and should not be construed as an alternative to income from continuing operations, cash flows from operating activities or net income (loss), as determined in accordance with GAAP. A reconciliation of net income (loss) to Adjusted EBITDA is as follows:	

 	 	Successor	 	 	 	 	 	Predecessor	 	 	
 	 	Year Ended
December  31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	 	Ten-Month
Period Ended
October  25,
2009	 	 	Years Ended
December 31,
2008	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	(In millions)	 	 	 	 	
Net income (loss)	 	$	74.1	  	 	$	(2.0	) 	 	 	 	 	 	$	841.1	  	 	$	(417.3	) 	 	 	 	
Less: Income (loss) from discontinued operations, net of taxes	 	 	—	  	 	 	0.5	  	 	 	 	 	 	 	6.6	  	 	 	(91.5	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	74.1	  	 	 	(2.5	) 	 	 	 	 	 	 	834.5	  	 	 	(325.8	) 	 	 	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization associated with continuing operations	 	 	58.4	  	 	 	11.2	  	 	 	 	 	 	 	37.7	  	 	 	63.8	  	 	 	 	
Interest expense, net	 	 	22.9	  	 	 	1.3	  	 	 	 	 	 	 	31.2	  	 	 	76.1	  	 	 	 	
Income tax expenses	 	 	8.4	  	 	 	1.9	  	 	 	 	 	 	 	7.3	  	 	 	11.6	  	 	 	 	
Restructuring and impairment charges(a)	 	 	2.0	  	 	 	—	  	 	 	 	 	 	 	0.4	  	 	 	13.4	  	 	 	 	
Other restructuring charges(b)	 	 	—	  	 	 	—	  	 	 	 	 	 	 	13.3	  	 	 	6.2	  	 	 	 	
Abandoned IPO expenses(c)	 	 	—	  	 	 	—	  	 	 	 	 	 	 	—	  	 	 	3.7	  	 	 	 	
Reorganization items, net(d)	 	 	—	  	 	 	—	  	 	 	 	 	 	 	(804.6	) 	 	 	—	  	 	 	 	
Inventory step-up(e)	 	 	0.9	  	 	 	17.2	  	 	 	 	 	 	 	—	  	 	 	—	  	 	 	 	
Equity-based compensation expense(f)	 	 	5.2	  	 	 	2.2	  	 	 	 	 	 	 	0.2	  	 	 	0.5	  	 	 	 	
Foreign currency loss (gain), net(g)	 	 	(14.7	) 	 	 	(9.3	) 	 	 	 	 	 	 	(43.4	) 	 	 	210.4	  	 	 	 	
Derivative valuation loss, net(h)	 	 	0.7	  	 	 	—	  	 	 	 	 	 	 	—	  	 	 	—	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted EBITDA	 	$	157.9	  	 	$	22.1	  	 	 	 	 	 	$	76.6	  	 	$	59.8	  	 	 	 	

 	(a)	This adjustment is comprised of all items included in the restructuring and impairment charges line item on our consolidated statements of operations, and eliminates the impact of restructuring and impairment charges related to (i) for 2010, impairment charges of $2.0 million recorded, of which $1.6 million of impairment charges were recognized for abandoned in-process research and development projects and $0.4 million of impairment charges were recognized as a result of an annual impairment test of in-process research and development, accounted for as indefinite-lived intangible assets as part of the application of fresh-start accounting, (ii) for 2009, termination benefits and other related costs, for the ten-month period ended October 25, 2009 in connection with the closure of one of our research and development facilities in Japan, (iii) for 2008, goodwill impairment triggered by the significant adverse change in the revenue of our mobile display solutions, or MDS reporting unit, and a reversal of a portion of the restructuring accrual related to the closure of our Gumi five-inch wafer fabrication facilities in 2007. We do not believe these restructuring and impairment charges are indicative of our core ongoing operating performance because we do not anticipate similar facility closures and market driven events in our ongoing operations, although we cannot guarantee that similar events will not occur in the future.	
 	(b)	This adjustment relates to certain restructuring charges that are not included in the restructuring and impairment charges line item on our consolidated statements of operations. These items are included in selling, general and administrative expenses in our consolidated statements of operations. These charges are comprised of the following: (i) for 2009, a charge of $13.3 million for restructuring-related professional fees and related expenses, and (ii) for 2008, a charge of $6.2 million for restructuring-related professional fees and related expenses. We do not believe these other restructuring charges are indicative of our core ongoing operating performance because these charges were related, in significant part, to actions we took in response to the impacts on our business resulting from the global economic recession that persisted through 2008 and 2009. We cannot guarantee that similar charges will not be incurred in the future.	
 	(c)	This adjustment eliminates a $3.7 million charge related to expenses incurred in connection with our abandoned initial public offering in 2008. We do not believe that these charges are indicative of our core operating performance. We expect to incur similar costs in connection with this offering.	
 	(d)	This adjustment eliminates the impact of largely non-cash reorganization income and expense items directly associated with our reorganization proceedings from our ongoing operations including, among others, professional fees, the revaluation of assets, the effects of the Chapter 11 reorganization plan and fresh-start accounting principles and the write-off of debt issuance costs. Included in reorganization items, net for the ten-month period ended October 25, 2009 was our predecessor’s gain recognized from the effects of our reorganization proceedings. The gain results from the difference between our predecessor’s carrying value of remaining pre-petition liabilities subject to compromise and the amounts to be distributed pursuant to the reorganization proceedings. The gain from the effects of the reorganization proceedings and the application of fresh-start accounting principles is comprised of the discharge of liabilities subject to	
 
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 	compromise, net of the issuance of new common units and new warrants and the accrual of amounts to be settled in cash. For details regarding this adjustment, see note 5 to the consolidated financial statements of MagnaChip Semiconductor Corporation included elsewhere in this prospectus. We do not believe these items are indicative of our core ongoing operating performance because they were incurred as a result of our Chapter 11 reorganization.	
 	(e)	This adjustment eliminates the one-time impact on cost of sales associated with the write-up of our inventory in accordance with the principles of fresh-start accounting upon consummation of the Chapter 11 reorganization.	
 	(f)	This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash equity-based compensation expenses in the future, 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.	
 	(g)	This adjustment eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, as supplemental information.	
 	(h)	This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents hedge ineffectiveness or derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in USD, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.	
 
 	    	Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:	
 
 	•	 	Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;	
 
 	•	 	Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;	
 
 	•	 	Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;	
 
 	•	 	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;	
 
 	•	 	Adjusted EBITDA does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;	
 
 	•	 	Adjusted EBITDA does not reflect the costs of holding certain assets and liabilities in foreign currencies; and	
 
 	•	 	other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.	
 
 	    	Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.	
 
(5)	We present Adjusted Net Income as a further supplemental measure of our performance. We prepare Adjusted Net Income by adjusting net income (loss) to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance.	
 
    	We present Adjusted Net Income for a number of reasons, including:	
 
 	Ÿ	 	we use Adjusted Net Income in communications with our board of directors concerning our consolidated financial performance;	
 
 	Ÿ	 	we believe that Adjusted Net Income is an enterprise level performance measure commonly reported and widely used by analysts and investors in our industry; and	
 
 	Ÿ	 	we anticipate that our investor and analyst presentations after we are public will include Adjusted Net Income.	
 
    	Adjusted Net Income is not a measure defined in accordance with GAAP and should not be construed as an alternative to income from continuing operations, cash flows from operating activities or net income (loss), as determined in accordance with GAAP. We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other companies in our industry may calculate Adjusted Net Income differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Net Income, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. We define Adjusted Net Income as net income (loss) less income (loss) from discontinued operations, net of taxes, excluding (i) restructuring and impairment charges, (ii) other restructuring charges, (iii) abandoned IPO expenses, (iv) reorganization items, net, (v) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (vi) equity-based compensation expense, (vii) amortization of intangibles associated with continuing operations, (viii) foreign currency gain (loss) and (ix) derivative valuation gain (loss), net.	
 
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    	The following table summarizes the adjustments to net income (loss) that we make in order to calculate Adjusted Net Income for the periods indicated:	

 	 	Successor	 	 	  	 	Predecessor	 	
 	 	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	  	 	Ten-Month
Period Ended
October  25,
2009	 	 	Years Ended
December 31,
2008	 	
 	 	(In millions)	 	
Net income (loss)	 	$	74.1	  	 	$	(2.0	) 	 	 	 	$	841.1	  	 	$	(417.3	) 	
Less: Income (loss) from discontinued operations, net of taxes	 	 	—	  	 	 	0.5	  	 	 	 	 	6.6	  	 	 	(91.5	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	74.1	  	 	 	(2.5	) 	 	 	 	 	834.5	  	 	 	(325.8	) 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restructuring and impairment charges(a)	 	 	2.0	  	 	 	—	  	 	 	 	 	0.4	  	 	 	13.4	  	
Other restructuring charges(b)	 	 	—	  	 	 	—	  	 	 	 	 	13.3	  	 	 	6.2	  	
Abandoned IPO expenses(c)	 	 	—	  	 	 	—	  	 	 	 	 	—	  	 	 	3.7	  	
Reorganization items, net(d)	 	 	—	  	 	 	—	  	 	 	 	 	(804.6	) 	 	 	—	  	
Inventory step-up(e)	 	 	0.9	  	 	 	17.2	  	 	 	 	 	—	  	 	 	—	  	
Equity-based compensation expense(f)	 	 	5.2	  	 	 	2.2	  	 	 	 	 	0.2	  	 	 	0.5	  	
Amortization of intangibles associated with continuing operations(g)	 	 	21.0	  	 	 	5.6	  	 	 	 	 	8.8	  	 	 	20.0	  	
Foreign currency loss (gain), net(h)	 	 	(14.7	) 	 	 	(9.3	) 	 	 	 	 	(43.4	) 	 	 	210.4	  	
Derivative valuation loss, net(i)	 	 	0.7	  	 	 	—	  	 	 	 	 	—	  	 	 	—	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Net Income (Loss)	 	$	89.2	  	 	$	13.3	  	 	 	 	$	9.3	  	 	$	(71.7	) 	

 	(a)	This adjustment is comprised of all items included in the restructuring and impairment charges line item on our consolidated statements of operations, and eliminates the impact of restructuring and impairment charges related to (i) for 2010, impairment charges of $2.0 million recorded, of which $1.6 million of impairment charges were recognized for abandoned in-process research and development projects and $0.4 million of impairment charges were recognized as a result of an annual impairment test of in-process research and development, accounted for as indefinite-lived intangible assets as part of the application of fresh-start accounting, (ii) for 2009, termination benefits and other related costs, for the ten-month period ended October 25, 2009 in connection with the closure of one of our research and development facilities in Japan, (iii) for 2008, goodwill impairment triggered by the significant adverse change in the revenue of our MDS reporting unit and a reversal of a portion of the restructuring accrual related to the closure of our Gumi five-inch wafer fabrication facilities in 2007. We do not believe these restructuring and impairment charges are indicative of our core ongoing operating performance because we do not anticipate similar facility closures and market driven events in our ongoing operations, although we cannot guarantee that similar events will not occur in the future.	
 	(b)	This adjustment relates to certain restructuring charges that are not included in the restructuring and impairment charges line item on our consolidated statements of operations. These items are included in selling, general and administrative expenses in our consolidated statements of operations. These charges are comprised of the following: (i) for 2009, a charge of $13.3 million for restructuring-related professional fees and related expenses, and (ii) for 2008, a charge of $6.2 million for restructuring-related professional fees and related expenses. We do not believe these other restructuring charges are indicative of our core ongoing operating performance because these charges were related, in significant part, to actions we took in response to the impacts on our business resulting from the global economic recession that persisted through 2008 and 2009. We cannot guarantee that similar charges will not be incurred in the future.	
 	(c)	This adjustment eliminates a $3.7 million charge in 2008 related to expenses incurred in connection with our abandoned initial public offering in 2008. We do not believe that these charges are indicative of our core operating performance. We expect to incur similar costs in connection with this offering.	
 	(d)	This adjustment eliminates the impact of largely non-cash reorganization income and expense items directly associated with our reorganization proceedings from our ongoing operations including, among others, professional fees, the revaluation of assets, the effects of the Chapter 11 reorganization plan and fresh-start accounting principles and the write-off of debt issuance costs. Included in reorganization items, net for the ten-month period ended October 25, 2009 was our predecessor’s gain recognized from the effects of our reorganization proceedings. The gain results from the difference between our predecessor’s carrying value of remaining pre-petition liabilities subject to compromise and the amounts to be distributed pursuant to the reorganization proceedings. The gain from the effects of the reorganization proceedings and the application of fresh-start accounting principles is comprised of the discharge of liabilities subject to compromise, net of the issuance of new common units and new warrants and the accrual of amounts to be settled in cash. For details regarding this adjustment, see note 5 to the consolidated financial statements of MagnaChip Semiconductor Corporation included elsewhere in this prospectus. We do not believe these items are indicative of our core ongoing operating performance because they were incurred as a result of our reorganization proceedings.	
 	(e)	This adjustment eliminates the one-time impact on cost of sales associated with the write-up of our inventory in accordance with the principles of fresh-start accounting upon consummation of the Chapter 11 reorganization.	
 	(f)	This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash equity-based compensation expenses in the future, 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.	
 
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 	(g)	This adjustment eliminates the non-cash impact of amortization expense for intangible assets created as a result of the purchase accounting treatment of the Original Acquisition and other subsequent acquisitions, and from the application of fresh-start accounting in connection with the reorganization proceedings. We do not believe these non-cash amortization expenses for intangibles are indicative of our core ongoing operating performance because the assets would not have been capitalized on our balance sheet but for the application of purchase accounting or fresh-start accounting, as applicable.	
 	(h)	This adjustment eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, as supplemental information.	
 	(i)	This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents hedge ineffectiveness or derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in USD, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.	
 
 	    	Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:	
 
 	•	 	Adjusted Net Income does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;	
 
 	•	 	Adjusted Net Income does not reflect changes in, or cash requirements for, our working capital needs;	
 
 	•	 	Adjusted Net Income does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;	
 
 	•	 	Adjusted Net Income does not reflect the costs of holding certain assets and liabilities in foreign currencies; and	
 
 	•	 	other companies in our industry may calculate Adjusted Net Income differently than we do, limiting its usefulness as a comparative measure.	
 
 	    	Because of these limitations, Adjusted Net Income should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted Net Income only supplementally.	
 
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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
We have prepared the unaudited pro forma condensed consolidated financial information of MagnaChip for the year ended December 31, 2010 in accordance with Article 11 of Regulation S-X.
The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2010 is derived from the historical consolidated financial statements of MagnaChip Semiconductor Corporation and gives pro forma effect to the following as if these events had occurred on January 1, 2010:
 
 	Ÿ	 	the reorganization proceedings and adoption of fresh-start reporting;	
 
 	Ÿ	 	the corporate conversion; and	
 
 	Ÿ	 	the issuance of $250 million senior notes by MagnaChip Semiconductor S.A. and MagnaChip Semiconductor Finance Company, our wholly-owned subsidiaries, and the application of the net proceeds therefrom.	
Basis of Presentation
The following information should be read in conjunction with “Selected Historical Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Capitalization” and the audited consolidated financial statements of MagnaChip Semiconductor Corporation and the related notes included elsewhere in this prospectus. The unaudited pro forma consolidated financial information is not necessarily indicative of operating results that would have been achieved if the transactions identified above had occurred on the dates indicated, nor does it purport to represent the results we will obtain in the future.
Management prepared the accompanying unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2010 in accordance with Article 11 of Regulation S-X for inclusion in this prospectus.
The accounting policies used in the preparation of the unaudited pro forma consolidated financial statements are those disclosed in the audited consolidated financial statements of MagnaChip Semiconductor Corporation for the year ended December 31, 2010.
The following unaudited pro forma condensed consolidated financial information should be read in conjunction with “Capitalization,” “Selected Historical Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the notes to those consolidated financial statements, included elsewhere in this prospectus.
The Reorganization Proceedings and Fresh-Start Reporting
On June 12, 2009 MagnaChip Semiconductor LLC, along with certain of its subsidiaries, including MagnaChip Semiconductor S.A., filed a voluntary petition for relief in the United States Bankruptcy Court for the District of Delaware under Chapter 11 of the United States Bankruptcy Code. On November 9, 2009, our plan of reorganization became effective and we emerged from the reorganization proceedings.
In connection with our emergence from the reorganization proceedings, we implemented fresh-start accounting in accordance with ASC 852. We elected to adopt a convenience date of October 25, 2009 (a month end for our financial reporting purposes) for application of fresh-start accounting. In
 
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accordance with ASC 852, we recorded largely non-cash reorganization income and expense items directly associated with our reorganization proceedings including the revaluation of assets, the effects of our reorganization plan and fresh-start accounting, the write-off of debt issuance costs and professional fees.
In implementing fresh-start reporting, our asset values were remeasured and allocated in conformity with ASC guidance on business combinations. Fresh-start reporting requires that all liabilities, other than deferred taxes and severance benefits, be stated at fair value. Deferred taxes are determined in conformity with guidance on income taxes.
The Corporate Conversion
Prior to the effectiveness of the registration statement of which this prospectus is a part, MagnaChip Semiconductor LLC will convert from a Delaware limited liability company to a Delaware corporation. The corporate conversion adjustments in the unaudited pro forma consolidated financial information for the year ended December 31, 2010 assume the consummation of the corporate conversion of MagnaChip Semiconductor LLC and the effectiveness of our certificate of incorporation, which is expected to occur prior to the effectiveness of the registration statement of which this prospectus is a part.
 
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Issuance of $250 Million Senior Notes and Applications of Net Proceeds
On April 9, 2010, MagnaChip Semiconductor S.A. and MagnaChip Semiconductor Finance Company, our wholly-owned subsidiaries, completed the sale of $250 million in aggregate principal amount of 10.500% senior notes due 2018 at an offering price of 98.674%. Net proceeds from the notes offering were $238.4 million which represents $250 million of principal amount net of $3.3 million of original issue discount and $8.3 million of debt issuance costs, including professional fees. Of the $238.4 million of net proceeds, $130.7 million was used to make a distribution to our unitholders and $61.6 million was used to repay all outstanding borrowings under our term loan. The remaining proceeds of $46.1 million were retained to fund working capital and for general corporate purposes.

 	  	Historical	 	 	 	 	 	Pro Forma	 	
 	  	Year Ended
December 31
2010	 	 	Adjustments	 	 	Year Ended
December 31,
2010	 	
 	  	(In millions, except per common share data)	 	
Condensed Pro Forma Statement of Operations:	  	 	 	 	 	 	 	 	 	 	 	 	
Net sales	  	$	770.4	  	 	$	—	  	 	$	770.4	  	
Cost of sales	  	 	526.8	  	 	 	(0.9	)(1) 	 	 	526.0	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	  	 	243.6	  	 	 	 	 	 	 	244.4	  	
Selling, general and administrative expenses	  	 	66.6	  	 	 	—	  	 	 	66.6	  	
Research and development expenses	  	 	83.5	  	 	 	—	  	 	 	83.5	  	
Restructuring and impairment charges	  	 	2.0	  	 	 	—	  	 	 	2.0	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Operating income from continuing operations	  	 	91.4	  	 	 	 	 	 	 	92.3	  	
Interest expense, net	  	 	(22.9	) 	 	 	(5.0	)(2) 	 	 	(27.9	) 	
Foreign currency gain, net	  	 	14.7	  	 	 	—	  	 	 	14.7	  	
Others	  	 	(0.7	) 	 	 	—	  	 	 	(0.7	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
 	  	 	(8.9	) 	 	 	 	 	 	 	(13.9	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations before income taxes	  	 	82.5	  	 	 	 	 	 	 	78.4	  	
Income tax expenses	  	 	8.4	  	 	 	3.6	(3) 	 	 	12.0	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	  	$	74.1	  	 	 	 	 	 	$	66.4	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Per common share data:	  	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations per common share—	  	 	 	 	 	 	 	 	 	 	 	 	
Basic	  	$	1.96	  	 	 	 	 	 	$	1.75	  	
Diluted	  	$	1.89	  	 	 	 	 	 	$	1.70	  	
Weighted average number of common shares—	  	 	 	 	 	 	 	 	 	 	 	 	
Basic	  	 	37.836	  	 	 	 	 	 	 	37.836	  	
Diluted	  	 	39.144	  	 	 	 	 	 	 	39.144	  	
Notes to Unaudited Pro Forma Consolidated Financial Information for the Year Ended December 31, 2010
 
(1)	To eliminate the one-time impact on cost of sales associated with the step up of our inventory of $17.9 million resulting from implementation of fresh-start accounting, of which $0.9 million was charged to cost of sales in the historical statement of operations for the year ended December 31, 2010, applying the first in, first out method, or FIFO. This adjustment is considered a material non-recurring charge which is directly attributable to the reorganization proceedings and fresh-start accounting and as such is being eliminated from the historical statement of operations in presenting the unaudited pro forma statement of operations.	
 
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(2)	To eliminate interest expense of $2.1 million which was incurred on our $61.6 million aggregate principal amount new term loan and $0.2 million write-off of debt issuance costs in connection with repayment of our new term loan which was recognized in the year ended December 31, 2010. In addition, the pro forma adjustment assumes the 10.500% senior notes in the aggregate principal amount of $250.0 million, issued on April 9, 2010, were outstanding as of January 1, 2010. The resulting additional interest expense from our 10.500% senior notes would have been $7.3 million using the effective interest rate method.	
 
(3)	We believe that the pro forma adjustments related to the issuance of $250 million aggregate principal amount of senior notes and the application of the net proceeds should not have an impact on income tax expense for the year ended December 31, 2010. The pro forma adjustment resulting in an increase in interest expense, net, is primarily related to our foreign subsidiary that has sufficient amounts of operating loss carry forwards with full valuation allowance for deferred tax assets and, accordingly, such pro forma adjustment will have no income tax effect.	
Upon the corporate conversion of MagnaChip Semiconductor LLC, a partnership entity, into MagnaChip Semiconductor Corporation, effective January 1, 2010, MagnaChip Semiconductor Corporation will become a taxable entity. The resulting income tax expenses for the year ended December 31, 2010 would be $3.6 million, mainly attributable to long outstanding intercompany balances.
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the “Selected Historical Consolidated Financial and Operating Data” and our consolidated financial statements and the related notes included elsewhere in this prospectus. 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 prospectus.
Overview
We are a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. We believe we have one of the broadest and deepest analog and mixed-signal semiconductor technology platforms in the industry, supported by our 30-year operating history, large portfolio of approximately 2,730 novel registered patents and 760 pending novel patent applications and extensive engineering and manufacturing process expertise. Our business is comprised of three key segments: Display Solutions, Power Solutions and Semiconductor Manufacturing Services. Our Display Solutions products include display drivers that cover a wide range of flat panel displays and multimedia devices. Our Power Solutions products include discrete and integrated circuit solutions for power management in high-volume consumer applications. Our Semiconductor Manufacturing Services segment provides specialty analog and mixed-signal foundry services for fabless semiconductor companies that serve the consumer, computing and wireless end markets.
Our wide variety of analog and mixed-signal semiconductor products and manufacturing services combined with our deep technology platform allows us to address multiple high-growth end markets and to rapidly develop and introduce new products and services in response to market demands. Our substantial manufacturing operations in Korea and design centers in Korea and Japan place us at the core of the global consumer electronics supply chain. We believe this enables us to quickly and efficiently respond to our customers’ needs and allows us to better service and capture additional demand from existing and new customers.
To maintain and increase our profitability, we must accurately forecast trends in demand for consumer electronics products that incorporate semiconductor products we produce. We must understand our customers’ needs as well as the likely end market trends and demand in the markets they serve. We must balance the likely manufacturing utilization demand of our product businesses and foundry business to optimize our facilities utilization. We must also invest in relevant research and development activities and manufacturing capacity and purchase necessary materials on a timely basis to meet our customers’ demand while maintaining our target margins and cash flow.
The semiconductor markets in which we participate are highly competitive. The prices of our products tend to decrease regularly over their useful lives, and such price decreases can be significant as new generations of products are introduced by us or our competitors. We strive to offset the impact of declining selling prices for existing products through cost reductions and the introduction of new products that command selling prices above the average selling price of our existing products. In addition, we seek to manage our inventories and manufacturing capacity so as to mitigate the risk of losses from product obsolescence.
Demand for our products and services is driven primarily by overall demand for consumer electronics products and can be adversely affected by periods of weak consumer spending or by
 
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market share losses by our customers. To mitigate the impact of market volatility on our business, we seek to address market segments and geographies with higher growth rates than the overall consumer electronics industry. For example, in recent years, we have experienced increasing demand from OEMs and consumers in China and Taiwan relative to overall demand for our products and services. We expect to derive a meaningful portion of our growth from growing demand in such markets. We also expect that new competitors will emerge in these markets that may place increased pressure on the pricing for our products and services, but we believe that we will be able to successfully compete based upon our higher quality products and services and that the impact from the increased competition will be more than offset by increased demand arising from such markets. Further, we believe we are well-positioned competitively as a result of our long operating history, existing manufacturing capacity and our Korea-based operations.
Within our Display Solutions and Power Solutions segments, net sales are driven by design wins in which we or another company is selected by an electronics OEM or other potential customer to supply its demand for a particular product. A customer will often have more than one supplier designed in to multi-source components for a particular product line. Once designed in, 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.
Within the Semiconductor Manufacturing Services business, net sales are driven by customers’ decisions on which manufacturing services provider to use for a particular product. Most of our semiconductor manufacturing services customers are fabless and depend upon service providers like us to manufacture their products. A customer will often have more than one supplier of manufacturing services; however, they tend to allocate a majority of manufacturing volume to one of their suppliers. We strive to be the primary supplier of manufacturing services to our customers. Once selected as a primary supplier, we often specify the pricing of a particular service on a per wafer basis 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 the products we manufacture for customers are used, the inventory levels maintained by our customers and in some cases, allocation of demand for manufacturing services among selected qualified suppliers.
In contrast to fabless semiconductor companies, our internal manufacturing capacity provides us with greater control over manufacturing costs and the ability to implement process and production improvements which can favorably impact gross profit margins. Our internal manufacturing capacity also allows for better control over delivery schedules, improved consistency over product quality and reliability and improved ability to protect intellectual property from misappropriation. However, having internal manufacturing capacity exposes us to the risk of under-utilization of manufacturing capacity which results in lower gross profit margins, particularly during downturns in the semiconductor industry.
Our products and services 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. 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. Additionally, the performance of many of our products is not necessarily dependent on geometry. As a result, our manufacturing base and strategy does not require substantial investment in leading edge process equipment, allowing us to utilize our facilities and equipment over an extended period of time with moderate required capital investments. Generally, incremental capacity expansions in our segment of the market result in more
 
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moderate industry capacity expansion as compared to leading edge processes. As a result, this market, and we, specifically, are less likely to experience significant industry overcapacity, which can cause product prices to plunge dramatically. In general, we seek to invest in manufacturing capacity that can be used for multiple high-value applications over an extended period of time. We believe this capital investment strategy enables us to optimize our capital investments and facilitates deeper and more diversified product and service offerings.
Our success going forward will depend upon our ability to adapt to future challenges such as the emergence of new competitors for our products and services or the consolidation of current competitors. Additionally, we must innovate to remain ahead of, or at least rapidly adapt to, technological breakthroughs that may lead to a significant change in the technology necessary to deliver our products and services. We believe that our established relationships and close collaboration with leading customers enhance our visibility into new product opportunities, market and technology trends and improve our ability to meet these challenges successfully. In our Semiconductor Manufacturing Services business, we strive to maintain competitiveness and our position as a primary manufacturing services provider to our customers by offering high value added, unique processes, high flexibility and excellent service.
Controls and Procedures
In connection with the audits of our consolidated financial statements for the ten-month period ended October 25, 2009 and two-month period ended December 31, 2009, our independent registered public accounting firm reported two control deficiencies which represented a material weakness in our internal control over financial reporting. The two control deficiencies were that we did not have a sufficient number of financial personnel with requisite financial accounting experience and that our internal controls over non-routine transactions were not effective to ensure that accounting considerations are identified and appropriately recorded. We identified and took steps to remediate this material weakness. Based on assessments of the remediation actions taken, our management has concluded that these two control deficiencies which represented a material weakness no longer exist as of December 31, 2010. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Controls and Procedures” for management’s remediation initiatives.
Recent Changes to Our Business
Beginning in the second half of 2008, we began to take steps to refocus our business strategy, enhance our operating efficiency and improve our cash flow and profitability. We restructured our continuing operations by reducing our cost structure, increasing our focus on our core, profitable technologies, products and customers, and implemented various initiatives to lower our manufacturing costs and improve our gross margins. In connection with these initiatives, we closed our Imaging Solutions business segment, which had been a source of substantial ongoing operating losses amounting to $91.5 million and $51.7 million in 2008 and 2007, respectively, and which required substantial ongoing capital investment. Our employee headcount has declined from 3,648 as of the end of July 2008 to 3,156 at the end of 2009. As a result of these actions, we were able to reduce our costs and improve our margins. Although our goal is to continue to focus on lower costs and improved margins on an ongoing basis, we expect that the financial benefits derived from our ongoing efforts will be incremental and any such benefits may be offset by other negative factors affecting our operations.
On June 12, 2009, we filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to address the growing demands on our cash flow resulting from our long-term indebtedness. Our plan of reorganization went effective and we emerged from the reorganization proceeding on November 9, 2009. As a result of the plan of reorganization, our indebtedness was reduced from $845.0 million immediately prior to the effectiveness of our plan of reorganization to $61.8 million as of December 31, 2009.
 
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During the first half of 2009, we instituted company-wide voluntary salary reductions, which resulted in one-time savings for our continuing operations during 2009 and which in turn contributed to the decrease in salaries and related expenses in 2009 relative to 2008. In June 2009, we returned to our employees one-third of the amount by which their salaries had been reduced. We reinstated salaries to prior levels in July 2009.
In connection with our emergence from reorganization proceedings, we implemented fresh-start accounting in accordance with ASC 852 governing reorganizations. We elected to adopt a convenience date of October 25, 2009 (a month end for our financial reporting purposes) for application of fresh-start accounting. In accordance with ASC 852 governing reorganizations, we recorded largely non-cash reorganization income and expense items directly associated with our reorganization proceedings including professional fees, the revaluation of assets, the effects of our reorganization plan and fresh-start accounting, and write-off of debt issuance costs.
In implementing fresh-start accounting, we re-measured our asset values and stated all liabilities, other than deferred taxes and severance benefits, at fair value. Our reorganization value was determined based on consideration of numerous factors and various valuation methodologies, including discounted cash flows, believed by management and our financial advisors to be representative of our business and industry. Information regarding the determination of the reorganization value and application of fresh-start accounting is included in note 3 to the consolidated financial statements of MagnaChip Semiconductor Corporation included elsewhere in this prospectus. In addition, under fresh-start accounting, accumulated deficit and accumulated other comprehensive income were eliminated.
Under fresh-start accounting, our inventory, net, and intangible assets, net, increased by $17.9 million and $28.3 million, respectively, and property, plant and equipment decreased by $13.9 million, in each case to reflect the estimated fair value as of our emergence from our reorganization proceedings. As a result, our cost of sales for the two-month period ended December 31, 2009 included $17.2 million of additional costs from the inventory step-up. This resulted in our gross margin for the two-month period ended December 31, 2009 being significantly lower than for the ten-month period ended October 25, 2009 and prior periods. The increase in intangible assets results in higher amortization expenses following our emergence from our reorganization proceedings which are included in cost of sales, selling general and administrative expenses and research and development expenses. The decrease in property, plant and equipment results in lower depreciation expenses, which are included in cost of sales, selling general and administrative expenses and research and development expenses following our emergence from our reorganization proceedings.
As a result of the application of fresh-start accounting, our consolidated financial statements prior to and including October 25, 2009 represent the operations of our pre-reorganization predecessor company and are presented separately from the consolidated financial statements of our post-reorganization successor company. For the purposes of our discussion and analysis of our results of operations, we often refer to results of operations for 2009 on a combined basis, including both the period before (predecessor company) and after (successor company) effectiveness of the plan of reorganization. We believe this comparison provides useful information as the principal impact of the plan of reorganization was on our debt and capital structure and not on our core operations; and many of the steps taken to improve our core operations had commenced prior to the commencement of our reorganization proceedings.
On April 9, 2010, we completed the sale of $250 million in aggregate principal amount of 10.500% senior notes due 2018. Of the $238.4 million of net proceeds, $130.7 million was used to make a distribution to our unitholders and $61.6 million was used to repay all outstanding borrowings
 
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under our term loan. The remaining proceeds of $46.1 million were retained to fund working capital and for general corporate purposes. As a result of the higher level of indebtedness from our senior notes offering, our interest expense will increase above that which was reported for the year ended December 31, 2010 to approximately $27.9 million per year.
Business Segments
We report in three separate business segments because we derive our revenues from three principal business lines: Display Solutions, Power Solutions, and Semiconductor Manufacturing Services. We have identified these segments based on how we allocate resources and assess our performance.
 
 	Ÿ	 	Display Solutions:    Our Display Solutions products include source and gate drivers and timing controllers that cover a wide range of flat panel displays used in LCD televisions and LED televisions and displays, mobile PCs and mobile communications and entertainment devices. Our display solutions support the industry’s most advanced display technologies, such as LTPS and AMOLED, as well as high-volume display technologies such as TFT. Our Display Solutions business represented 39.7%, 50.5% and 50.5% of our net sales for the fiscal years ended December 31, 2010, 2009 (on a combined basis) and 2008, respectively.	
 
 	Ÿ	 	Power Solutions:    Our Power Solutions segment produces power management semiconductor products including discrete and integrated circuit solutions for power management in high-volume consumer applications. These products include MOSFETs, LED drivers, DC-DC converters, analog switches and linear regulators, such as low-dropout regulators, or LDOs. Our power solutions products are designed for applications such as mobile phones, LCD televisions, and desktop computers, and allow electronics manufacturers to achieve specific design goals of high efficiency and low standby power consumption. Going forward, we expect to continue to expand our power management product portfolio. Our Power Solutions business represented 7.4%, 2.2% and 0.9% of our net sales for the fiscal years ended December 31, 2010, 2009 (on a combined basis) and 2008, respectively.	
 
 	Ÿ	 	Semiconductor Manufacturing Services:    Our Semiconductor Manufacturing Services segment provides specialty analog and mixed-signal foundry services to fabless semiconductor companies that serve the consumer, computing and wireless end markets. We manufacture wafers based on our customers’ product designs. We do not market these products directly to end customers but rather supply manufactured wafers and products to our customers to market to their end customers. We offer approximately 240 process flows to our manufacturing services customers. We also often partner with key customers to jointly develop or customize specialized processes that enable our customers to improve their products and allow us to develop unique manufacturing expertise. Our manufacturing services are targeted at customers who require differentiated, specialty analog and mixed-signal process technologies such as high voltage CMOS, embedded memory and power. These customers typically serve high-growth and high-volume applications in the consumer, computing and wireless end markets. Our Semiconductor Manufacturing Services business represented 52.6%, 46.7% and 47.7% of our net sales for the fiscal years ended December 31, 2010, 2009 (on a combined basis) and 2008, respectively.	
Additional Business Metrics Evaluated by Management
Adjusted EBITDA and Adjusted Net Income
We use the terms Adjusted EBITDA and Adjusted Net Income throughout this prospectus. Adjusted EBITDA, as we define it, is a non-GAAP measure. We define Adjusted EBITDA as net income (loss) less income (loss) from discontinued operations, net of taxes, adjusted to exclude
 
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(i) depreciation and amortization associated with continuing operations, (ii) interest expense, net, (iii) income tax expense (benefits), (iv) restructuring and impairment charges, (v) other restructuring charges, (vi) abandoned IPO expenses, (vii) reorganization items, net, (viii) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (ix) equity-based compensation expense, (x) foreign currency gain (loss), net and (xi) derivative valuation gain (loss), net.
We define Adjusted Net Income as net income (loss) less income (loss) from discontinued operations, net of taxes excluding (i) restructuring and impairment charges, (ii) other restructuring charges, (iii) abandoned IPO expenses, (iv) reorganization items, net, (v) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (vi) equity-based compensation expense, (vii) amortization of intangibles associated with continuing operations, (viii) foreign currency gain (loss), net and (ix) derivative valuation gain (loss), net.
We present Adjusted EBITDA as a supplemental measure of our performance because:
 
 	Ÿ	 	Adjusted EBITDA eliminates the impact of a number of items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance;	
 
 	Ÿ	 	we believe that Adjusted EBITDA is an enterprise level performance measure commonly reported and widely used by analysts and investors in our industry;	
 
 	Ÿ	 	we anticipate that our investor and analyst presentations after we are public will include Adjusted EBITDA; and	
 
 	Ÿ	 	we believe that Adjusted EBITDA provides investors with a more consistent measurement of period to period performance of our core operations, as well as a comparison of our operating performance to companies in our industry.	
We use Adjusted EBITDA in a number of ways, including:
 
 	Ÿ	 	for planning purposes, including the preparation of our annual operating budget;	
 
 	Ÿ	 	to evaluate the effectiveness of our enterprise level business strategies;	
 
 	Ÿ	 	in communications with our board of directors concerning our consolidated financial performance; and	
 
 	Ÿ	 	in certain of our compensation plans as a performance measure for determining incentive compensation payments.	
We present Adjusted Net Income for a number of reasons, including:
 
 	Ÿ	 	we use Adjusted Net Income in communications with our board of directors concerning our consolidated financial performance;	
 
 	Ÿ	 	we believe that Adjusted Net Income is an enterprise level performance measure commonly reported and widely used by analysts and investors in our industry; and	
 
 	Ÿ	 	we anticipate that our investor and analyst presentations after we are public will include Adjusted Net Income.	
In evaluating Adjusted EBITDA and Adjusted Net Income, you should be aware that in the future we may incur expenses similar to the adjustments in our presentation of Adjusted EBITDA and Adjusted Net Income. Our presentation of Adjusted EBITDA and Adjusted Net Income should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Adjusted EBITDA and Adjusted Net Income are not measures defined in accordance with GAAP and should not be construed as an alternative to operating income, cash flows from operating activities or
 
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net income (loss), as determined in accordance with GAAP. For additional information regarding how we calculate Adjusted EBITDA and Adjusted Net Income, please see “Prospectus Summary—Summary Historical and Unaudited Pro Forma Consolidated Financial Data.”
On a pro forma basis, our Adjusted EBITDA and Adjusted Net Income for the year ended December 31, 2010 were $157.9 million and $80.6 million, respectively. Our Adjusted EBITDA and Adjusted Net Income for the combined twelve-month period ended December 31, 2009 were $98.7 million and $22.6 million, respectively. Our Adjusted EBITDA and Adjusted Net Loss for the year ended December 31, 2008 were $59.8 million and $71.7 million, respectively. This improvement resulted from our restructuring efforts and improvements in market conditions.
Factors Affecting Our Results of Operations
Net Sales.    We derive a majority of our sales (net of sales returns and allowances) from three reportable segments: Display Solutions, Power Solutions and Semiconductor Manufacturing Services. Our product inventory is primarily located in Korea and is available for drop shipment globally. Outside of Korea, we maintain limited product inventory, and our sales representatives generally relay orders to our factories in Korea for fulfillment. We have strategically located our sales and technical support offices near concentrations of major customers. Our sales offices are located in Hong Kong, Japan, Korea, Taiwan, China, the United Kingdom and the United States. Our network of authorized agents and distributors consists of agents in the United States and Europe and distributors and agents in the Asia Pacific region. Our net sales from All other consist principally of rental income and, to a limited extent in 2008, semiconductor processing services for one customer where we completed a limited number of process steps, rather than the entire production process, which we refer to as unit processing.
We recognize revenue when risk and reward of ownership passes to the customer either upon shipment, upon product delivery at the customer’s location or upon customer acceptance, depending on the terms of the arrangement. For the year ended December 31, 2010 and the combined twelve-month period ended December 31, 2009, we sold products to over 500 and 185 customers, respectively, and our net sales to our ten largest customers represented 63% and 69% of our net sales for the year ended December 31, 2010 and the combined twelve-month period ended December 31, 2009, respectively. The increase in number of customers is due to the continuing growth of our Power Solutions business. We have a combined production capacity of over 136,000 eight-inch equivalent semiconductor wafers per month. We believe our large-scale, cost-effective fabrication facilities enable us to rapidly adjust our production levels to meet shifts in demand by our end customers.
Gross Profit.    Our overall gross profit generally fluctuates as a result of changes in overall sales volumes and in the average selling prices of our products and services. Other factors that influence our gross profit include changes in product mix, the introduction of new products and services and subsequent generations of existing products and services, shifts in the utilization of our manufacturing facilities and the yields achieved by our manufacturing operations, changes in material, labor and other manufacturing costs and variation in depreciation expense. Gross profit varies by our operating segments.
Average Selling Prices.    Average selling prices for our products tend to be highest at the time of introduction of new products which utilize the latest technology and tend to decrease over time as such products mature in the market and are replaced by next generation products. We strive to offset the impact of declining selling prices for existing products through our product development activities and by introducing new products that command selling prices above the average selling price of our existing products. In addition, we seek to manage our inventories and manufacturing capacity so as to preclude losses from product and productive capacity obsolescence.
 
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Material Costs.    Our cost of sales consists of costs of raw materials, such as silicon wafers, chemicals, gases and tape, packaging supplies, equipment maintenance and depreciation expenses. We use processes that require specialized raw materials, such as silicon wafers, that are generally available from a limited number of suppliers. If demand increases or supplies decrease, the costs of our raw materials could significantly increase.
Labor Costs.    A significant portion of our employees are located in Korea. Under Korean labor laws, most employees and certain executive officers with one or more years of service are entitled to severance benefits upon the termination of their employment based on their length of service and rate of pay. As of December 31, 2010, approximately 98% of our employees were eligible for severance benefits. We have in the past implemented temporary reductions in salaries to manage through downturns in the industry. We expect to and have reversed such temporary reductions when business conditions improve.
Depreciation Expense.    We periodically evaluate the carrying values of long-lived assets, including property, plant and equipment and intangible assets, as well as the related depreciation periods. At December 31, 2010, we depreciated our property, plant and equipment using the straight-line method over the estimated useful lives of our assets. Depreciation rates vary from 30-40 years on buildings to five to ten years for certain equipment and assets. Our evaluation of carrying values is based on various analyses including cash flow and profitability projections. If our projections indicate that future undiscounted cash flows are not sufficient to recover the carrying values of the related long-lived assets, the carrying value of the assets is impaired and will be reduced, with the reduction charged to expense so that the carrying value is equal to fair value.
Selling Expenses.    We sell our products worldwide through a direct sales force as well as a network of sales agents and representatives to OEMs, including major branded customers and contract manufacturers, and indirectly through distributors. Selling expenses consist primarily of the personnel costs for the members of our direct sales force, a network of sales representatives and other costs of distribution. Personnel costs include base salary, benefits and incentive compensation. As incentive compensation is tied to various net sales goals, it will increase or decrease with net sales.
General and Administrative Expenses.    General and administrative expenses consist of the costs of various corporate operations, including finance, legal, human resources and other administrative functions. These expenses primarily consist of payroll-related expenses, consulting and other professional fees and office facility-related expenses. Historically, our selling, general and administrative expenses have remained relatively constant as a percentage of net sales, and we expect this trend to continue in the future.
Research and Development.    The rapid technological change and product obsolescence that characterize our industry require us to make continuous investments in research and development. Product development time frames vary but, in general, we incur research and development costs one to two years before generating sales from the associated new products. These expenses include personnel costs for members of our engineering workforce, cost of photomasks, silicon wafers and other non-recurring engineering charges related to product design. Additionally, we develop base-line process technology through experimentation and through the design and use of characterization wafers that help achieve commercially feasible yields for new products. The majority of research and development expenses are for process development that serves as a common technology platform for all of our product segments. Consequently, we do not allocate these expenses to individual segments. Although our research and development expenses declined significantly from 2008 to 2009, the expenses increased in the year ended December 31, 2010 and we expect the expenses to increase in future periods and to remain a relatively constant percentage of our net sales as we continue to increase our investments in research and development to develop additional products and expand our business.
 
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Restructuring and Impairment Charges.    We evaluate the recoverability of certain long-lived assets and in-process research and development assets on a periodic basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In our efforts to improve our overall profitability in future periods, we have closed or otherwise impaired, and may in the future close or impair, facilities that are underutilized and that are no longer aligned with our long-term business goals. For example, in 2008 we discontinued our Imaging Solutions business segment.
Interest Expense, Net.    Our interest expense was incurred under the Predecessor Company’s senior secured credit facility, the Predecessor Company’s second priority senior secured notes and senior subordinated notes and the Successor Company’s new term loan under the Successor Company. Our new term loan bore interest at six-month LIBOR plus 12%, and was minimally offset by interest income on cash balances. In April 2010, we repaid our new term loan with a portion of the proceeds from our sale of $250 million in aggregate principal amount of 10.500% senior notes due 2018. As a result of our reorganization, we expect that our interest expense will decrease in amount and as a percentage of net sales relative to historical periods. However, as a result of our senior notes offering, our interest expense will increase above that which was reported for the year ended December 31, 2010 to approximately $27.9 million per year.
Impact of Foreign Currency Exchange Rates on Reported Results of Operations.     Historically, a portion of our revenues and greater than the majority of our operating expenses and costs of sales have been denominated in non-U.S. currencies, principally the Korean won, and we expect that this will remain true in the future. Because we report our results of operations in U.S. dollars, changes in the exchange rate between the Korean won and the U.S. dollar could materially impact our reported results of operations and distort period to period comparisons. In particular, because of the difference in the amount of our consolidated revenues and expenses that are in U.S. dollars relative to Korean won, 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 (loss) from continuing operations 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. As a result of such foreign currency fluctuations, it could be more difficult to detect underlying trends in our business and results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our stock could be adversely affected.
 
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For periods ended on or prior to October 25, 2009, we converted our non-U.S. revenues and expenses into U.S. dollars based on cumulative average exchange rates over the periods presented. Beginning on October 25, 2009, we convert our non-U.S. revenues and expenses into U.S. dollars based on monthly average exchange rates. The following table provides the cumulative average exchange rates that we used to convert Korean won into U.S. dollars for each of the periods ended on our prior to October 25, 2009, as well as the monthly average exchange rates used for the two-month period ended December 31, 2009 and for the year ended December 31, 2010:

Period	  	Rate	 	
Year ended December 31, 2007	  	 	929:1	  	
Year ended December 31, 2008	  	 	1,099:1	  	
Ten-month period ended October 25, 2009	  	 	1,302:1	  	
Two-month period ended December 31, 2009	  	 	 	 	
November 2009	  	 	1,172:1	  	
December 2009	  	 	1,165:1	  	
Year ended December 31, 2010	  	 	 	 	
January 2010	  	 	1,139:1	  	
February 2010	  	 	1,157:1	  	
March 2010	  	 	1,138:1	  	
April 2010	  	 	1,117:1	  	
May 2010	  	 	1,163:1	  	
June 2010	  	 	1,212:1	  	
July 2010	  	 	1,207:1	  	
August 2010	  	 	1,180:1	  	
September 2010	  	 	1,167:1	  	
October 2010	  	 	1,123:1	  	
November 2010	  	 	1,126:1	  	
December 2010	  	 	1,148:1	  	
As a result of the depreciation of the Korean won against the U.S. dollar from 2007 to 2008 and from 2008 to 2009, foreign currency fluctuations generally had a materially beneficial impact on our reported profit margins and operating income (loss) from continuing operations for such periods. In contrast, as a result of the appreciation of the Korean won against the U.S. dollar from the year ended December 31, 2009 to the year ended December 31, 2010, foreign currency fluctuations had a net unfavorable impact on our reported profit margins and operating income (loss) from continuing operations for the year ended December 31, 2010 compared to the prior period. In order to provide more detailed information regarding the impact of foreign currency fluctuations on our results of operations, in our discussion of period to period comparisons under the heading “Results of Operations,” we have included information regarding the impact of the year-to-year change in the Korean won/U.S. dollar exchange rate. The information, which is described below as the impact of the depreciation or appreciation of the Korean won against the U.S. dollar, measures the impact in the change in applicable monthly or cumulative average exchange rate for the most recent period discussed as compared to the applicable monthly or cumulative average exchange rate during the prior period. For net sales that were originally denominated in Korean won, we have compared the applicable monthly or cumulative average exchange rate in effect for the prior period against the applicable monthly or cumulative average exchange rate for the period in which the sale took place on a transaction-by-transaction basis. For cost of sales and other expenses, we have compared the applicable monthly or cumulative average exchange rate during the prior period to the applicable monthly or cumulative average exchange rate during the most recent period discussed and applied that to the amount of our aggregate cost of sales and other expenses for the period that were originally denominated in Korean won. A substantial portion of the net sales recorded at our Korean subsidiary are in U.S. dollars and are converted into Korean won for reporting purposes at the subsidiary level.
 
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Although this approach does not reflect the fluctuations of the currency exchange rates for every transaction on a day-to-day basis, we believe that it provides a useful indication of the magnitude of the exchange rate impact for the periods presented.
From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. For example, in January 2010 and May 2010 our Korean subsidiary entered into foreign currency option and forward contracts in order to mitigate a portion of the impact of U.S. dollar-Korean won exchange rate fluctuations on our operating results. The January 2010 option and forward contracts require us to sell specified notional amounts in U.S. dollars and provide us the option to sell specified notional amounts in U.S. dollars during each month of 2010 commencing February 2010 to our counterparty, in each case, in exchange for Korean won at specified fixed exchange rates. The May 2010 option and forward contracts require us to sell specified notional amounts in U.S. dollars and provide us the option to sell specified notional amounts in U.S. dollars during the months of January 2011 through June 2011 to our counterparty, in each case, in exchange for Korean won at specified fixed exchange rates. In August 2010 our Korean subsidiary additionally entered into zero cost collar contracts for the same purpose with the above hedge contracts. The August 2010 zero cost collar contracts require us to sell specified notional amounts in U.S. dollars and provide us the option to sell specified notional amounts in U.S. dollars during the months of July 2011 through December 2011 to our counterparty, in each case, in exchange for Korean won at specified fixed exchange rates. In January 2011, our Korean subsidiary additionally entered into zero cost collar contracts for the same purpose with the above hedge contracts. The January 2011 zero cost collar contracts require us to sell specified notional amounts in U.S. dollars and provide us the option to sell specified notional amounts in U.S. dollars during the months of January 2012 through June 2012 to our counterparty, in each case, in exchange for Korean won at specified fixed exchange rates. Obligations under these foreign currency option, forward and zero cost collar contracts must be cash collateralized if our exposure exceeds certain specified thresholds. These option, forward and zero cost collar contracts may be terminated by the counterparty in a number of circumstances, including if our long-term debt rating falls below B-/B3 or if our total qualified and unrestricted cash and cash equivalents is less than $30 million at the end of a fiscal quarter. For further information regarding the derivative financial instruments, see note 11 to our audited consolidated financial statements for the year ended December 31, 2010 elsewhere in this prospectus.
Foreign Currency Gain or Loss.    Foreign currency translation gains or losses on transactions by us or our subsidiaries in a currency other than our or our subsidiaries’ functional currency are included in our statements of operations as a component of other income (expense). A substantial portion of this net foreign currency gain or loss relates to non-cash translation gain or loss related to the principal balance of intercompany borrowings at our Korean subsidiary that are denominated in U.S. dollars. This gain or loss results from fluctuations in the exchange rate between the Korean won and U.S. dollar.
Income Taxes.    We record our income taxes in each of the tax jurisdictions in which we operate. This process involves using an asset and liability approach whereby deferred tax assets and liabilities are recorded for differences in the financial reporting bases and tax bases of our assets and liabilities. We exercise significant management judgment in determining our provision for income taxes, deferred tax assets and liabilities. We periodically evaluate our deferred tax assets to ascertain whether it is more likely than not that the deferred tax assets will be realized. Our income tax expense has been low in absolute dollars and as a percentage of net sales principally due to the availability of tax loss carry-forwards and we expect such rate to remain low for at least the next few years.
Our operations are subject to income and transaction taxes in Korea and in multiple foreign jurisdictions. Significant estimates and judgments are required in determining our worldwide provision for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations. The ultimate amount of tax liability may be uncertain as a result.
 
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Capital Expenditures.    We invest in manufacturing equipment, software design tools and other tangible and intangible assets for capacity expansion and technology improvement. Capacity expansions and technology improvements typically occur in anticipation of seasonal increases in demand. We typically pay for capital expenditures in partial installments with portions due on order, delivery and final acceptance. Our capital expenditures include our payments for the purchase of property, plant and equipment as well as payments for the registration of intellectual property rights.
Inventories.    We monitor our inventory levels in light of product development changes and market expectations. We may be required to take additional charges for quantities in excess of demand, cost in excess of market value and product age. Our analysis may take into consideration historical usage, expected demand, anticipated sales price, new product development schedules, the effect new products might have on the sales of existing products, product age, customer design activity, customer concentration and other factors. These forecasts require us to estimate our ability to predict demand for current and future products and compare those estimates with our current inventory levels and inventory purchase commitments. Our forecasts for our inventory may differ from actual inventory use.
Principles of Consolidation.    Our consolidated financial statements include the accounts of our company and our wholly-owned subsidiaries. All intercompany transactions and balances are eliminated in consolidation.
Segments.    We operate in three segments: Display Solutions, Power Solutions and Semiconductor Manufacturing Services. Our Power Solutions segment began to generate net sales in the second quarter of 2008. Net sales and gross profit for the All other category primarily relate to certain business activities that do not constitute operating or reportable segments.
 
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Results of Operations
The following table sets forth, for the periods indicated, certain information related to our operations, expressed in U.S. dollars and as a percentage of our net sales:

 	 	Successor Company	 	 	 	  	Predecessor Company	 	 	
 	 	Year Ended
December  31,
2010	 	 	Two-Month
Period  Ended
December 31,
2009	 	 	 	  	Ten-Month
Period  Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	 	
 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
 	 	Amount	 	 	% of
net
sales	 	 	Amount	 	 	% of
net
sales	 	 	 	  	Amount	 	 	% of
net
sales	 	 	Amount	 	 	% of
net
sales	 	 	 	 	 	 	
 	 	(In millions)	 	 	 	 	 	 	
Consolidated statements of operations data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	770.4	  	 	 	100.0	% 	 	$	111.1	  	 	 	100.0	% 	 	 	  	$	449.0	  	 	 	100.0	% 	 	$	601.7	  	 	 	100.0	% 	 	 	 	 	 	
Cost of sales	 	 	526.8	  	 	 	68.4	  	 	 	90.4	  	 	 	81.4	  	 	 	  	 	311.1	  	 	 	69.3	  	 	 	445.3	  	 	 	74.0	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	243.6	  	 	 	31.6	  	 	 	20.7	  	 	 	18.6	  	 	 	  	 	137.8	  	 	 	30.7	  	 	 	156.4	  	 	 	26.0	  	 	 	 	 	 	
Selling, general and administrative expenses	 	 	66.6	  	 	 	8.6	  	 	 	14.5	  	 	 	13.1	  	 	 	  	 	56.3	  	 	 	12.5	  	 	 	81.3	  	 	 	13.5	  	 	 	 	 	 	
Research and development expenses	 	 	83.5	  	 	 	10.8	  	 	 	14.7	  	 	 	13.3	  	 	 	  	 	56.1	  	 	 	12.5	  	 	 	89.5	  	 	 	14.9	  	 	 	 	 	 	
Restructuring and impairment charges	 	 	2.0	  	 	 	0.3	  	 	 	—	  	 	 	—	  	 	 	  	 	0.4	  	 	 	0.1	  	 	 	13.4	  	 	 	2.2	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss) from continuing operations	 	 	91.4	  	 	 	11.9	  	 	 	(8.6	) 	 	 	(7.7	) 	 	 	  	 	25.0	  	 	 	5.6	  	 	 	(27.7	) 	 	 	(4.6	) 	 	 	 	 	 	
Interest expense, net	 	 	(22.9	) 	 	 	(3.0	) 	 	 	(1.3	) 	 	 	(1.1	) 	 	 	  	 	(31.2	) 	 	 	(6.9	) 	 	 	(76.1	) 	 	 	(12.7	) 	 	 	 	 	 	
Foreign currency gain (loss), net	 	 	14.7	  	 	 	1.9	  	 	 	9.3	  	 	 	8.4	  	 	 	  	 	43.4	  	 	 	9.7	  	 	 	(210.4	) 	 	 	(35.0	) 	 	 	 	 	 	
Reorganization items, net	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	  	 	804.6	  	 	 	179.2	  	 	 	—	  	 	 	—	  	 	 	 	 	 	
Others	 	 	(0.7	) 	 	 	(0.1	) 	 	 	—	  	 	 	—	  	 	 	  	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	(8.9	) 	 	 	(1.2	) 	 	 	8.1	  	 	 	7.3	  	 	 	  	 	816.8	  	 	 	181.9	  	 	 	(286.5	) 	 	 	(47.6	) 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations before income taxes	 	 	82.5	  	 	 	10.7	  	 	 	(0.5	) 	 	 	(0.5	) 	 	 	  	 	841.8	  	 	 	187.5	  	 	 	(314.3	) 	 	 	(52.2	) 	 	 	 	 	 	
Income tax expenses	 	 	8.4	  	 	 	1.1	  	 	 	1.9	  	 	 	1.8	  	 	 	  	 	7.3	  	 	 	1.6	  	 	 	11.6	  	 	 	1.9	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	74.1	  	 	 	9.6	  	 	 	(2.5	) 	 	 	(2.2	) 	 	 	  	 	834.5	  	 	 	185.9	  	 	 	(325.8	) 	 	 	(54.2	) 	 	 	 	 	 	
Income (loss) from discontinued operations, net of taxes	 	 	—	  	 	 	—	  	 	 	0.5	  	 	 	0.5	  	 	 	  	 	6.6	  	 	 	1.5	  	 	 	(91.5	) 	 	 	(15.2	) 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	74.1	  	 	 	9.6	% 	 	$	(2.0	) 	 	 	(1.8	)% 	 	 	  	$	841.1	  	 	 	187.3	% 	 	$	(417.3	) 	 	 	(69.4	)% 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Sales:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Display Solutions	 	$	305.9	  	 	 	39.7	% 	 	$	51.0	  	 	 	46.0	% 	 	 	  	$	231.9	  	 	 	51.6	% 	 	$	304.1	  	 	 	50.5	% 	 	 	 	 	 	
Power Solutions	 	 	57.3	  	 	 	7.4	  	 	 	4.7	  	 	 	4.3	  	 	 	  	 	7.6	  	 	 	1.7	  	 	 	5.4	  	 	 	0.9	  	 	 	 	 	 	
Semiconductor Manufacturing Services	 	 	405.2	  	 	 	52.6	  	 	 	54.8	  	 	 	49.3	  	 	 	  	 	206.7	  	 	 	46.0	  	 	 	287.1	  	 	 	47.7	  	 	 	 	 	 	
All other	 	 	2.1	  	 	 	0.3	  	 	 	0.5	  	 	 	0.5	  	 	 	  	 	2.8	  	 	 	0.6	  	 	 	5.0	  	 	 	0.8	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	770.4	  	 	 	100.0	% 	 	$	111.1	  	 	 	100.0	% 	 	 	  	$	449.0	  	 	 	100.0	% 	 	$	601.7	  	 	 	100.0	% 	 	 	 	 	 	

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Results of Operations—Comparison of Years Ended December 31, 2010 and December 31, 2009
The following table sets forth consolidated results of operations for the year ended December 31, 2010, the two-month period ended December 31, 2009 and the ten-month period ended October 25, 2009:

 	 	Successor
Company	 	 	 	 	 	Predecessor
Company	 	 	 	 	
 	 	Year Ended
December 31, 2010	 	 	Two-Month
Period Ended
December 31, 2009	 	 	 	 	 	Ten-Month
Period Ended
October 25, 2009	 	 	 	 	
 	 	Amount	 	 	% of
Net Sales	 	 	Amount	 	 	% of
Net Sales	 	 	 	 	 	Amount	 	 	% of
Net Sales	 	 	Change
Amount	 	
 	 	(In millions)	 	
Net sales	 	$	770.4	  	 	 	100.0	% 	 	$	111.1	  	 	 	100.0	% 	 	 	 	 	 	$	449.0	  	 	 	100.0	% 	 	$	210.3	  	
Cost of sales	 	 	526.8	  	 	 	68.4	  	 	 	90.4	  	 	 	81.4	  	 	 	 	 	 	 	311.1	  	 	 	69.3	  	 	 	125.3	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	243.6	  	 	 	31.6	  	 	 	20.7	  	 	 	18.6	  	 	 	 	 	 	 	137.8	  	 	 	30.7	  	 	 	85.0	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	66.6	  	 	 	8.6	  	 	 	14.5	  	 	 	13.1	  	 	 	 	 	 	 	56.3	  	 	 	12.5	  	 	 	(4.2	) 	
Research and development expenses	 	 	83.5	  	 	 	10.8	  	 	 	14.7	  	 	 	13.3	  	 	 	 	 	 	 	56.1	  	 	 	12.5	  	 	 	12.6	  	
Restructuring and impairment charges	 	 	2.0	  	 	 	0.3	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	0.4	  	 	 	0.1	  	 	 	1.6	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss) from continuing operations	 	 	91.4	  	 	 	11.9	  	 	 	(8.6	) 	 	 	(7.7	) 	 	 	 	 	 	 	25.0	  	 	 	5.6	  	 	 	75.0	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense, net	 	 	(22.9	) 	 	 	(3.0	) 	 	 	(1.3	) 	 	 	(1.1	) 	 	 	 	 	 	 	(31.2	) 	 	 	(6.9	) 	 	 	9.5	  	
Foreign currency gain, net	 	 	14.7	  	 	 	1.9	  	 	 	9.3	  	 	 	8.4	  	 	 	 	 	 	 	43.4	  	 	 	9.7	  	 	 	(38.1	) 	
Reorganization items, net	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	804.6	  	 	 	179.2	  	 	 	(804.6	) 	
Others	 	 	(0.7	) 	 	 	(0.1	) 	 	 	—	  	 	 	—	  	 	 	 	 	 	 	—	  	 	 	—	  	 	 	(0.7	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	(8.9	) 	 	 	(1.2	) 	 	 	8.1	  	 	 	7.3	  	 	 	 	 	 	 	816.8	  	 	 	181.9	  	 	 	(833.8	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations before income taxes	 	 	82.5	  	 	 	10.7	  	 	 	(0.5	) 	 	 	(0.5	) 	 	 	 	 	 	 	841.8	  	 	 	187.5	  	 	 	(758.8	) 	
Income tax expenses	 	 	8.4	  	 	 	1.1	  	 	 	1.9	  	 	 	1.8	  	 	 	 	 	 	 	7.3	  	 	 	1.6	  	 	 	(0.9	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	74.1	  	 	 	9.6	  	 	 	(2.5	) 	 	 	(2.2	) 	 	 	 	 	 	 	834.5	  	 	 	185.9	  	 	 	(757.9	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from discontinued operations, net of taxes	 	 	—	  	 	 	—	  	 	 	0.5	  	 	 	0.5	  	 	 	 	 	 	 	6.6	  	 	 	1.5	  	 	 	(7.1	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	74.1	  	 	 	9.6	% 	 	$	(2.0	) 	 	 	(1.8	)% 	 	 	 	 	 	$	841.1	  	 	 	187.3	% 	 	$	(765.0	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Sales

 	 	Successor
Company	 	 	 	 	 	Predecessor
Company	 	 	 	 	
 	 	 	 	 	 	 	 	Two-Month	 	 	 	 	 	Ten-Month	 	 	 	 	
 	 	Year Ended
December 31, 2010	 	 	Period Ended
December 31, 2009	 	 	 	 	 	Period Ended
October 25, 2009	 	 	 	 	
 	 	Amount	 	 	% of
Net Sales	 	 	Amount	 	 	% of
Net Sales	 	 	 	 	 	Amount	 	 	% of
Net Sales	 	 	Change
Amount	 	
 	 	(In millions)	 	
Display Solutions	 	$	305.9	  	 	 	39.7	% 	 	$	51.0	  	 	 	46.0	% 	 	 	 	 	 	$	231.9	  	 	 	51.6	% 	 	$	22.9	  	
Power Solutions	 	 	57.3	  	 	 	7.4	  	 	 	4.7	  	 	 	4.3	  	 	 	 	 	 	 	7.6	  	 	 	1.7	  	 	 	44.9	  	
Semiconductor Manufacturing Services	 	 	405.2	  	 	 	52.6	  	 	 	54.8	  	 	 	49.3	  	 	 	 	 	 	 	206.7	  	 	 	46.0	  	 	 	143.8	  	
All other	 	 	2.1	  	 	 	0.3	  	 	 	0.5	  	 	 	0.5	  	 	 	 	 	 	 	2.8	  	 	 	0.6	  	 	 	(1.3	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	770.4	  	 	 	100.0	% 	 	$	111.1	  	 	 	100.0	% 	 	 	 	 	 	$	449.0	  	 	 	100.0	% 	 	$	210.3	  	

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Net sales were $770.4 million for the year ended December 31, 2010, a $210.3 million, or 37.6 %, increase compared to $560.1 million for the combined twelve-month period ended December 31, 2009, or $111.1 million for the two-month period ended December 31, 2009 and $449.0 million for the ten-month period ended October 25, 2009. This increase was primarily due to increases in our product sales volume driven by overall business recovery in the market, an improved product mix and a $16.5 million favorable impact resulting from the appreciation of the Korean won against the U.S. dollar, which were partially offset by a decrease in average selling prices.
Display Solutions.    Net sales from our Display Solutions segment were $305.9 million for the year ended December 31, 2010, a $22.9 million, or 8.1%, increase compared to $282.9 million for the combined twelve-month period ended December 31, 2009, or $51.0 million for the two-month period ended December 31, 2009 and $231.9 million for the ten-month period ended October 25, 2009. The increase was primarily due to a 26.6% increase in sales volume. Sales volume increased as the consumer electronics industry began to recover from the economic slowdown and demand and shipments for certain consumer electronics products such as digital televisions, PCs and smart phones increased. This increase was partially offset by a 15.1% decrease in average selling prices, which was primarily from consumer price declines for LCD televisions, PC monitors and mobile devices.
Power Solutions.    Net sales from our Power Solutions segment were $57.3 million for the year ended December 31, 2010, a $44.9 million, or 362.9%, increase compared to $12.4 million for the combined twelve-month period ended December 31, 2009, or $4.7 million for the two-month period ended December 31, 2009 and $7.6 million for the ten-month period ended October 25, 2009. The increase was primarily due to a 173.5% increase in sales volume and a 69.2% increase in average selling prices driven by an improved product mix and higher demand for MOSFET products from existing and new customers as we grew this business.
Semiconductor Manufacturing Services.    Net sales from our Semiconductor Manufacturing Services segment were $405.2 million for the year ended December 31, 2010, a $143.8 million, or 55.0%, increase compared to $261.4 million for the combined twelve-month period ended December 31, 2009, or $54.8 million for the two-month period ended December 31, 2009 and $206.7 million for the ten-month period ended October 25, 2009. This increase was primarily due to a 52.1% increase in sales volume and 2.0% increase in average selling prices of eight-inch equivalent wafers driven by a strong market demand upside due to the recovery from the economic slowdown and an improved product mix of advanced process geometry.
All Other.    Net sales from All other were $2.1 million for the year ended December 31, 2010, a $1.3 million, or 38.5%, decrease compared to $3.3 million for the combined twelve-month period ended December 31, 2009, or $0.5 million for the two-month period ended December 31, 2009 and $2.8 million for the ten-month period ended October 25, 2009. This decrease resulted from lower rental income due to the relocation of one lessee of our building.
 
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Net Sales by Geographic Region
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 year ended December 31, 2010, the two-month period ended December 31, 2009 and the ten-month period ended October 25, 2009:

 	  	Successor
Company	 	 	Predecessor
Company	 	 	 	 	
 	  	Year Ended
December 31, 2010	 	 	Two-Month
Period Ended
December 31, 2009	 	 	Ten-Month
Period Ended
October 25, 2009	 	 	 	 	
 	  	Amount	 	  	% of
Net Sales	 	 	Amount	 	  	% of
Net Sales	 	 	Amount	 	  	% of
Net Sales	 	 	Change
Amount	 	
 	  	(In millions)	 	
Korea	  	$	379.1	  	  	 	49.2	% 	 	$	62.2	  	  	 	56.0	% 	 	$	244.3	  	  	 	54.4	% 	 	$	72.5	  	
Asia Pacific	  	 	222.1	  	  	 	28.8	  	 	 	25.6	  	  	 	23.0	  	 	 	116.9	  	  	 	26.0	  	 	 	79.6	  	
Japan	  	 	57.4	  	  	 	7.5	  	 	 	6.5	  	  	 	5.8	  	 	 	31.6	  	  	 	7.0	  	 	 	19.3	  	
North America	  	 	95.2	  	  	 	12.4	  	 	 	14.9	  	  	 	13.4	  	 	 	48.5	  	  	 	10.8	  	 	 	31.8	  	
Europe	  	 	14.9	  	  	 	1.9	  	 	 	1.9	  	  	 	1.7	  	 	 	7.7	  	  	 	1.7	  	 	 	5.4	  	
Africa	  	 	1.7	  	  	 	0.2	  	 	 	—	  	  	 	—	  	 	 	—	  	  	 	—	  	 	 	1.7	  	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
 	  	$	770.4	  	  	 	100.0	% 	 	$	111.1	  	  	 	100.0	% 	 	$	449.0	  	  	 	100.0	% 	 	$	210.3	  	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Net sales in Korea for the year ended December 31, 2010 increased compared to the combined twelve-month period ended December 31, 2009, primarily due to the overall business recovery in the market and increased demand for Display Solutions products and Semiconductor Manufacturing Services. Net sales in Asia Pacific and North America for the year ended December 31, 2010 increased compared to the combined twelve-month period ended December 31, 2009, primarily due to the overall business recovery in the market and increased demand for Semiconductor Manufacturing Services and Power Solutions products.
Gross Profit

 	  	Successor
Company	 	 	Predecessor
Company	 	 	 	 	
 	  	Year Ended
December 31, 2010	 	 	Two-Month
Period Ended
December 31, 2009	 	 	Ten-Month
Period Ended
October 25, 2009	 	 	 	 	
 	  	Account	 	  	% of
Net Sales	 	 	Account	 	  	% of
Net Sales	 	 	Account	 	  	% of
Net Sales	 	 	Change
Amount	 	
 	  	(In millions)	 	
Display Solutions	  	$	78.2	  	  	 	25.6	% 	 	$	8.7	  	  	 	17.1	% 	 	$	61.8	  	  	 	26.6	% 	 	$	7.6	  	
Power Solutions	  	 	7.9	  	  	 	13.7	  	 	 	0.7	  	  	 	15.5	  	 	 	1.4	  	  	 	18.8	  	 	 	5.7	  	
Semiconductor Manufacturing Services	  	 	155.5	  	  	 	38.4	  	 	 	10.7	  	  	 	19.5	  	 	 	71.8	  	  	 	34.8	  	 	 	73.0	  	
All other	  	 	2.1	  	  	 	100.0	  	 	 	0.5	  	  	 	100.0	  	 	 	2.8	  	  	 	100.0	  	 	 	(1.3	) 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
 	  	$	243.6	  	  	 	31.6	% 	 	$	20.7	  	  	 	18.6	% 	 	$	137.8	  	  	 	30.7	% 	 	$	85.0	  	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total gross profit was $243.6 million for the year ended December 31, 2010 compared to $158.5 million for the combined twelve-month period ended December 31, 2009, or $20.7 million for the two-month period ended December 31, 2009 and $137.8 million for the ten-month period ended October 25, 2009, a $85.0 million, or 53.6%, increase. Gross profit as a percentage of net sales for the year ended December 31, 2010 increased to 31.6% compared to 28.3% for the combined twelve-
 
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month period ended December 31, 2009. This increase in gross margin was primarily attributable to increased sales volume and a positive favorable impact on cost of sales in 2010 by the fresh-start inventory valuation, partially offset by lower average selling prices and a $15.9 million unfavorable impact resulting from the appreciation of the Korean won against the U.S. dollar, which adversely impacted cost of sales to a greater extent than the favorable impact on net sales. Cost of sales for the year ended December 31, 2010 increased by $125.3 million compared to the combined twelve-month period ended December 31, 2009. The increase in cost of sales was primarily due to a $32.4 million unfavorable impact resulting from the appreciation of the Korean won against the U.S. dollar, a $27.0 million increase in material costs, a $40.0 million increase in labor costs resulting from the increased sales volume and the reinstatement of our salary levels from our company-wide voluntary salary reductions that were in effect in the first half of 2009, a $16.9 million increase in subcontractor costs due to the increased sales volume and a $22.4 million increase in overhead costs related to maintenance, repair and supplies expense incurred for maintaining higher levels of utilization of our manufacturing facilities.
Display Solutions.    Gross margin for our Display Solutions segment for the year ended December 31, 2010 increased to 25.6% compared to 24.9% for the combined twelve-month period ended December 31, 2009 primarily due to a 26.6% increase in sales volume and improved product mix offset in part by lower average selling prices. Cost of sales for the year ended December 31, 2010 increased by $15.3 million compared to the combined twelve-month period ended December 31, 2009, primarily due to a $12.6 million unfavorable impact resulting from the appreciation of the Korean won against the U.S. dollar and a $10.2 million increase in labor costs resulting from the increased sales volume. The total increase was partially offset by the impact of the fresh-start step-up of our inventory valuation, which decreased by $6.4 million compared to 2009.
Power Solutions.    Gross margin for our Power Solutions segment for the year ended December 31, 2010 decreased to 13.7% compared to 17.5% for the combined twelve-month period ended December 31, 2009. However, gross profit increased by $5.7 million for the year ended December 31, 2010 compared to the combined twelve-month period ended December 31, 2009 due to increased sales volume and average selling prices. Cost of sales for the year ended December 31, 2010 increased by $39.2 million compared to the combined twelve-month period ended December 31, 2009 primarily due to a $9.9 million increase in material costs, a $4.3 million increase in labor costs, a $16.8 million increase in subcontractor costs due to increased sales volume, a $3.9 million increase in overhead costs related to maintenance, repair and supplies expenses incurred for maintaining a higher level of utilization of our manufacturing facilities, and a $2.5 million unfavorable impact resulting from the appreciation of the Korean won against the U.S. dollar.
Semiconductor Manufacturing Services.    Gross margin for our Semiconductor Manufacturing Services segment increased to 38.4% in the year ended December 31, 2010 from 31.6% in the combined twelve-month period ended December 31, 2009. This increase was primarily due to a decrease in unit cost of sales resulting from higher utilization of our manufacturing facilities and improved product mix. Gross profit increased by $73.0 million for the year ended December 31, 2010 compared to the combined twelve-month period ended December 31, 2009 due to increased sales volume and average selling prices. Cost of sales for the year ended December 31, 2010 increased by $70.8 million compared to the combined twelve-month period ended December 31, 2009, which was primarily attributable to a $17.3 million unfavorable impact resulting from the appreciation of the Korean won against the U.S. dollar, a $19.2 million increase in material costs and a $25.5 million increase in labor costs resulting from the increased sales volume and the reinstatement of our salary level from our company-wide voluntary salary reductions that were in effect in the first half of 2009 and $16.3 million increase in overhead costs related to maintenance, repair and supplies expense incurred for
 
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maintaining higher levels of utilization of our manufacturing facilities. The total increase was partially offset by the impact of the fresh-start step-up of our inventory valuation, which decreased by $10.9 million compared to 2009 .
All Other.    Gross margin for All other remained the same as there was no cost of sales in either period.
Operating Expenses
Selling, General and Administrative Expenses.    Selling, general, and administrative expenses were $66.6 million, or 8.6% of net sales for the year ended December 31, 2010, compared to $70.8 million, or 12.6% of net sales for the combined twelve-month period ended December 31, 2009. The decrease of $4.2 million, or 5.9%, was primarily attributable to a $15.3 million decrease in outside service expenses, primarily due to a decrease in restructuring-related professional fees and related expenses. These decreases were partially offset by a $4.3 million unfavorable impact resulting from the appreciation of the Korean won against the U.S. dollar and a $7.3 million increase in salaries and severance benefits resulting from the reinstatement of our salary levels from our company-wide voluntary salary reductions that were in effect in the first half of 2009.
Research and Development Expenses.    Research and development expenses for the year ended December 31, 2010 were $83.5 million, an increase of $12.6 million, or 17.8%, from $70.9 million for the combined twelve-month period ended December 31, 2009. This increase was due to a $5.8 million unfavorable impact resulting from the appreciation of the Korean won against the U.S. dollar, a $5.1 million increase in salaries and related expenses resulting from the reinstatement of our salary levels from our company-wide voluntary salary reductions that were in effect in the first half of 2009, a $1.9 million increase in material costs, a $1.1 million increase in outside service fees and a $4.2 million increase in amortization expenses due to the write-up of our intangible assets in accordance with fresh-start accounting. These increases were partially offset by a $5.3 million decrease in costs transferred from manufacturing to research and development expenses due to improved facilities utilization resulting from our higher net sales. Research and development expenses as a percentage of net sales were 10.8% in the year ended December 31, 2010, compared to 12.7% in the combined twelve-month period ended December 31, 2009.
Restructuring and Impairment Charges.    Restructuring and impairment charges increased by $1.6 million in the year ended December 31, 2010 compared to the combined twelve-month period ended December 31, 2009. Impairment charges of $2.0 million recorded in the year ended December 31, 2010 were related to impairment of in-process research and development projects,
which were accounted for as indefinite-lived intangible assets as part of the application of fresh-start accounting. Of the impairment charges of $2.0 million, $1.6 million of impairment charges were recognized for abandoned in-process research and development projects and $0.4 million of impairment charges were recognized as a result of our annual impairment test of in-process research and development. Restructuring charges of $0.4 million recorded in the combined twelve-month period ended December 31, 2009 were related to the closure of our research and development facilities in Japan.
Operating Income from Continuing Operations
As a result of the foregoing, operating income from continuing operations increased by $75.0 million, or 458.5%, in the year ended December 31, 2010 compared to the combined twelve-month period ended December 31, 2009. As discussed above, the increase in operating income from continuing operations was primarily a result of the 37.6% increase in net sales over the prior year, partially offset by a $12.6 million, or 17.8%, increase in research and development expenses during the same year. The increase in net sales for the year ended December 31, 2010 is mainly due to
 
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increased sales volume driven by overall business recovery in the market and an improved product mix, primarily in connection with our Semiconductor Manufacturing Services segment.
Other Income (Expense)
Interest Expense, Net.    Net interest expense was $22.9 million during the year ended December 31, 2010, a decrease of $9.5 million compared to $32.4 million for the combined twelve-month period ended December 31, 2009. Interest expense for the year ended December 31, 2010 was incurred under our $250.0 million principal amount senior notes issued on April 9, 2010 and partially incurred under our new term loan, which was fully repaid on April 9, 2010. Interest expense for the combined twelve-month period ended December 31, 2009 was mainly incurred under our $750.0 million principal amount of notes and $95.0 million senior secured credit facility. Upon our emergence from reorganization proceedings, our $750.0 million notes were discharged pursuant to the reorganization plan. On November 6, 2009, $33.3 million of our senior secured credit facility was repaid in cash and $61.8 million was refinanced with the new term loan.
Foreign Currency Gain (Loss), Net.    Net foreign currency gain for the year ended December 31, 2010 was $14.7 million, compared to net foreign currency gain of $52.8 million for the combined twelve-month period ended December 31, 2009. A substantial portion of our net foreign currency gain or loss is non-cash translation gain or loss recorded for intercompany borrowings at our Korean subsidiary and is affected by changes in the exchange rate between the Korean won and the U.S. dollar. Foreign currency translation gain from our intercompany borrowings was included in determining our consolidated net income since the intercompany borrowings were not considered long-term investments in nature because management intended to repay these intercompany borrowings at their respective maturity dates. The Korean won to U.S. dollar exchange rates were 1,138.9:1 and 1,167.6:1 using the first base rate as of December 31, 2010 and December 31, 2009, respectively, as quoted by the Korea Exchange Bank.
Others.    Others for the year ended December 31, 2010 was comprised of dividend income from our investment in equity instruments and loss on valuation of derivatives which were designated as hedging instruments. The majority of the loss was loss on valuation of derivatives which represents either hedge ineffectiveness or components of changes in fair value of derivatives excluded from the assessments of hedge effectiveness.
Income Tax Expenses.    Income tax expenses for the year ended December 31, 2010 were $8.4 million, compared to income tax expenses of $9.2 million for the combined twelve-month period ended December 31, 2009. Income tax expenses for the year ended December 31, 2010 were comprised of $0.6 million of current income tax expenses, net incurred in various jurisdictions in which our overseas subsidiaries are located, $5.4 million of withholding taxes mostly accrued on intercompany interest payments, which would be utilized as foreign tax credits, but due to the uncertainty of utilization, full valuation allowance was recognized, $2.5 million of additional recognition of liabilities for uncertain tax positions and a $1.5 million income tax effect from the change of deferred tax assets less $1.6 million reversal of liabilities for uncertain tax positions due to the lapse of the applicable statute of limitations.
Income from Discontinued Operations, Net of Taxes
Income from Discontinued Operations, Net of Taxes.    During 2008, we closed our Imaging Solutions business segment. During the combined twelve-month period ended December 31, 2009, we recognized net income of $7.1 million relating to our discontinued operations, largely due to the sales of patents related to our closed Imaging Solutions business segment, which resulted in an $8.3 million gain.
 
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Net Income (Loss)
As a result of the foregoing, net income decreased by $765.0 million in the year ended December 31, 2010 compared to the combined twelve-month period ended December 31, 2009. As discussed above, the decrease in net income was primarily due to $804.6 million decrease in net reorganization gain directly associated with our reorganization proceedings and primarily reflects the discharge of liabilities of $798.0 million, partially offset by an increase in operating income from continuing operations of $75.0 million, or 458.5%, compared to the combined twelve-month period ended December 31, 2009.
Results of Operations—Comparison of Years Ended December 31, 2009 and December 31, 2008
The following table sets forth consolidated results of operations for the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008:

 	 	Successor
Company	 	 	  	  	Predecessor Company	 	 	Change
Amount	 	
 	 	Two-Month
Period
Ended
December 31,
2009	 	 	  	  	Ten-Month
Period
Ended
October 25,
2009	 	 	Year
Ended
December 31,
2008	 	 	 	 	
 	 	Amount	 	 	% of
net
sales	 	 	  	  	Amount	 	 	% of
net
sales	 	 	Amount	 	 	% of
net
sales	 	 	 	 	
 	 	(In millions)	 	
Net sales	 	$	111.1	  	 	 	100.0	% 	 	 	  	$	449.0	  	 	 	100.0	% 	 	$	601.7	  	 	 	100.0	% 	 	$	(41.6	) 	
Cost of sales	 	 	90.4	  	 	 	81.4	  	 	 	  	 	311.1	  	 	 	69.3	  	 	 	445.3	  	 	 	74.0	  	 	 	(43.7	) 	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	20.7	  	 	 	18.6	  	 	 	  	 	137.8	  	 	 	30.7	  	 	 	156.4	  	 	 	26.0	  	 	 	2.1	  	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	14.5	  	 	 	13.1	  	 	 	  	 	56.3	  	 	 	12.5	  	 	 	81.3	  	 	 	13.5	  	 	 	(10.5	) 	
Research and development expenses	 	 	14.7	  	 	 	13.3	  	 	 	  	 	56.1	  	 	 	12.5	  	 	 	89.5	  	 	 	14.9	  	 	 	(18.6	) 	
Restructuring and impairment charges	 	 	—	  	 	 	—	  	 	 	  	 	0.4	  	 	 	0.1	  	 	 	13.4	  	 	 	2.2	  	 	 	(12.9	) 	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss) from continuing operations	 	 	(8.6	) 	 	 	(7.7	) 	 	 	  	 	25.0	  	 	 	5.6	  	 	 	(27.7	) 	 	 	(4.6	) 	 	 	44.1	  	
Interest expense, net	 	 	(1.3	) 	 	 	(1.1	) 	 	 	  	 	(31.2	) 	 	 	(6.9	) 	 	 	(76.1	) 	 	 	(12.7	) 	 	 	43.7	  	
Foreign currency gain (loss), net	 	 	9.3	  	 	 	8.4	  	 	 	  	 	43.4	  	 	 	9.7	  	 	 	(210.4	) 	 	 	(35.0	) 	 	 	263.2	  	
Reorganization items, net	 	 	—	  	 	 	—	  	 	 	  	 	804.6	  	 	 	179.2	  	 	 	—	  	 	 	—	  	 	 	804.6	  	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	8.1	  	 	 	7.3	  	 	 	  	 	816.8	  	 	 	181.9	  	 	 	(286.5	) 	 	 	(47.6	) 	 	 	1,111.5	  	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations before income taxes	 	 	(0.5	) 	 	 	(0.5	) 	 	 	  	 	841.8	  	 	 	187.5	  	 	 	(314.3	) 	 	 	(52.2	) 	 	 	1,155.5	  	
Income tax expenses	 	 	1.9	  	 	 	1.8	  	 	 	  	 	7.3	  	 	 	1.6	  	 	 	11.6	  	 	 	1.9	  	 	 	(2.3	) 	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	(2.5	) 	 	 	(2.2	) 	 	 	  	 	834.5	  	 	 	185.9	  	 	 	(325.8	) 	 	 	(54.2	) 	 	 	1,157.9	  	
Income (loss) from discontinued operations, net of taxes	 	 	0.5	  	 	 	0.5	  	 	 	  	 	6.6	  	 	 	1.5	  	 	 	(91.5	) 	 	 	(15.2	) 	 	 	98.6	  	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	(2.0	) 	 	 	(1.8	)% 	 	 	  	$	841.1	  	 	 	187.3	% 	 	$	(417.3	) 	 	 	(69.4	)% 	 	$	1,256.4	  	

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Net Sales

 	 	Successor
Company	 	 	  	  	Predecessor Company	 	 	Change
Amount	 	
 	 	Two-Month
Period
Ended
December 31,
2009	 	 	  	  	Ten-Month
Period
Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	 	 	 	
 	 	Amount	 	 	% of
net
sales	 	 	  	  	Amount	 	 	% of
net
sales	 	 	Amount	 	 	% of
net
sales	 	 	 	 	
 	 	(In millions)	 	
Display Solutions	 	$	51.0	  	 	 	46.0	% 	 	 	  	$	231.9	  	 	 	51.6	% 	 	$	304.1	  	 	 	50.5	% 	 	$	(21.2	) 	
Power Solutions	 	 	4.7	  	 	 	4.3	  	 	 	  	 	7.6	  	 	 	1.7	  	 	 	5.4	  	 	 	0.9	  	 	 	6.9	  	
Semiconductor Manufacturing Services	 	 	54.8	  	 	 	49.3	  	 	 	  	 	206.7	  	 	 	46.0	  	 	 	287.1	  	 	 	47.7	  	 	 	(25.7	) 	
All other	 	 	0.5	  	 	 	0.5	  	 	 	  	 	2.8	  	 	 	0.6	  	 	 	5.0	  	 	 	0.8	  	 	 	(1.7	) 	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	111.1	  	 	 	100.0	% 	 	 	  	$	449.0	  	 	 	100.0	% 	 	$	601.7	  	 	 	100.0	% 	 	$	(41.6	) 	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales were $111.1 million for the two-month period ended December 31, 2009 and $449.0 million for the ten-month period ended October 25, 2009, or $560.1 million in aggregate, a $41.6 million, or 6.9%, decrease, compared to $601.7 million in 2008. Net sales generated in our three operating segments during 2009 in aggregate were $556.7 million, a decrease of $39.9 million, or 6.7%, from 2008. This decrease was principally due to the impact of the depreciation of the Korean won against the U.S. dollar in the amount of $17.6 million and a decrease in average selling prices of our products, both of which were partially offset by increases in product sales volume. Among our segments, net sales decreased for our Display Solutions and our Semiconductor Manufacturing Service segments which was offset in part by an increase in net sales from our Power Solutions segment.
Display Solutions.    Net sales from Display Solutions were $51.0 million for the two-month period ended December 31, 2009 and $231.9 million for the ten-month period ended October 25, 2009, or $282.9 million in aggregate, a $21.2 million, or 7.0%, decrease from $304.1 million for 2008. The decrease resulted from a 24.9% decrease in average selling prices, primarily from display driver products for LCD televisions, PC monitors and mobile devices. The reduction in average selling prices in 2009 resulted in part from reduced demand for consumer electronics products generally, and new products in particular, during the first half of 2009 as a result of the worldwide economic slowdown. These decreases in average selling prices were partially offset by a 24.6% increase in sales volume. Volume increased in the second half of 2009 as the consumer electronics industry began to recover from the economic slowdown as demand and shipments for consumer electronics products such as digital televisions, PCs, and smartphones increased.
Power Solutions.    Net sales from Power Solutions were $4.7 million for the two-month period ended December 31, 2009 and $7.6 million for the ten-month period ended October 25, 2009, or $12.4 million in aggregate, a $6.9 million, or 127.6%, increase from $5.4 million for 2008. The increase resulted from a 221.3% increase in sales volume, most of which was attributable to higher demand for MOSFET products driven by our existing and new customers. Such increases in volume were partially offset by a 29.4% decrease in average sales prices. We were able to attract new customers, largely due to MOSFET products utilized in high voltage technologies and computing solutions.
Semiconductor Manufacturing Services.    Net sales from Semiconductor Manufacturing Services were $54.8 million for the two-month period ended December 31, 2009 and $206.7 million for the ten-month period ended October 25, 2009, or $261.4 million in aggregate, a $25.7 million, or 8.9%,
 
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decrease compared to net sales of $287.1 million for 2008. This decrease was primarily due to a 0.5% decrease in sales volume and 3.4% decrease in average selling price of eight-inch equivalent wafers given decreased market demand for such products.
All other.    Net sales from All other were $0.5 million for the two-month period ended December 31, 2009 and $2.8 million for the ten-month period ended October 25, 2009, or $3.3 million in aggregate compared to $5.0 million for 2008. This decrease of $1.7 million, or 33.6%, resulted from lower rental income due to the relocation of one of the lessees of one of our buildings.
Net Sales by Geographic Region
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 two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008:

 	 	Successor
Company	 	 	  	  	Predecessor Company	 	 	Change
Amount	 	
 	 	Two-Month
Period
Ended
December 31,
2009	 	 	  	  	Ten-Month
Period
Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	 	 	 	
 	 	Amount	 	 	% of
net
sales	 	 	  	  	Amount	 	 	% of
net
sales	 	 	Amount	 	 	% of
net
sales	 	 	 	 	
 	 	(In millions)	 	
Korea	 	$	62.2	  	 	 	56.0	% 	 	 	  	$	244.3	  	 	 	54.4	% 	 	$	301.0	  	 	 	50.0	% 	 	$	5.5	  	
Asia Pacific	 	 	25.6	  	 	 	23.0	  	 	 	  	 	116.9	  	 	 	26.0	  	 	 	144.5	  	 	 	24.0	  	 	 	(2.0	) 	
Japan	 	 	6.5	  	 	 	5.8	  	 	 	  	 	31.6	  	 	 	7.0	  	 	 	79.9	  	 	 	13.3	  	 	 	(41.8	) 	
North America	 	 	14.9	  	 	 	13.4	  	 	 	  	 	48.5	  	 	 	10.8	  	 	 	61.3	  	 	 	10.2	  	 	 	2.0	  	
Europe	 	 	1.9	  	 	 	1.7	  	 	 	  	 	7.7	  	 	 	1.7	  	 	 	14.9	  	 	 	2.5	  	 	 	(5.4	) 	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	111.1	  	 	 	100.0	% 	 	 	  	$	449.0	  	 	 	100.0	% 	 	$	601.7	  	 	 	100.0	% 	 	$	(41.6	) 	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales in Japan in 2009 declined as a percentage of total net sales principally as a result of declines in customer sales relating to electronic games due to the overall slowness in that market.
Gross Profit

 	 	Successor
Company	 	 	  	  	Predecessor Company	 	 	Change
Amount	 	
 	 	Two-Month
Period
Ended
December 31,
2009	 	 	  	  	Ten-Month
Period
Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	 	 	 	
 	 	Amount	 	 	% of
net
sales	 	 	  	  	Amount	 	 	% of
net
sales	 	 	Amount	 	 	% of
net
sales	 	 	 	 	
 	 	(In millions)	 	
Display Solutions	 	$	8.7	  	 	 	17.1	% 	 	 	  	$	61.8	  	 	 	26.6	% 	 	$	57.4	  	 	 	18.9	% 	 	$	13.1	  	
Power Solutions	 	 	0.7	  	 	 	15.5	  	 	 	  	 	1.4	  	 	 	18.8	  	 	 	(4.3	) 	 	 	(78.6	) 	 	 	6.4	  	
Semiconductor Manufacturing Services	 	 	10.7	  	 	 	19.5	  	 	 	  	 	71.8	  	 	 	34.8	  	 	 	98.4	  	 	 	34.3	  	 	 	(15.9	) 	
All other	 	 	0.5	  	 	 	100.0	  	 	 	  	 	2.8	  	 	 	100.0	  	 	 	4.9	  	 	 	97.3	  	 	 	(1.6	) 	
 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	20.7	  	 	 	18.6	% 	 	 	  	$	137.8	  	 	 	30.7	% 	 	$	156.4	  	 	 	26.0	% 	 	$	2.1	  	

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Total gross profit was $20.7 million for the two-month period ended December 31, 2009 and $137.8 million for the ten-month period ended October 25, 2009, or $158.5 million in aggregate compared to $156.4 million for 2008, a $2.1 million, or 1.3%, increase. Gross margin, or gross profit as a percentage of net sales, in 2009 increased to 28.3% compared to 26.0% for the year ended December 31, 2008. This increase in gross margin was primarily attributable to a $22.8 million favorable impact resulting from the depreciation of the Korean won against the U.S. dollar and an increase in sales volume. These increases were partially offset by lower average selling prices and the impact of a $17.2 million increase in our cost of sales as a result of the write-up of our inventory in accordance with the principles of fresh-start accounting upon the consummation of our reorganization proceedings. Cost of sales for the combined twelve-month period ended December 31, 2009 decreased by $43.7 million compared to 2008. The decreases in cost of sales were primarily due to a $40.4 million favorable impact resulting from the depreciation of the Korean won against the U.S. dollar, a $10.2 million decrease in labor costs, a $9.6 million decrease in subcontractor costs and a $3.2 million decrease in depreciation, which were partially offset by a $6.4 million increase in material costs resulting from the increase in sales volume and a $1.8 million increase of overhead costs. Gross margin for the two-month period ended December 31, 2009 was 18.6% compared to 30.7% for the ten-month period ended October 25, 2009. Gross margin was higher in the ten-month period ended October 25, 2009 compared to the two-month period ended December 31, 2009 principally due to a $17.2 million one-time impact on cost of sales which is recorded in the two-month period ended December 31, 2009 associated with the step up of our inventory as a result of adoption of fresh-start accounting. As of December 31, 2009, $0.7 million of the total increase in inventory valuation remained. We included the remaining increase in inventory valuation in cost of sales for the quarter ending March 31, 2010. As a result, we expect gross margin in future periods to return to historical levels, excluding foreign currency fluctuation impacts.
Display Solutions.    Gross margin for Display Solutions for the combined twelve-month period ended December 31, 2009 improved to 24.9% compared to 18.9% for the year ended December 31, 2008 primarily due to a decrease in unit costs resulting from a 24.6% increase in sales volume compared to 2008 offset in part by lower average selling prices and the impact of the write-up of our inventory in accordance with fresh-start accounting. Cost of sales for the combined twelve-month period ended December 31, 2009 decreased by $34.3 million compared to 2008, primarily due to a $17.8 million favorable impact resulting from the depreciation of the Korean won against the U.S. dollar, a $7.1 million decrease in labor costs, a $8.2 million decrease in subcontractor costs and a $3.8 million decrease in depreciation, which were partially offset by a $3.8 million increase in material costs due to increased sales volume and a $7.2 million increase resulting from the step-up of our inventory valuation as a result of our adoption of fresh-start accounting.
Power Solutions.    Gross margin for Power Solutions for the combined twelve-month period ended December 31, 2009 improved to 17.5% compared to (78.6)% for the year ended December 31, 2008 primarily due to lower unit costs resulting from the 221.3% increase in sales volume offset in part by lower average selling prices and the impact of the write-up of our inventory in accordance with fresh-start accounting. Cost of sales for the combined twelve-month period ended December 31, 2009 increased by $0.5 million compared to 2008, primarily due to a $2.3 million increase in material costs and a $1.1 million increase in overhead costs, which were partially offset by a $0.7 million favorable impact resulting from of the depreciation of the Korean won against the U.S. dollar. Gross margin was negative in 2008 as we first began operating the segment in late 2007 and had not yet achieved sales volumes required to generate a positive gross margin.
Semiconductor Manufacturing Services.    Gross margin for Semiconductor Manufacturing Services decreased to 31.6% in the combined twelve-month period ended December 31, 2009 from 34.3% in the year ended December 31, 2008. This decrease was primarily due to an overall decrease in production volume and average selling prices in an aggregate amount of $29.5 million, partially
 
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offset by a $13.6 million favorable impact resulting from the depreciation of the Korean won against the U.S. dollar. Cost of sales for the combined twelve-month period ended December 31, 2009 decreased by $9.8 million compared to 2008, which was primarily attributable to a $21.9 million favorable impact resulting from the depreciation of the Korean won against the U.S. dollar, which was offset in part by a $0.4 million increase in material costs and a $10.9 million increase resulting from the step-up of our inventory valuation as a result of our adoption of fresh-start accounting.
All other.    Gross margin for All other for the combined twelve-month period ended December 31, 2009 increased to 100.0% from 97.3% for the year ended December 31, 2008. All net sales included in All other in 2009 represent rent revenues for which there is no cost of sales. For 2008, All other included limited revenue from unit processing which resulted in a gross margin of 97.3%.
Operating Expenses
Selling, General and Administrative Expenses.    Selling, general, and administrative expenses were $70.8 million, or 12.6%, of net sales for the combined twelve-month period ended December 31, 2009 compared to $81.3 million, or 13.5%, for 2008. The decrease of $10.5 million, or 12.9%, from the prior-year period was attributable to a decrease of $7.2 million due to the depreciation of the Korean won against the U.S. dollar and a decrease of $3.6 million due to a reduction in headcount and a short-term decrease in salaries and related expenses in connection with our cost-reduction efforts in 2009 as well as a decrease in depreciation and amortization expenses of $4.9 million. These decreases were partially offset by a $6.1 million increase in outside service expenses.
Research and Development Expenses.    Research and development expenses for the combined twelve-month period ended December 31, 2009 were $70.9 million, a decrease of $18.6 million, or 20.8%, from $89.5 million for the year ended December 31, 2008. This decrease was due to the depreciation of the Korean won against the U.S. dollar of $8.5 million, a $3.2 million decrease in salaries and related expenses due to lower headcount and our short-term decrease in salaries. Through our cost reduction initiatives, material costs decreased by $4.8 million and outside service fees decreased by $2.6 million. The remaining decrease in research and development expenses was attributable to reductions in various overhead expenses. Research and development expenses as a percentage of net sales were 12.7% in 2009, compared to 14.9% in 2008.
Restructuring and Impairment Charges.    Restructuring and impairment charges decreased by $12.9 million in the combined twelve-month period ended December 31, 2009 compared to the year ended December 31, 2008. Restructuring charges of $0.4 million recorded in the ten-month period ended October 25, 2009 were related to the closure of one of our research and development facilities in Japan. Restructuring charges of $13.4 million for the year ended December 31, 2008 reflected an impairment charge of $14.2 million as a result of the significant reduction in net sales attributable to our Display Solutions products, offset in part by an $0.9 million reversal of unused accrued restructuring charges from prior periods.
Operating Income (Loss) from Continuing Operations
As a result of the foregoing, operating income (loss) from continuing operations increased by $44.1 million in the combined twelve-month period ended December 31, 2009 compared to a loss of $27.7 million in the year ended December 31, 2008. As discussed above, the increase in operating income from continuing operations was primarily a result of the decreases in selling, general and administrative expenses and research and development expenses, which are primarily due to the depreciation of the Korean won against the U.S. dollar, a decrease in depreciation and amortization expenses, and our cost reduction efforts to enhance our operating efficiency and improve our
 
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profitability. In connection with cost reduction, we implemented several restructuring plans including headcount reductions and a short-term decrease in salaries and related expenses, which had a positive effect on operating income.
Other Income (Expense)
Interest Expense, net.    Net interest expense was $32.4 million during the combined twelve-month period ended December 31, 2009, a decrease of $43.7 million compared to $76.1 million for the year ended December 31, 2008. Interest expense was incurred under our $750 million principal amount of notes and our senior secured credit facility. From June 12, 2009, the date of our initial reorganization filing, to October 25, 2009, we did not accrue interest expenses related to our notes, which were categorized as liabilities subject to compromise. Upon our emergence from our reorganization proceedings, our $750.0 million notes were discharged pursuant to the reorganization plan. Net interest expense in 2008 included a write-off of remaining debt issuance costs of $12.3 million related to our notes since we were not compliant with certain financial covenants under the terms of our notes and therefore, amounts outstanding were reclassified as current portion of long-term debt in our balance sheet as of December 31, 2008.
Foreign Currency Gain (Loss), net.    Net foreign currency gain for the combined twelve-month period ended December 31, 2009 was $52.8 million, compared to net foreign exchange loss of $210.4 million for the year ended December 31, 2008. A substantial portion of our net foreign currency gain or loss is non-cash translation gain or loss recorded for intercompany borrowings at our Korean subsidiary and is affected by changes in the exchange rate between the Korean won and the U.S. dollar. Foreign currency translation gain from the intercompany borrowings was included in determining our consolidated net income since the intercompany borrowings were not considered long-term investments in nature because management intended to repay these intercompany borrowings at their respective maturity dates. The Korean won to U.S. dollar exchange rates were 1,167.6:1 and 1,262.0:1 using the first base rate as of December 31, 2009 as quoted by the Korea Exchange Bank and the noon buying rate in effect as of December 31, 2008 as quoted by the Federal Reserve Bank of New York, respectively. The exchange rate quotation from the Federal Reserve Bank was available on or before December 31, 2008.
Reorganization items, net.    Net reorganization gain of $804.6 million in the ten-month period ended October 25, 2009 represents the impact of non-cash reorganization income and expense items directly associated with our reorganization proceedings and primarily reflects the discharge of liabilities of $798.0 million. Net reorganization gain also includes professional fees, the revaluation of assets and the write-off of debt issuance costs. These items are related primarily to our reorganization proceedings, and are not the result of our current operations. Accordingly, we do not expect these items to continue on an ongoing basis. Further information on reorganization related items is discussed in note 5 to the consolidated financial statements of MagnaChip Semiconductor Corporation included elsewhere in this prospectus.
Income Tax Expenses
Income Tax Expenses.    Income tax expenses for the combined twelve-month period ended December 31, 2009 were $9.2 million, compared to income tax expenses of $11.6 million for the year ended December 31, 2008. Income tax expense for 2009 was comprised of $6.7 million of withholding taxes mostly paid on intercompany interest payments, $0.8 million of current income taxes incurred in various jurisdictions in which we operate and a $1.7 million income tax effect from the change of deferred tax assets. Due to the uncertainty of the utilization of foreign tax credits, we did not recognize these withholding taxes as deferred tax assets.
 
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Income from discontinued operations, net of taxes
Income from discontinued operations, net of taxes.    During 2008, we closed our Imaging Solutions business segment, recognizing a net loss of $91.5 million from discontinued operations, of which $15.9 million was from negative gross margin, $37.5 million was from research and development cost and $34.2 million was attributable to restructuring and impairment charges incurred during the third quarter of 2008. During the combined twelve-month period ended December 31, 2009, we recognized net income of $7.1 million relating to our discontinued operations, largely due to the sale of patents related to our closed Imaging Solutions business segment, which resulted in a $8.3 million gain.
Net Income (Loss)
As a result of the foregoing, net income increased by $1,256.4 million in the combined twelve-month period ended December 31, 2009 compared to a loss of $417.3 million in the year ended December 31, 2008. As discussed above, the increase in net income was primarily a result of our emergence from reorganization proceedings. Upon emergence from reorganization proceedings, a substantial majority of our indebtedness was discharged and recorded as reorganization gain of $804.6 million and such discharged liabilities resulted in a reduction in interest expense as well in the combined twelve-month period ended December 31, 2009. In addition, for the year ended December 31, 2008, a substantial foreign currency loss of $210.4 million due to the depreciation of the Korean won against the U.S. dollar and a net loss of $91.5 million from our closed Imaging Solutions Business segment were recorded.
 
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Periodic Results of Operations
The following tables set forth unaudited selected consolidated financial data for each of the quarters in the eight-quarter period ended December 31, 2010. The information for each of these periods has been prepared on the same basis as the audited financial statements included elsewhere in this prospectus and, in the opinion of management, includes adjustments for normal recurring items, necessary for the fair statement of the results of operations for these periods. This data should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this prospectus. These operating results are not necessarily indicative of our operating results for any future period.

 	 	Successor(1)	 	 	  	 	Predecessor(1)	 	 	
 	 	Three Months Ended	 	 	Two-Month
Period Ended
December 31,
2009**	 	 	  	 	One-Month
Period
Ended
October 25,
2009*	 	 	Three Months Ended	 	 	
 	 	December 31,
2010*	 	 	September 30,
2010*	 	 	June 30,
2010*	 	 	March 31,
2010*	 	 	 	 	 	 	 	 	 	 	September 27,
2009*	 	 	June 28,
2009*	 	 	March 29,
2009*	 	 	 	 	 	 	 	 	
 	 	 	 	 	(In million)	 	 	 	 	 	 	 	 	
Statements of Operations Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	186.8	  	 	$	209.4	  	 	$	194.7	  	 	$	179.5	  	 	$	111.1	  	 	 	 	$	51.2	  	 	$	156.6	  	 	$	139.7	  	 	$	101.5	  	 	 	 	 	 	 	 	
Cost of sales	 	 	126.4	  	 	 	140.1	  	 	 	130.2	  	 	 	130.1	  	 	 	90.4	  	 	 	 	 	34.8	  	 	 	104.5	  	 	 	91.4	  	 	 	80.6	  	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	60.4	  	 	 	69.3	  	 	 	64.5	  	 	 	49.4	  	 	 	20.7	  	 	 	 	 	16.5	  	 	 	52.2	  	 	 	48.3	  	 	 	20.9	  	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	16.6	  	 	 	16.2	  	 	 	16.0	  	 	 	17.9	  	 	 	14.5	  	 	 	 	 	5.5	  	 	 	17.2	  	 	 	18.4	  	 	 	15.3	  	 	 	 	 	 	 	 	
Research and development expenses	 	 	19.3	  	 	 	23.1	  	 	 	20.5	  	 	 	20.5	  	 	 	14.7	  	 	 	 	 	5.2	  	 	 	17.7	  	 	 	16.2	  	 	 	17.0	  	 	 	 	 	 	 	 	
Restructuring and impairment charges	 	 	1.0	  	 	 	0.4	  	 	 	0.3	  	 	 	0.3	  	 	 	—	  	 	 	 	 	—	  	 	 	—	  	 	 	0.4	  	 	 	0.1	  	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss) from continuing operations	 	 	23.5	  	 	 	29.6	  	 	 	27.8	  	 	 	10.6	  	 	 	(8.6	) 	 	 	 	 	5.8	  	 	 	17.3	  	 	 	13.4	  	 	 	(11.4	) 	 	 	 	 	 	 	 	
Interest expense, net	 	 	(7.0	) 	 	 	(7.3	) 	 	 	(6.6	) 	 	 	(2.0	) 	 	 	(1.3	) 	 	 	 	 	(1.0	) 	 	 	(2.6	) 	 	 	(12.8	) 	 	 	(14.7	) 	 	 	 	 	 	 	 	
Foreign currency gain (loss), net	 	 	—	  	 	 	41.4	  	 	 	(48.3	) 	 	 	21.6	  	 	 	9.3	  	 	 	 	 	7.4	  	 	 	45.4	  	 	 	30.8	  	 	 	(40.2	) 	 	 	 	 	 	 	 	
Reorganization items, net	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	809.0	  	 	 	(4.1	) 	 	 	(0.3	) 	 	 	—	  	 	 	 	 	 	 	 	
Others	 	 	—	  	 	 	0.3	  	 	 	(1.0	) 	 	 	(0.1	) 	 	 	—	  	 	 	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	(7.0	) 	 	 	34.4	  	 	 	(55.8	) 	 	 	19.5	  	 	 	8.1	  	 	 	 	 	815.4	  	 	 	38.7	  	 	 	17.6	  	 	 	(54.9	) 	 	 	 	 	 	 	 	
Income (loss) from continuing operations before income taxes	 	 	16.5	  	 	 	64.0	  	 	 	(28.0	) 	 	 	30.1	  	 	 	(0.5	) 	 	 	 	 	821.2	  	 	 	56.0	  	 	 	31.0	  	 	 	(66.3	) 	 	 	 	 	 	 	 	
Income tax expenses (benefits)	 	 	4.2	  	 	 	2.5	  	 	 	2.7	  	 	 	(1.0	) 	 	 	1.9	  	 	 	 	 	(0.1	) 	 	 	2.4	  	 	 	2.4	  	 	 	2.6	  	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	12.3	  	 	 	61.5	  	 	 	(30.7	) 	 	 	31.1	  	 	 	(2.5	) 	 	 	 	 	821.3	  	 	 	53.5	  	 	 	28.6	  	 	 	(68.9	) 	 	 	 	 	 	 	 	
Income (loss) from discontinued operations, net of taxes	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	0.5	  	 	 	 	 	(0.6	) 	 	 	8.9	  	 	 	(1.0	) 	 	 	(0.8	) 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	12.3	  	 	$	61.5	  	 	$	(30.7	) 	 	$	31.1	  	 	$	(2.0	) 	 	 	 	$	820.7	  	 	$	62.4	  	 	$	27.6	  	 	$	(69.7	) 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Supplemental Data (unaudited):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted EBITDA(2)	 	$	39.7	  	 	$	45.7	  	 	$	43.8	  	 	$	28.7	  	 	$	22.1	  	 	 	 	$	10.6	  	 	$	34.5	  	 	$	29.3	  	 	$	2.3	  	 	 	 	 	 	 	 	
Adjusted Net Income (Loss)(3)	 	 	17.4	  	 	 	26.2	  	 	 	25.7	  	 	 	19.9	  	 	 	13.3	  	 	 	 	 	6.9	  	 	 	20.4	  	 	 	5.0	  	 	 	(22.9	) 	 	 	 	 	 	 	 	
 
*	Derived from our unaudited interim consolidated financial statements.	
**	Derived from our audited consolidated financial statements.	
 
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(1)	As of October 25, 2009, the fresh-start adoption date, we adopted fresh-start accounting for our consolidated financial statements. Because of the emergence from reorganization proceedings and adoption of fresh-start accounting, the historical financial information for periods after October 25, 2009 is not fully comparable to periods before October 25, 2009. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Changes to Our Business.”	
(2)	We define Adjusted EBITDA as net income (loss) less income (loss) from discontinued operations, net of taxes, adjusted to exclude (i) depreciation and amortization associated with continuing operations, (ii) interest expense, net, (iii) income tax expenses (benefits), (iv) restructuring and impairment charges, (v) other restructuring charges, (vi) abandoned IPO expenses, (vii) reorganization items, net, (viii) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (ix) equity-based compensation expense,(x) foreign currency gain (loss), net and (xi) derivative valuation gain (loss), net. A reconciliation of net income (loss) to Adjusted EBITDA is as follows:	

 	 	Successor	 	 	  	 	Predecessor	 	 	
 	 	Three Months Ended	 	 	Two-Month
Period Ended
December 31,
2009	 	 	  	 	One-Month
Period
Ended
October 25,
2009	 	 	Three Months Ended	 	 	
 	 	December 31,
2010	 	 	September 30,
2010	 	 	June 30,
2010	 	 	March 31,
2010	 	 	 	 	 	 	 	 	 	 	September 27,
2009	 	 	June 28,
2009	 	 	March 29,
2009	 	 	 	 	 	 	 	 	
 	 	 	 	 	(In million)	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	12.3	  	 	$	61.5	  	 	$	(30.7	) 	 	$	31.1	  	 	$	(2.0	) 	 	 	 	$	820.7	  	 	$	62.4	  	 	$	27.6	  	 	$	(69.7	) 	 	 	 	 	 	 	 	
Less: Income (loss) from discontinued operations, net of taxes	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	0.5	  	 	 	 	 	(0.6	) 	 	 	8.9	  	 	 	(1.0	) 	 	 	(0.8	) 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	12.3	  	 	 	61.5	  	 	 	(30.7	) 	 	 	31.1	  	 	 	(2.5	) 	 	 	 	 	821.3	  	 	 	53.5	  	 	 	28.6	  	 	 	(68.9	) 	 	 	 	 	 	 	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization associated with continuing operations	 	 	14.1	  	 	 	14.3	  	 	 	14.5	  	 	 	15.5	  	 	 	11.2	  	 	 	 	 	3.6	  	 	 	11.9	  	 	 	11.7	  	 	 	10.4	  	 	 	 	 	 	 	 	
Interest expense, net	 	 	7.0	  	 	 	7.3	  	 	 	6.6	  	 	 	2.0	  	 	 	1.3	  	 	 	 	 	1.0	  	 	 	2.6	  	 	 	12.8	  	 	 	14.7	  	 	 	 	 	 	 	 	
Income tax expenses (benefits)	 	 	4.2	  	 	 	2.5	  	 	 	2.7	  	 	 	(1.0	) 	 	 	1.9	  	 	 	 	 	(0.1	) 	 	 	2.4	  	 	 	2.4	  	 	 	2.6	  	 	 	 	 	 	 	 	
Restructuring and impairment charges(a)	 	 	1.0	  	 	 	0.4	  	 	 	0.3	  	 	 	0.3	  	 	 	—	  	 	 	 	 	—	  	 	 	—	  	 	 	0.4	  	 	 	0.1	  	 	 	 	 	 	 	 	
Other restructuring charges(b)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	1.1	  	 	 	5.3	  	 	 	3.7	  	 	 	3.1	  	 	 	 	 	 	 	 	
Reorganization items, net(c)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	(809.0	) 	 	 	4.1	  	 	 	0.3	  	 	 	—	  	 	 	 	 	 	 	 	
Inventory step-up(d)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	0.9	  	 	 	17.2	  	 	 	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	 	
Equity-based compensation expense(e)	 	 	1.2	  	 	 	1.3	  	 	 	1.3	  	 	 	1.5	  	 	 	2.2	  	 	 	 	 	—	  	 	 	0.1	  	 	 	0.1	  	 	 	0.1	  	 	 	 	 	 	 	 	
Foreign
currency loss (gain), net(f)	 	 	—	  	 	 	(41.4	) 	 	 	48.3	  	 	 	(21.6	) 	 	 	(9.3	) 	 	 	 	 	(7.4	) 	 	 	(45.4	) 	 	 	(30.8	) 	 	 	40.2	  	 	 	 	 	 	 	 	
Derivative valuation loss (gain), net(g)	 	 	—	  	 	 	(0.3	) 	 	 	1.0	  	 	 	0.1	  	 	 	—	  	 	 	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted EBITDA	 	$	39.7	  	 	$	45.7	  	 	$	43.8	  	 	$	28.7	  	 	$	22.1	  	 	 	 	$	10.6	  	 	$	34.5	  	 	$	29.3	  	 	$	2.3	  	 	 	 	 	 	 	 	

 	(a)	This adjustment is comprised of all items included in the restructuring and impairment charges line item on our consolidated statements of operations, and eliminates the impact of restructuring and impairment charges related to (i) for 2010, impairment charges of an aggregate of $2.0 million recorded, of which an aggregate of $1.6 million of impairment charges were recognized for abandoned in-process research and development projects and an aggregate of $0.4 million of impairment charges were recognized as a result of an annual impairment test of in-process research and development, accounted for as indefinite-lived intangible assets as part of the application of fresh-start accounting, and (ii) for the three months ended June 28 and March 29, 2009, termination benefits and other related costs in connection with the closure of one of our research and development facilities in Japan.	
 	(b)	This adjustment relates to certain restructuring charges that are not included in the restructuring and impairment charges line item on our consolidated statements of operations. These items are included in selling, general and administrative expenses in our consolidated statements of operations. These charges are restructuring-related professional fees and related expenses incurred during each period.	
 
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 	(c)	This adjustment eliminates the impact of largely non-cash reorganization income and expense items directly associated with our reorganization proceedings from our ongoing operations including, among others, professional fees, the revaluation of assets, the effects of the Chapter 11 reorganization plan and fresh-start accounting principles and the write-off of debt issuance costs. These items are comprised of the following: (i) for the one-month period ended October 25, 2009, our predecessor’s gain recognized upon the effectiveness of the reorganization plan which was primarily composed of debt discharge gains and net of reorganization related professional fees and other charges, and (ii) for three months ended September 27, 2009 and June 28, 2009, professional fees incurred in connection with our reorganization proceedings.	
 	(d)	This adjustment eliminates the one-time impact on cost of sales associated with the write-up of our inventory in accordance with the principles of fresh-start accounting upon consummation of the Chapter 11 reorganization.	
 	(e)	This adjustment eliminates the impact of non-cash equity-based compensation expenses.	
 	(f)	This adjustment eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables.	
 	(g)	This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents hedge ineffectiveness or derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in USD, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.	
 
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(3)	We define Adjusted Net Income as net income (loss) less income (loss) from discontinued operations, net of taxes, excluding (i) restructuring and impairment charges, (ii) other restructuring charges, (iii) abandoned IPO expenses, (iv) reorganization items, net, (v) the increase in cost of sales resulting from the fresh-start accounting inventory step-up, (vi) equity-based compensation expense, (vii) amortization of intangibles associated with continuing operations, (viii) foreign currency gain (loss) and (ix) derivative valuation gain (loss), net. The following table summarizes the adjustments to net income (loss) that we make in order to calculate Adjusted Net Income for the periods indicated:	

 	 	Successor	 	 	  	 	Predecessor	 	 	
 	 	Three Months Ended	 	 	Two-Month
Period Ended
December 31,
2009	 	 	  	 	One-Month
Period
Ended
October 25,
2009	 	 	Three Months Ended	 	 	
 	 	December 31,
2010	 	 	September 30,
2010	 	 	June 30,
2010	 	 	March 31,
2010	 	 	 	 	 	 	 	 	 	 	September 27,
2009	 	 	June 28,
2009	 	 	March 29,
2009	 	 	 	 	 	 	 	 	
 	 	 	 	 	(In million)	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	12.3	  	 	$	61.5	  	 	$	(30.7	) 	 	$	31.1	  	 	$	(2.0	) 	 	 	 	$	820.7	  	 	$	62.4	  	 	$	27.6	  	 	$	(69.7	) 	 	 	 	 	 	 	 	
Less: Income (loss) from discontinued operations, net of taxes	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	0.5	  	 	 	 	 	(0.6	) 	 	 	8.9	  	 	 	(1.0	) 	 	 	(0.8	) 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	12.3	  	 	 	61.5	  	 	 	(30.7	) 	 	 	31.1	  	 	 	(2.5	) 	 	 	 	 	821.3	  	 	 	53.5	  	 	 	28.6	  	 	 	(68.9	) 	 	 	 	 	 	 	 	
Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restructuring and impairment charges(a)	 	 	1.0	  	 	 	0.4	  	 	 	0.3	  	 	 	0.3	  	 	 	—	  	 	 	 	 	—	  	 	 	—	  	 	 	0.4	  	 	 	0.1	  	 	 	 	 	 	 	 	
Other restructuring charges(b)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	1.1	  	 	 	5.3	  	 	 	3.7	  	 	 	3.1	  	 	 	 	 	 	 	 	
Reorganization items, net(c)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	(809.0	) 	 	 	4.1	  	 	 	0.3	  	 	 	—	  	 	 	 	 	 	 	 	
Inventory step-up(d)	 	 	—	  	 	 	—	  	 	 	—	  	 	 	0.9	  	 	 	17.2	  	 	 	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	 	
Equity-based compensation expense(e)	 	 	1.2	  	 	 	1.3	  	 	 	1.3	  	 	 	1.5	  	 	 	2.2	  	 	 	 	 	—	  	 	 	0.1	  	 	 	0.1	  	 	 	0.1	  	 	 	 	 	 	 	 	
Amortization of intangibles associated with continuing operations(f)	 	 	2.9	  	 	 	4.7	  	 	 	5.7	  	 	 	7.7	  	 	 	5.6	  	 	 	 	 	0.9	  	 	 	2.8	  	 	 	2.7	  	 	 	2.4	  	 	 	 	 	 	 	 	
Foreign currency loss (gain), net(g)	 	 	—	  	 	 	(41.4	) 	 	 	48.3	  	 	 	(21.6	) 	 	 	(9.3	) 	 	 	 	 	(7.4	) 	 	 	(45.4	) 	 	 	(30.8	) 	 	 	40.2	  	 	 	 	 	 	 	 	
Derivative valuation loss (gain), net (h)	 	 	—	  	 	 	(0.3	) 	 	 	1.0	  	 	 	0.1	  	 	 	—	  	 	 	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Net Income (Loss)	 	$	17.4	  	 	$	26.2	  	 	$	25.7	  	 	$	19.9	  	 	$	13.3	  	 	 	 	$	6.9	  	 	$	20.4	  	 	$	5.0	  	 	$	(22.9	) 	 	 	 	 	 	 	 	

 	(a)	This adjustment is comprised of all items included in the restructuring and impairment charges line item on our consolidated statements of operations, and eliminates the impact of restructuring and impairment charges related to (i) for 2010, impairment charges of an aggregate of $2.0 million recorded, of which an aggregate of $1.6 million of impairment charges were recognized for abandoned in-process research and development projects and an aggregate of $0.4 million of impairment charges were recognized as a result of an annual impairment test of in-process research and development, accounted for as indefinite-lived intangible assets as part of the application of fresh-start accounting, and (ii) for the three months ended June 28, 2009 and March 29, 2009, termination benefits and other related costs in connection with the closure of one of our research and development facilities in Japan.	
 	(b)	This adjustment relates to certain restructuring charges that are not included in the restructuring and impairment charges line item on our consolidated statements of operations. These items are included in selling, general and administrative expenses in our consolidated statements of operations. These charges are restructuring-related professional fees and related expenses incurred during each period.	
 	(c)	This adjustment eliminates the impact of largely non-cash reorganization income and expense items directly associated with our reorganization proceedings from our ongoing operations including, among others, professional fees, the revaluation of assets, the effects of the Chapter 11 reorganization plan and fresh-start accounting principles and the write-off of debt issuance costs. These items are comprised of the following: (i) for the one-month period ended October 25, 2009, our predecessor’s gain recognized upon the effectiveness of the reorganization plan which was primarily composed of debt discharge gains and net of reorganization related professional fees and other charges, and (ii) for three months ended September 27, 2009 and June 28, 2009, professional fees incurred in connection with our reorganization proceedings.	
 	(d)	This adjustment eliminates the one-time impact on cost of sales associated with the write-up of our inventory in accordance with the principles of fresh-start accounting upon consummation of the Chapter 11 reorganization.	
 
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 	(e)	This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash equity-based compensation expenses in the future, 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.	
 	(f)	This adjustment eliminates the non-cash impact of amortization expense for intangible assets created as a result of the acquisition accounting treatment of the Original Acquisition and other subsequent acquisitions, and from the application of fresh-start accounting in connection with the reorganization proceedings.	
 	(g)	This adjustment eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables.	
 	(h)	This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents hedge ineffectiveness or derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in USD, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.	
Net sales increased 37.7% from the three months ended March 29, 2009 to the three months ended June 28, 2009 partially due to the fact that the first quarter is traditionally a seasonally slow quarter for us due to reduced demand for consumer products after the end of the holiday season. Our net sales increased 12.1% from the three months ended June 29, 2009 to the three months ended September 27, 2009, primarily as a result of increased demand as the consumer electronics industry began to recover from the economic slowdown. Our net sales for the combined three-month period ended December 31, 2009 increased by 3.6% from the three months ended September 27, 2009 due to increased market demand which overcame our seasonal weakness. Our net sales for the three months ended March 31, 2010 increased by 10.6% from the combined three-month period ended December 31, 2009 as the overall recovery from the economic slowdown had a greater impact than our typical seasonal weakness. Our net sales for the three months ended June 30, 2010 increased by 8.5% from the three months ended March 31, 2010 due to improved product mix and increased market demand as the consumer electronics industry continued to recover from the economic slowdown. Our net sales for the three months ended September 30, 2010 increased by 7.6% from the three months ended June 30, 2010, primarily due to improved product mix and increased market demand for Semiconductor Manufacturing Services and Power Solutions products. Our net sales for the three months ended December 31, 2010 decreased by 10.8% from the three months ended September 30, 2010, primarily due to decreased market demand for Semiconductor Manufacturing Services and Display Solutions products as a result of our customers’ efforts to reduce their inventory levels.
Gross margin increased to 34.6% and 33.3% in the three months ended June 28, 2009 and September 27, 2009, respectively, from 20.6% in the three months ended March 29, 2009. The increase was primarily related to an increase in sales volume resulting from increased demand in connection with the global economic recovery and the impact of our cost reduction efforts. Gross margin in the combined three-month period ended December 31, 2009 decreased primarily due to a $17.2 million unfavorable impact which resulted from the write-up of our inventory in accordance with the principles of fresh-start accounting upon our emergence from reorganization proceedings. Gross margin in the three months ended March 31, 2010 improved as compared to the combined three- month period ended December 31, 2009 as the unfavorable impact from the inventory write-up of our inventory was limited to $0.9 million which had not yet been recognized as of December 31, 2009. Gross margin increased to 33.1% in the three months ended June 30, 2010 from 27.5% in the three months ended March 31, 2010. The increase was primarily due to increased sales volume and improved utilization of our manufacturing facilities. Gross margin was 33.1% as a percent of revenue in the three months ended September 30, 2010, and remained the same as the three months ended June 30, 2010. Gross margin decreased to 32.3% in the three months ended December 31, 2010 from 33.1% in the three months ended September 30, 2010. The decrease was primarily due to decreased sales volume resulting from our customers’ efforts to reduce their inventory levels and lower utilization of our manufacturing facilities.
 
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Selling, general and administrative expenses for the three months ended June 28, 2009 and September 27, 2009 increased compared to the three months ended March 29, 2009 primarily due to the increase in outside service fees for restructuring-related professional fees and related expenses. Selling, general and administrative expenses for the combined three-month period ended December 31, 2009 increased compared to the three months ended September 27, 2009 due to an increase in salaries resulting from incentive payments made to our employees following our successful emergence from our reorganization proceedings and an increase in amortization expenses resulting from the write-up of certain intangible assets in accordance with the application of fresh-start accounting. Selling, general and administrative expenses for the three months ended June 30, 2010 decreased compared to the three months ended March 31, 2010 primarily due to decreases in depreciation and amortization as amortization of certain intangible assets was completed in April 2010. Selling, general and administrative expenses remained relatively constant over the quarters ended December 31, 2010, September 30, 2010 and June 30, 2010.
Research and development expenses remained relatively constant in absolute dollars over the eight quarter period. Research and development expense as a percentage of net sales was 16.7% in the three months ended March 29, 2009, which was higher than other quarters due to the substantially lower net sales in the three months ended March 29, 2009.
Restructuring and impairment charges for the three months ended June 28, 2009 and March 29, 2009, were related to termination benefits and other related costs in connection with the closure of one of our research and development facilities in Japan. Restructuring and impairment charges for the three months ended December 31, 2010, September 30, 2010, June 30, 2010 and March 31,2010 were related to impairment of in-process research and development projects in each period, accounted for as indefinite-lived intangible assets as part of the application of fresh-start accounting.
Interest expense, net, decreased in the three months ended September 27, 2009 as we did not accrue for interest expense related to our $750.0 million notes from June 12, 2009, the date of our initial reorganization filing, to October 25, 2009, as they were categorized as liabilities subject to compromise. These notes were discharged pursuant to the reorganization plan upon our emergence from our reorganization proceedings. As a result of our April 2010 senior notes offering and repayment of our new term loan, our interest expense, net, for the three months ended June 30, 2010 increased compared to the three months ended March 31, 2010. Interest expenses for the three months ended September 30, 2010 increased compared to the three months ended June 30, 2010 as interest for the senior notes was fully recognized during the period. Interest expenses for the three months ended December 31, 2010 remained relatively constant compare to the three months ended September 30, 2010.
A substantial portion of our net foreign currency gain or loss is non-cash translation gain or loss recorded for intercompany borrowing at our Korean subsidiary and is affected by changes in the exchange rate between Korean won and the U.S. dollar. During the three months ended March 29, 2009 and the three months ended June 30, 2010, foreign currency loss was recognized due to the depreciation of the Korean won against the U.S. dollar. During the three months ended June 28, 2009, the three months ended September 27, 2009, the combined three-month period ended December 31, 2009, the three months ended March 31, 2010, and the three months ended September 30, 2010, foreign currency gains have been recognized due to the appreciation of the Korean won against the U.S. dollar. During the three months ended December 31, 2010, the foreign exchange rate between Korean won and the U.S. dollar remained relatively constant.
Reorganization items, net, were incurred from our reorganization proceedings, implementation of our plan of reorganization, and the adoption of fresh-start reporting, and consisted mainly of the discharge of liabilities subject to compromise.
 
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Others for each quarter in the year ended December 31, 2010 were comprised of dividend income from our investment in equity instruments and loss on valuation of derivatives, which represents either hedge ineffectiveness or components of changes in fair value of derivatives excluded from the assessments of hedge effectiveness.
Income tax expense for 2009 and 2010 was primarily comprised of withholding taxes paid on intercompany interest payments, current income taxes incurred in various jurisdictions in which we operate, liabilities for uncertain tax positions and the income tax effect from the change of deferred tax assets. Income tax benefits in the three months ended March 31, 2010 were primarily derived from the reversal of liabilities for uncertain tax positions due to the lapse of the applicable statute of limitations. Income tax expenses for the three months ended December 31, 2010 increased compared to the three months ended September 30 and June 30, 2010 primarily due to increase in liabilities for uncertain tax positions.
Income (loss) from discontinued operations during 2009 related to our former Imaging Solutions business segment. Income from discontinued operations in the three months ended September 27, 2009 was primarily derived from the sale of patents related to Imaging Solutions business segment.
Liquidity and Capital Resources
Our principal capital requirements are to invest in research and development and capital equipment, to make debt service payments and to fund working capital needs. We calculate working capital as current assets less current liabilities.
Our principal sources of liquidity are our cash and cash equivalents, our cash flows from operations and our financing activities, including $46.1 million of net proceeds from the $250 million aggregate principal amount senior notes offering. The principal purpose of the senior notes offering was to fund a $130.7 million distribution to our unitholders. Most of our current equity holders are former creditors and the distribution allowed us to provide a return to creditors that supported us during our reorganization proceedings. The distribution to our unitholders was approved by our board of directors and was not required due to any contractual or other obligation. In addition to the distribution, we used the proceeds of the senior notes offering to increase our cash reserves and pay down current debt that was accruing interest at a higher rate than the notes. We funded the distribution and other uses of proceeds through the senior notes offering because we believed that the debt market at the time would be receptive to the offering and because we could affect a debt offering faster than other forms of financing, including equity financing. Although we currently anticipate these sources of liquidity will be sufficient to meet our cash needs through the next twelve months, our operating cash flow was negative for the two-month period ended December 31, 2009 as well as for 2008 and 2007 and we may require or choose to obtain additional financing. Our ability to obtain financing will depend on, among other things, our business plans, operating performance, and the condition of the capital markets at the time we seek financing and could be adversely impacted by our 2009 reorganization proceedings and our non-compliance with bank covenants that preceded the filing. We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. The current rating of our senior notes is B2 by Moody’s and B+ by Standard and Poors, both of which are below investment grade. Any lowering of these ratings would adversely impact our ability to raise additional debt financing and increase the cost of any such financing that may be obtained. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, and our stockholders may experience dilution. If we need to raise additional funds in the future and are unable to do so or obtain additional financing on unfavorable terms in the future, it is possible we would have to limit certain planned activities including sales and marketing and research and development activities. As of December 31, 2010, our cash and cash equivalents balance was $172.2 million, a $107.2 million
 
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increase, compared to $64.9 million as of December 31, 2009. The increase resulted from $106.4 million of cash inflow provided by operating activities and $42.5 million of cash inflow provided by financing activities, which was offset by $43.7 million cash outflow used in investing activities. As of December 31, 2009, our cash and cash equivalents balance was $64.9 million, a $49.1 million increase from our cash, cash equivalents and restricted cash balance of $15.8 million as of December 31, 2008. The increase in cash and cash equivalents for the combined twelve-month period ended December 31, 2009 was primarily attributable to a cash inflow of $41.5 million from operating activities, coupled with a cash inflow of $11.5 million from investing activities.
Cash Flows from Operating Activities
Cash inflows generated by operating activities totaled $106.4 million for the year ended December 31, 2010, compared to $41.5 million of cash provided by operating activities in the combined twelve-month period ended December 31, 2009. The increase was primarily attributable to an increase in gross profit of $85.0 million resulting from higher net sales. The net operating cash inflow for the year ended December 31, 2010 reflects our net income of $74.1 million adjusted by non-cash charges of $73.4 million, which mainly consisted of depreciation and amortization charges and gain on foreign currency translation, net, which was partially offset by an increase in net operating assets of $41.1 million.
Cash flows generated by operating activities totaled $41.5 million in the combined twelve-month period ended December 31, 2009, compared to $18.4 million of cash used in operating activities in 2008. This increase in cash flows was primarily attributable to income from continuing operations which improved due to the restructuring of our operations and our reorganization plan as described above. The net operating cash inflow for the combined twelve-month period ended December 31, 2009 principally reflected our net income of $839.1 million adjusted by non-cash charges of $799.4 million, which mainly consisted of non-cash reorganization items derived from our reorganization plan.
Our working capital balance as of December 31, 2010 was $273.6 million compared to $128.5 million as of December 31, 2009. The $145.1 million increase was primarily attributable to a $107.2 million increase in cash and cash equivalents provided by operating activities and financing activities, a $44.8 million increase in accounts receivable due to an increase in net sales which was partially offset by a $7.5 million increase in other accounts payable associated with capital expenditures and a $10.5 million increase in accrued expenses mainly due to an increase in accrued interest expenses incurred under our $250.0 million principal amount of senior notes.
Our working capital balance as of December 31, 2009 was $128.5 million, compared to negative $814.5 million as of December 31, 2008. The significant increase in our working capital balance was principally due to the discharge of $750.0 million in debt recorded in current liabilities resulting from our reorganization plan in 2009 as well as cash generated from operations and investing activities.
Cash Flows from Investing Activities
Cash flows used in investing activities totaled $43.7 million in the year ended December 31, 2010, compared to $11.5 million of cash generated by investing activities in the combined twelve-month period ended December 31, 2009. The increase was primarily due to an increase in capital expenditures of $35.0 million. In 2009, cash of $11.4 million was released from restriction in connection with our reorganization plan, which contributed to cash flows generated by investing activities.
Cash flows generated by investing activities totaled $11.5 million in the combined twelve-month period ended December 31, 2009, compared to $39.6 million of cash used in investing activities in the 2008. In 2009, we had a decrease in capital expenditures of $20.5 million from $29.7 million in 2008 to
 
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$9.2 million in the combined twelve-month period ended December 31, 2009. In 2008, cash of $11.8 million was restricted pursuant to the terms of a forbearance agreement in relation to short-term borrowings; in 2009, it was released from restriction in connection with our reorganization plan. Cash flow from investing activities in 2009 also included cash proceeds of $9.4 million from the sale of intangible assets.
Cash Flows from Financing Activities
Cash flows provided by financing activities totaled $42.5 million in the year ended December 31, 2010, compared to $2.0 million in the combined twelve-month period ended December 31, 2009. On April 9, 2010, we completed the sale of $250 million in aggregate principal amount of 10.5% senior notes due 2018, which we refer to as our senior notes. Of the $238.4 million of net proceeds, which represents $250 million of principal amount net of $3.3 million of original issue discount and $8.3 million of debt issuance costs, $130.7 million was used to make a distribution to our unitholders and $61.8 million was used to repay all outstanding borrowings under our new term loan. On August 31, 2010, we acquired $10,673 thousand of tangible assets as noncash investing and financing activities by entering into a capital lease agreement.
Cash flows provided by financing activities totaled $2.0 million in the combined twelve-month period ended December 31, 2009, compared to $14.7 million in 2008. There were no significant financing activities in 2009 other than the repayment of short-term borrowings and the issuance of common units as part of our reorganization in 2009.
Capital Expenditures
We routinely make capital expenditures to enhance our existing facilities and reinforce our global research and development capability.
For the year ended December 31, 2010, capital expenditures were $44.2 million, a $35.0 million, or 379.7%, increase from $9.2 million in the combined twelve-month period ended December 31, 2009. The increase was due to supporting capacity expansion and technology improvements at our fabrication facilities in anticipation of sales growth.
For the combined twelve-month period ended December 31, 2009, capital expenditures were $9.2 million, a $20.5 million, or 69.0%, decrease from $29.7 million in 2008 due to no additional capacity increase during our reorganization proceedings.
Seasonality
Our net sales and number of distinct products sold are affected by market variations from quarter to quarter due to business cycles, and resulting product demand, of our customers. Our Display Solutions business typically experiences demand increases in the third and fourth calendar quarters due to increased holiday demand for the consumer products that serve as the end markets for our products. During the first quarter, by contrast, consumer products manufacturers generally reduce orders in order to reduce excess inventory remaining from the holiday season. In our Semiconductor Manufacturing Services business, the supply-demand cycle is usually one quarter ahead of the broader semiconductor market due to lead time from wafer input to shipment to our customers, so the demand for these products tends to peak in the third quarter and is slower in the fourth and first quarters.
 
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Contractual Obligations
The following summarizes our contractual obligations as of December 31, 2010:

 	  	Payments Due by Period	 	
 	  	Total	 	  	2011	 	  	2012	 	  	2013	 	  	2014	 	  	2015	 	  	Thereafter	 	
 	  	(In millions)	 	
Senior notes(1)	  	$	446.9	  	  	$	26.3	  	  	$	26.3	  	  	$	26.3	  	  	$	26.3	  	  	$	26.3	  	  	$	315.6	  	
Capital lease(2)	  	 	9.4	  	  	 	6.2	  	  	 	3.2	  	  	 	—	  	  	 	—	  	  	 	—	  	  	 	—	  	
Operating lease(2)	  	 	51.3	  	  	 	5.3	  	  	 	4.0	  	  	 	2.0	  	  	 	1.9	  	  	 	1.9	  	  	 	36.2	  	
Others(3)	  	 	10.8	  	  	 	6.0	  	  	 	4.7	  	  	 	0.2	  	  	 	—	  	  	 	—	  	  	 	—	  	
 
(1)	$250 million aggregate principal amount as well as interest payments of senior notes issued in April 2010, which bear interest at a rate of 10.5% per annum and mature in 2018.	
(2)	Assumes constant currency exchange rate for Korean won to U.S. dollars of 1,138.9.	
(3)	Includes license agreements and other contractual obligations.	
The indenture relating to our $250 million senior notes contains covenants that limit our ability and the ability of our restricted subsidiaries to: (i) declare or pay any dividend or make any payment or distribution on account of or purchase or redeem our capital stock or equity interests of our restricted subsidiaries; (ii) make any principal payment on, or redeem or repurchase, prior to any scheduled repayment, sinking fund payment or maturity, any subordinated indebtedness; (iii) make certain investments; (iv) incur additional indebtedness and issue certain types of capital stock; (v) create or incur any lien (except for permitted liens) that secures obligations under any indebtedness or related guarantee; (vi) merge with or into or sell all or substantially all of our assets to other companies; (vii) enter into certain types of transactions with affiliates; (viii) guarantee the payment of any indebtedness; (ix) enter into sale-leaseback transactions; (x) enter into agreements that would restrict the ability of the restricted subsidiaries to make distributions with respect to their equity, to make loans to us or other restricted subsidiaries or to transfer assets to us or other restricted subsidiaries; and (xi) designate unrestricted subsidiaries.
We lease equipment for manufacturing and research and development purposes. These leases are accounted for as capital leases as the ownership of the equipment will be transferred to us upon expiration of the lease terms or we have bargain purchase options at the end of the lease terms.
We lease land, office space and equipment under various operating lease agreements that expire through 2034.
We follow ASC guidance on uncertain tax positions. Our unrecognized tax benefits totaled $2.9 million as of December 31, 2010. These unrecognized tax benefits have been excluded from the above table because we cannot estimate the period of cash settlement with the respective taxing authorities.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to the market risk that the value of a financial instrument will fluctuate due to changes in market conditions, primarily from changes in foreign currency exchange rates and interest rates. In the normal course of our business, we are subject to market risks associated with interest rate movements and currency movements on our assets and liabilities.
Foreign Currency Exposures
We have exposure to foreign currency exchange rate fluctuations on net income from our subsidiaries denominated in currencies other than U.S. dollars, as our foreign subsidiaries in Korea, Taiwan, China, Japan and Hong Kong use local currency as their functional currency. From time to time these subsidiaries have cash and financial instruments in local currency. The amounts held in
 
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Japan, Taiwan, Hong Kong and China are not material in regards to foreign currency movements. However, based on the cash and financial instruments balance at December 31, 2010 for our Korean subsidiary, a 10% devaluation of the Korean won against the U.S. dollar would have resulted in a decrease of $3.8 million in our U.S. dollar financial instruments and cash balances. Based on the Japanese yen cash balance at December 31, 2010, a 10% devaluation of the Japanese yen against the U.S. dollar would have resulted in a decrease of $0.2 million in our U.S. dollar cash balance.
Interest Rate Exposures
On April 9, 2010, we completed the sale of $250 million in aggregate principal amount of 10.500% senior notes due 2018. The $61.6 million of total outstanding borrowings under our term loan was repaid on the same date. The $250 million 10.500% senior notes due 2018 are subject to changes in fair value due to interest rate changes. If the market interest rate increases by 10% and all other variables were held constant from their levels at December 31, 2010, we estimate that the fair value of this fixed rate note would decrease by $12.8 million and we would have additional interest expense costs over the market rate of $1.1 million (on a 360-day basis). If the market interest rate decreased by 10% and all other variables were held constant from their levels at December 31, 2010, we estimate that the fair value of this fixed rate note would increase by $13.7 million and we would have a reduction in interest expense costs over the market rate of $1.3 million (on a 360-day basis).
Critical Accounting Policies and Estimates
Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in our consolidated financial statements and accompanying notes.
We believe that our significant accounting policies, which are described in notes 3 and 4 to the consolidated financial statements of MagnaChip Semiconductor Corporation for the year ended December 31, 2010 included elsewhere in this prospectus, are critical due to the fact that they involve a high degree of judgment and estimates about the effects of matters that are inherently uncertain. We base these estimates and judgments on historical experience, knowledge of current conditions and other assumptions and information that we believe to be reasonable. Estimates and assumptions about future events and their effects cannot be determined with certainty. Accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the business environment in which we operate changes.
Revenue Recognition and Accounts Receivable Valuation
Our revenue is primarily derived from the sale of semiconductor products that we design and the manufacture of semiconductor wafers for third parties. We recognize revenue when persuasive evidence of an arrangement exists, the product has been delivered and title and risk of loss have transferred, the price is fixed and determinable and collection of resulting receivables is reasonably assured.
We recognize revenue upon shipment, upon delivery of the product at the customer’s location or upon customer acceptance depending on terms of the arrangements, when the risks and rewards of ownership have passed to the customer. Certain sale arrangements include customer acceptance provisions that require written notification of acceptance within the pre-determined period from the date of delivery of the product. If the pre-determined period has ended without written notification, customer acceptance is deemed to have occurred pursuant to the underlying sales arrangements. In such cases, we recognize revenue the earlier of the written notification or the pre-determined period from date of delivery. Specialty semiconductor manufacturing services are performed pursuant to manufacturing
 
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agreements and purchase orders. Standard products are shipped and sold based upon purchase orders from customers. Our revenue recognition policy is consistent across our product lines, marketing venues and all geographic areas. All amounts billed to a customer related to shipping and handling are classified as sales, while all costs incurred by us for shipping and handling are classified as expenses. We currently manufacture a substantial portion of our products internally at our wafer fabrication facilities. In the future, we expect to rely, to some extent, on outside wafer foundries for additional capacity and advanced technologies.
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make payment. If the financial condition of our customers were to deteriorate, additional allowances may be required. The establishment of reserves for sales discounts is based on management judgments that require significant estimates of a variety of factors, including forecasted demand, returns and industry pricing assumptions.
Accrual of Warranty Cost
We record warranty liabilities for the estimated costs that may be incurred under limited warranties. Our warranties generally cover product defects based on compliance with our specifications and are normally applicable for twelve months from the date of product delivery. These liabilities are accrued when revenues are recognized. Warranty costs include the costs to replace the defective products. Factors that affect our warranty liability include historical and anticipated rates of warranty claims on those repairs and the cost per claim to satisfy our warranty obligations. As these factors are impacted by actual experience and future expectations, we periodically assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary.
Inventory Valuation
Inventories are valued at the lower of cost or market, using the average method, which approximates the first in, first out method. Because of the cyclical nature of the semiconductor industry, changes in inventory levels, obsolescence of technology and product life cycles, we write down inventories to net realizable value. When there is a difference in the carrying value and the net realizable value the difference is recognized as a loss on valuation of inventories within cost of sales. We estimate the net realizable value for such finished goods and work-in-progress based primarily upon the latest invoice prices and current market conditions.
We employ a variety of methodologies to determine the amount of inventory reserves necessary. While a portion of the reserve is determined based upon the age of inventory and lower of cost or market calculations, an element of the reserve is subject to significant judgments made by us about future demand for our inventory. For example, reserves are established for excess inventory based on inventory levels in excess of six months of projected demand, as judged by management, for each specific product. If actual demand for our products is less than our estimates, additional reserves for existing inventories may need to be recorded in future periods.
In addition, as prescribed in ASC guidance on inventory costs, the cost of inventories is determined based on the normal capacity of each fabrication facility. If the capacity utilization is lower than a level that management believes to be normal, the fixed overhead costs per production unit which exceed those which would be incurred when the fabrication facilities are running under normal capacity are charged to cost of sales rather than capitalized as inventories.
Long-Lived Assets
We assess long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset group may not be recoverable. Factors that we
 
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consider in deciding when to perform an impairment review include significant under-performance of a business or product line in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in our use of the assets. Recoverability of assets that will continue to be used in our operations is measured by comparing the carrying value of the asset group to our estimate of the related total future undiscounted net cash flows. If an asset group’s carrying value is not recoverable through the related undiscounted cash flows, the asset group is considered to be impaired. The impairment is measured by the difference between the asset group’s carrying value and its fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique.
Impairments of long-lived assets are determined for groups of assets related to the lowest level of identifiable independent cash flows. We must make subjective judgments in determining the independent cash flows that can be related to specific asset groupings. Additionally, an evaluation of impairment of long-lived assets requires estimates of future operating results that are used in the preparation of the expected future undiscounted cash flows. Actual future operating results and the remaining economic lives of our long-lived assets could differ from the estimates used in assessing the recoverability of these assets.
Intangible Assets
The fair value of our intangible assets was recorded in connection with fresh-start reporting on October 25, 2009 and was determined based on the present value of each research project’s projected cash flows using an income approach. Future cash flows are predominately based on the net income forecast of each project, consistent with historical pricing, margins and expense levels of similar products. Revenues are estimated based on relevant market size and growth factors, expected industry trends and individual project life cycles. The resulting cash flows are then discounted at a rate approximating our weighted average cost of capital.
In-process research and development, or IPR&D, is considered an indefinite-lived intangible asset and is not subject to amortization. IPR&D assets must be tested for impairment annually or more frequently if events or changes in circumstances indicate that the assets might be impaired. The impairment test consists of a comparison of the fair value of the IPR&D asset with its carrying amount. If the carrying amount of the IPR&D asset exceeds its fair value, an impairment loss must be recognized in an amount equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the IPR&D asset will be its new accounting basis. Subsequent reversal of a previously recognized impairment loss is prohibited. The initial determination and subsequent evaluation for impairment of the IPR&D asset requires management to make significant judgments and estimates. Once the IPR&D projects have been completed or abandoned, the useful life of the IPR&D asset is determined and amortized accordingly.
Technology, customer relationships and intellectual property assets are considered definite-lived assets and are amortized on a straight-line basis over their respective useful lives, ranging from 1 to 10 years.
Income Taxes
We account for income taxes in accordance with ASC guidance addressing accounting for income taxes. The guidance requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in a company’s financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying values and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
 
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Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities.
We regularly review our deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and expiration of tax credits and net operating loss carry-forwards. We established valuation allowances for deferred tax assets at most of our subsidiaries since, other than with respect to one particular subsidiary, it is not probable that a majority of the deferred tax assets will be realizable. The valuation allowance at this particular subsidiary was not established since it is more likely than not that the deferred tax assets at this subsidiary will be realizable based on the current prospects for its future taxable income.
Changes in our evaluation of our deferred income tax assets from period to period could have a significant effect on our net operating results and financial condition.
In addition, beginning January 1, 2007, we account for uncertainties related to income taxes in compliance with ASC guidance on uncertain tax positions. Under this guidance, we evaluate our tax positions taken or expected to be taken in a tax return for recognition and measurement on our consolidated financial statements. Only those tax positions that meet the “more likely than not” threshold are recognized on the consolidated financial statements at the largest amount of benefit that has a greater than 50 percent likelihood of ultimately being realized. Assumptions, judgment and the use of estimates are required in determining if the “more likely than not” standard has been met when developing the provision for income taxes. A change in the assessment of the “more likely than not” standard could materially impact our consolidated financial statements.
Accounting for Stock/Unit-based Compensation
In 2006, we adopted ASC guidance addressing accounting for unit-based compensation based on a fair value method. Under this guidance, unit-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award. We use the Black-Scholes option pricing model to value unit options. In developing assumptions for fair value calculation under the guidance, we use estimates based on historical data and market information. A small change in the assumptions used in the estimate can cause a relatively significant change in the fair value calculation.
The determination of the fair value of our common units on each grant date was a two-step process. First, management estimated our enterprise value in consultation with such advisers as we deemed appropriate. Second, this business enterprise value was allocated to all sources of capital invested in us based on each type of security’s respective rights and claims to our total business enterprise value. This allocation included a calculation of the fair value of our common units on a non-marketable basis. The business enterprise value was determined based on an income approach and a market approach using the revenue multiples of comparable companies, giving appropriate weight to each approach. The income approach was based on the discounted cash flow method and an estimated weighted average cost of capital.
Determination of the fair value of our common units involves complex and subjective judgments regarding projected financial and operating results, our unique business risks, the liquidity of our units and our operating history and prospects at the time of grant. If we make different judgments or adopt different assumptions, material differences could result in the amount of the share-based compensation expenses recorded because the estimated fair value of the underlying units for the options granted would be different.
 
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Fresh-Start Reporting
Upon emergence from our reorganization proceedings, we adopted fresh-start reporting in accordance with ASC 852. Our emergence from reorganization proceedings resulted in a new reporting entity with no retained earnings or accumulated deficit. Accordingly, our consolidated financial statements for periods prior to and including October 25, 2009 are not comparable to consolidated financial statements presented on or after October 25, 2009.
Fresh-start reporting reflects our value as determined in our confirmed plan of reorganization. Under fresh-start reporting, our asset values were remeasured and allocated in conformity with ASC guidance on business combinations. Fresh-start reporting required that all liabilities, other than deferred taxes and severance benefits, be stated at fair value. Deferred taxes are determined in conformity with ASC guidance on income taxes or ASC 740.
Cash Flow Hedges
We are exposed to non-functional currency denominated cash flow fluctuations in connection with third party sales. We use foreign currency forward and option contracts to hedge certain of these risks. Throughout the term of the designated cash flow hedge relationship, but at least quarterly, a retrospective evaluation and prospective assessment of hedge effectiveness is performed. Designated components of our derivative instruments’ gains or losses are included in the assessment of hedge effectiveness. In conjunction with our effectiveness testing, we also evaluate ineffectiveness associated with the hedge relationship. Resulting ineffectiveness, if any, is recognized immediately in our consolidated statements of operations.
We record the fair value of our foreign currency derivative contracts qualifying for cash flow hedge accounting treatment in our consolidated balance sheet with the effective portion of the related gain or loss on those contracts deferred in unitholders’ equity as a component of accumulated other comprehensive income. These deferred gains or losses are recognized in our consolidated statements of operations in the same period in which the underlying hedged sales transactions are recognized and on the same line item as the underlying hedged items. However, in the event the relationship is no longer effective, we recognize the change in the fair value of the hedging derivative instrument from the date the hedging derivative instrument becomes no longer effective immediately in the consolidated statements of operations.
Recent Accounting Pronouncements
In January 2010, the FASB issued Accounting Standards Update 2010-06, or ASU 2010-06, which amends the disclosure requirements of ASC 820, “ Fair Value Measurements and Disclosures ,” as of January 1, 2010, or ASC 820. ASU 2010-06 requires new disclosures for any transfers of fair value into and out of Level 1 and 2 fair value measurements and separate presentation of purchases, sales, issuances and settlements within the reconciliation of Level 3 unobservable inputs. We previously adopted ASC 820 on January 1, 2008 and January 1, 2009 for financial assets and liabilities and for nonfinancial assets and liabilities, respectively. ASU 2010-06 is effective for annual and interim periods beginning after December 15, 2009, except for the Level 3 reconciliation which is effective for annual and interim periods beginning after December 15, 2010. The adoption of ASU 2010-06 as of January 1, 2010 did not have a material effect on our financial condition or results of operations. We do not expect the adoption of ASU 2010-06 in relation to the Level 3 reconciliation to have a material impact on our financial condition or results of operations.
In June 2009, the FASB issued ASC 810, “Consolidation,” or ASC 810, which (1) replaces the quantitative-based risks and rewards calculation for determining whether an enterprise is the primary beneficiary in a variable interest entity with an approach that is primarily qualitative, (2) requires
 
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ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity and (3) requires additional disclosures about an enterprise’s involvement in variable interest entities. We were required to adopt ASC 810 as of the beginning of 2010. The adoption of ASC 810 did not have a material impact on our consolidated financial position, results of operations or cash flows.
Controls and Procedures
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and is effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. As a private company we have designed our internal control over financial reporting to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. As a public company, under Section 404 of the Sarbanes-Oxley Act, we will also be required to include a report of management on our internal control over financial reporting in our Annual Reports on Form 10-K. This requirement will first apply to our Annual Report on Form 10-K for our fiscal year ending December 31, 2011. We may also in the future become subject to the requirement that our independent registered public accounting firm attest to and report on the effectiveness of our internal control over financial reporting. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
In connection with audits of our consolidated financial statements for the ten-month period ended October 25, 2009 and two-month period ended December 31, 2009, our independent registered public accounting firm reported two control deficiencies which represented a material weakness in our internal control over financial reporting. The two control deficiencies which represented a material weakness were that we did not have a sufficient number of financial personnel with the requisite financial accounting experience and our controls over non-routine transactions were not effective to ensure that accounting considerations were identified and appropriately recorded.
Our management and our board of directors agree that the control deficiencies identified by our independent registered public accounting firm represented a material weakness. We have identified and have taken steps to remediate this material weakness.
We remediated our material weakness in internal control over financial reporting by implementing the following remediation activities:
 
 	Ÿ	 	Management enhanced our financial accounting capability. This included:	
(i) hiring a director of financial reporting to review internal control over financial reporting and expanding staffing and resources dedicated to financial reporting,
(ii) providing additional training to accounting personnel to strengthen their GAAP knowledge and ability to identify potential errors in the underlying financial reporting process, and
(iii) maintaining professional services from external professional firms to supplement internal resources during the transition period.
 
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 	Ÿ	 	Management improved our period end closing process to identify non-routine and significant transactions earlier and to take appropriate financial reporting actions. This included:	
(i) defining key financial reporting schedule and action items,
(ii) redefining our book closing checklist for each key responsible person and for each reviewer,
(iii) having regular meetings with financial reporting parties to update the significant accounting events and to review the identified accounting issues,
(iv) communicating with other non-financial reporting parties to ensure all non-routine and significant transactions are captured and analyzed by the accounting team, and
(v) monitoring key changes in GAAP and financial reporting requirements and analyzing the impact of changed GAAP or related regulation on the company.
Based upon the remediation actions taken by us, our management has concluded that the two control deficiencies which represented a material weakness no longer exist as of December 31, 2010.
Management is responsible for and is committed to maintaining a strong control environment, high ethical standards, and financial reporting integrity. This commitment continues to be communicated to and reinforced with our employees.
 
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BUSINESS
Our Business
We are a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. We believe we have one of the broadest and deepest analog and mixed-signal semiconductor technology platforms in the industry, supported by our 30-year operating history, large portfolio of approximately 2,730 registered novel patents and 760 pending novel patent applications and extensive engineering and manufacturing process expertise. Our business is comprised of three key segments: Display Solutions, Power Solutions and Semiconductor Manufacturing Services. Our Display Solutions products include display drivers that cover a wide range of flat panel displays and mobile multimedia devices. Our Power Solutions products include discrete and integrated circuit solutions for power management in high-volume consumer applications. Our Semiconductor Manufacturing Services segment provides specialty analog and mixed-signal foundry services for fabless semiconductor companies that serve the consumer, computing and wireless end markets.
Our wide variety of analog and mixed-signal semiconductor products and manufacturing services combined with our deep technology platform allows us to address multiple high-growth end markets and to rapidly develop and introduce new products and services in response to market demands. Our substantial manufacturing operations in Korea and design centers in Korea and Japan place us at the core of the global consumer electronics supply chain. We believe this enables us to quickly and efficiently respond to our customers’ needs and allows us to better service and capture additional demand from existing and new customers.
We have a long history of supplying and collaborating on product and technology development with leading innovators in the consumer electronics market. As a result, we have been able to strengthen our technology platform and develop products and services that are in high demand by our customers and end consumers. We sold over 2,400 and 2,300 distinct products to over 500 and 185 customers for the year ended December 31, 2010 and the combined twelve-month period ended December 31, 2009, with a substantial portion of our revenues derived from a concentrated number of customers. The increase in number of customers is due to the continuing growth of our Power Solutions business. Our largest semiconductor manufacturing services customers include some of the fastest growing and leading semiconductor companies that design analog and mixed-signal products for the consumer, computing, and wireless end markets.
For the year ended December 31, 2010, we generated net sales of $770.4 million, income from continuing operations of $74.1 million, Adjusted EBITDA of $157.9 million and Adjusted Net Income of $89.2 million. For 2009 (on a combined basis), we generated net sales of $560.1 million, income from continuing operations of $832.0 million, Adjusted EBITDA of $98.7 million and Adjusted Net Income of $22.6 million. On June 12, 2009, we filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code and our plan of reorganization became effective on November 9, 2009. For 2008, we generated net sales of $601.7 million, losses from continuing operations of $325.8 million, Adjusted EBITDA of $59.8 million and Adjusted Net Loss of $71.7 million. See “Prospectus Summary—Summary Historical and Unaudited Pro Forma Consolidated Financial Data,” beginning on page 8 for an explanation of our use of Adjusted EBITDA and Adjusted Net Income.
Market Opportunity
The consumer electronics market is large and growing rapidly. Growth in this market is being driven by consumers seeking to enjoy a wide variety of available rich media content, such as high definition audio and video, mobile television and games. Consumer electronics manufacturers
 
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recognize that the consumer entertainment experience plays a critical role in differentiating their products. To address and further stimulate consumer demand, electronics manufacturers have been driving rapid advances in the technology, functionality, form factor, cost, quality, reliability and power consumption of their products. Electronics manufacturers are continuously implementing advanced technologies in new generations of electronic devices using analog and mixed-signal semiconductor components, such as display drivers that enable display of high resolution images, encoding and decoding devices that allow playback of high definition audio and video, and power management semiconductors that increase power efficiency, thereby reducing heat dissipation and extending battery life. These advanced generations of consumer devices are growing faster than the overall consumer electronics market. For example, according to Gartner, production of LCD televisions, smartphones, mobile PCs, and media tablets is expected to grow from 2010 to 2013 by a compound annual growth rate of 8%, 39%, 25%, and 99%, respectively.
The user experience delivered by a consumer electronic device is substantially driven by the quality of the display, audio and video processing capabilities and power efficiency of the device. Analog and mixed-signal semiconductors enable and enhance these capabilities. Examples of these analog and mixed-signal semiconductors include display drivers, timing controllers, audio encoding and decoding devices, or codecs, and interface circuits, as well as power management semiconductors such as voltage regulators, converters, and switches. According to iSuppli, in 2009, the display driver semiconductor market was $6.2 billion and the power management semiconductor market was $22.4 billion.
Requirements of Leading Consumer Electronics Manufacturers
We believe our target customers view the following characteristics and capabilities as key differentiating factors among available analog and mixed-signal semiconductor suppliers and manufacturing service providers:
 
 	Ÿ	 	Broad Offering of Differentiated Products with Advanced System-Level Features and Functions.    Leading consumer electronics manufacturers seek to differentiate their products by incorporating innovative semiconductor products that enable unique system-level functionality and enhance performance. These consumer electronics manufacturers seek to closely collaborate with semiconductor solutions providers that continuously develop new and advanced products, technologies, and manufacturing processes that enable state of the art features and functions, such as bright and thin displays, small form factor and energy efficiency.	
 
 	Ÿ	 	Fast Time to Market with New Products.    As a result of rapid technological advancements and short product lifecycles, our target customers typically prefer suppliers who have a compelling pipeline of new products and can leverage a substantial intellectual property and technology base to accelerate product design and manufacturing when needed.	
 
 	Ÿ	 	Nimble, Stable and Reliable Manufacturing Services.    Fabless semiconductor providers who rely on external manufacturing services often face rapidly changing product cycles. If these fabless companies are unable to meet the demand for their products due to issues with their manufacturing services providers, their profitability and market share can be significantly impacted. As a result, they prefer semiconductor manufacturing services providers who can increase production quickly and meet demand consistently through periods of constrained industry capacity. Furthermore, many fabless semiconductor providers serving the consumer electronics and industrial sectors need specialized analog and mixed-signal manufacturing capabilities to address their product performance and cost requirements.	
 
 	Ÿ	 	Ability to Deliver Cost Competitive Solutions.    Electronics manufacturers are under constant pressure to deliver cost competitive solutions. To accomplish this objective, they need strategic semiconductor suppliers that have the ability to provide system-level solutions, highly	
 
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 	integrated products, a broad product offering at a range of price points and have the design and manufacturing infrastructure and logistical support to deliver cost competitive products.	
 
 	Ÿ	 	Focus on Delivering Highly Energy Efficient Products.    Consumers increasingly seek longer run time, environmentally friendly and energy efficient consumer electronic products. In addition, there is increasing regulatory focus on reducing energy consumption of consumer electronic products. For instance, the California Energy Commission recently adopted standards that require televisions sold in California to consume 33% less energy by 2011 and 49% less energy by 2013. As a result of global focus on more environmentally friendly products, our customers are seeking analog and mixed-signal semiconductor suppliers that have the technological expertise to deliver solutions that satisfy these ever increasing regulatory and consumer power efficiency demands.	
Our Competitive Strengths
Designing and manufacturing analog and mixed-signal semiconductors capable of meeting the evolving functionality requirements for consumer electronics devices is challenging. In order to grow and succeed in the industry, we believe semiconductor suppliers must have a broad, advanced intellectual property portfolio, product design expertise, comprehensive product offerings and specialized manufacturing process technologies and capabilities. Our competitive strengths enable us to offer our customers solutions to solve their key challenges. We believe our strengths include:
 
 	Ÿ	 	Advanced Analog and Mixed-Signal Semiconductor Technology and Intellectual Property Platform.    We believe we have one of the broadest and deepest analog and mixed-signal semiconductor technology platforms in the industry. Our long operating history, large patent portfolio, extensive engineering and manufacturing process expertise and wide selection of analog and mixed-signal intellectual property libraries allow us to leverage our technology and develop new products across multiple end markets. Our product development efforts are supported by a team of approximately 394 engineers. Our platform allows us to develop and introduce new products quickly as well as to integrate numerous functions into a single product. For example, we were one of the first companies to introduce a commercial AMOLED display driver for mobile phones.	
 
 	Ÿ	 	Established Relationships and Close Collaboration with Leading Global Electronics Companies.    We have a long history of supplying and collaborating on product and technology development with leading innovators in the consumer electronics market. Our close customer relationships have been built based on many years of close collaborative product development which provides us with deep system level knowledge and key insights into our customers’ needs. As a result, we are able to continuously strengthen our technology platform in areas of strategic interest for our customers and focus on those products and services that our customers and end consumers demand the most.	
 
 	Ÿ	 	Longstanding Presence in Asia and Proximity to Global Consumer Electronics Supply Chain.    Our presence in Asia facilitates close contact with our customers, fast response to their needs and enhances our visibility into new product opportunities, markets and technology trends. According to Gartner, semiconductor consumption in Asia, excluding Japan, has increased from 49% of global production in 2004 to 60% in 2009 and is projected to grow to 66% by 2013. Our substantial manufacturing operations in Korea and design centers in Korea and Japan place us close to many of our largest customers and to the core of the global consumer electronics supply chain. We have active applications, engineering, product design, and customer support resources, as well as senior management and marketing resources, in geographic locations close to our customers. This allows us to strengthen our relationship with customers through better service, faster turnaround time and improved product design collaboration. We believe this also helps our customers to deliver products faster than their competitors and to solve problems more efficiently than would be possible with other suppliers.	
 
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 	Ÿ	 	Broad Portfolio of Product and Service Offerings Targeting Large, High-Growth Markets.    We continue to develop a wide variety of analog and mixed-signal semiconductor solutions for multiple high-growth consumer electronics end markets. We believe our expanding product and service offerings allow us to provide additional products to new and existing customers and to cross-sell our products and services to our established customers. For example, we have leveraged our technology expertise and customer relationships to develop and grow a new business offering power management solutions to customers. Our power management solutions enable our customers to increase system stability and reduce heat dissipation and energy use, resulting in cost savings for our customers, as well as environmental benefits. We have been able to sell these new products to our existing customers as well as expand our customer base.	
 
 	Ÿ	 	Distinctive Analog and Mixed-Signal Process Technology Expertise and Manufacturing Capabilities.    We have developed specialty analog and mixed-signal manufacturing processes such as high voltage CMOS, power and embedded memory. These processes enable us to flexibly ramp mass production of display, power and mixed-signal products, and shorten the duration from design to delivery of highly integrated, high-performance analog and mixed-signal semiconductors. As a result of the depth of our process technology, captive manufacturing facilities and customer support capabilities, we believe the majority of our top twenty manufacturing services customers by revenue currently use us as their primary manufacturing source for the products that we manufacture for them.	
 
 	Ÿ	 	Highly Efficient Manufacturing Capabilities.    Our manufacturing strategy is focused on optimizing our asset utilization across our display driver and power management products as well as our semiconductor manufacturing services, which enables us to maintain the price competitiveness of our products and services through our low-cost operating structure and improve our operational efficiency. We believe the location of our primary manufacturing and research and development facilities in Asia and relatively low required ongoing capital expenditures provide us with a number of cost advantages. We offer specialty analog process technologies that do not require substantial investment in leading edge, smaller geometry process equipment. We are able to utilize our manufacturing base over an extended period of time and thereby minimize our capital expenditure requirements.	
 
 	Ÿ	 	Strong Financial Model with a Low-Cost Structure.    Over the past two years we implemented significant structural improvements to our operating and financial model that lowered our capital investment requirements and improved our cash flow and profitability. The long lifecycles of our manufacturing processes, equipment and facilities allow us to keep our new capital requirements relatively low. We believe that our low-cost but highly skilled design and support engineers and manufacturing base position us favorably to compete in the marketplace and provide operating leverage in our operating model.	
Our Strategy
Our objective is to grow our business, our cash flow and profitability and to establish our position as a leading provider of analog and mixed-signal semiconductor products and services for high-volume markets. Our business strategy emphasizes the following key elements:
 
 	Ÿ	 	Leverage Our Advanced Analog and Mixed-Signal Technology Platform to Innovate and Deliver New Products and Services.     We intend to continue to utilize our extensive patent and technology portfolio, analog and mixed-signal design and manufacturing expertise and specific end-market applications and system-level design expertise to deliver products with high levels of performance by utilizing our systems expertise and leveraging our deep knowledge of our customers’ needs. For example, we have recently utilized our extensive patent portfolio, process technologies and analog and mixed-signal technology platform to	
 
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 	develop cost-effective Super Junction MOSFETs as well as low power integrated power solutions for AC-DC offline switchers to address more of our customers’ needs. In Display Solutions, we continue to invest in research and development to introduce new technologies to support our customers’ technology roadmaps such as their transition to 240Hz 3D LED televisions. In Semiconductor Manufacturing Services, we are developing cost-effective processes that substantially reduce die size using deep trench isolation.	
 
 	Ÿ	 	Increase Business with Existing Customers.    We have a global customer base consisting of leading consumer electronics OEMs who sell into multiple end markets. We intend to continue to strengthen our relationships with our customers by collaborating on critical design and product development in order to improve our design win rates. We will seek to increase our customer penetration by more closely aligning our product roadmap with those of our key customers and by taking advantage of our broad product portfolio, our deep knowledge of customer needs and existing relationships to sell more existing and new products. For example, two of our largest display driver customers have display modules in production using our power management products. These power management products have been purchased and evaluated via their key subcontractors for LCD backlight units and LCD integrated power supplies.	
 
 	Ÿ	 	Broaden Our Customer Base.    We expect to continue to expand our global design centers, local application engineering support and sales presence, particularly in China, Hong Kong, Taiwan and Macau, or collectively, Greater China, and other high-growth geographies, to penetrate new accounts. In addition, we intend to introduce new products and variations of existing products to address a broader customer base. In order to broaden our market penetration, we are complementing our direct customer relationships and sales with an expanded base of distributors, especially to aid the growth of our power management business. We expect to continue to expand our distribution channels as we broaden our power management penetration beyond existing customers.	
 
 	Ÿ	 	Aggressively Grow the Power Business.    We have utilized our extensive patent portfolio, process technologies, captive manufacturing facilities and analog and mixed-signal technology platform to develop power management solutions that expand our market opportunity and address more of our customers’ needs. We intend to increase the pace of our new power product introductions by continuing to collaborate closely with our industry-leading customers. For example, we began mass production of our first integrated power solution for LCD televisions at one of our major Korean customers in early 2010. We also intend to capitalize on the market needs and regulatory requirements for power management products that reduce energy consumption of consumer electronic products by introducing products that are more energy efficient than those of competitors. We believe our integrated designs, unique low-cost process technologies and deep customer relationships will enable us to increase sales of our power solutions to our current power solutions customers, and as an extension of our other product offerings, to our other customers.	
 
 	Ÿ	 	Drive Execution Excellence. We have significantly improved our execution through a number of management initiatives implemented under the direction of our Chief Executive Officer and Chairman, Sang Park. As an example, we have introduced new processes for product development, customer service and personnel development. We expect these ongoing initiatives will continue to improve our new product development and customer service as well as enhance our commitment to a culture of quick action and execution by our workforce. In addition, we have focused on and continually improved our manufacturing efficiency during the past several years. As a result of our focus on execution excellence, we have also meaningfully reduced our time from new product definition to development completion. For example, we have improved our average development turnaround time by over 40% over the last three years for semiconductor manufacturing services by implementing continuous business process improvement initiatives and we improved our manufacturing productivity per operator by 22% from 2009 to 2010.	
 
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 	Ÿ	 	Optimize Asset Utilization, Return on Capital Investments and Cash Flow Generation.    We intend to keep our capital expenditures relatively low by maintaining our focus on specialty process technologies that do not require substantial investment in frequent upgrades to the latest manufacturing equipment. We also believe our power management business should increase our utilization and return on capital as the manufacturing of these products primarily relies on our 0.35µm geometry and low-cost equipment. By utilizing our manufacturing facilities for both our display solutions and power solutions products and our semiconductor manufacturing services customers, we will seek to maximize return on our capital investments and our cash flow generation.	
Our Technology
We continuously strengthen our advanced analog and mixed-signal semiconductor technology platform by developing innovative technologies and integrated circuit building blocks that enhance the functionality of consumer electronics products through brighter, thinner displays, enhanced image quality, smaller form factor and longer battery life. We seek to further build our technology platform through proprietary research and development and selective licensing and acquisition of complementary technologies, as well as disciplined process improvements in our manufacturing operations. Our goal is to leverage our experience and development initiatives across multiple end markets and utilize our understanding of system-level issues our customers face to introduce new technologies that enable our customers to develop more advanced, higher performance products.
Our display technology portfolio includes building blocks for display drivers and timing controllers, processor and interface technologies, as well as sophisticated production techniques, such as chip-on-glass, or COG, which enables the manufacture of thinner displays. Our advanced display drivers incorporate LTPS and AMOLED panel technologies that enable the highest resolution displays. Furthermore, we are developing a broad intellectual property portfolio to improve the power efficiency of displays, including the development of our smart mobile luminance control, or SMLC, algorithm.
We have a long history of specialized process technology development and have a number of distinctive process implementations. We have approximately 240 process flows we can utilize for our products and offer to our semiconductor manufacturing services customers. Our process technologies include standard CMOS, high voltage CMOS, ultra-low leakage high voltage CMOS and BCDMOS. Our manufacturing processes incorporate embedded memory solutions such as static random access memory, or SRAM, one-time programmable, or OTP, memory, multiple-time programmable, or MTP, memory, EEPROM, and single-transistor random access memory, or 1TRAM. More broadly, we focus extensively on processes that reduce die size across all of the products we manufacture, in order to deliver cost-effective solutions to our customers.
Expertise in high voltage and deep trench BCDMOS process technologies, low power analog and mixed-signal design capabilities and packaging know-how are key requirements in the power management market. We are currently leveraging our capabilities in these areas with products such as AC-DC converters, DC-DC converters, linear regulators, including LDO, regulators and analog switches, and power MOSFETs. We believe our system level understanding of applications such as LCD televisions and mobile phones will allow us to more quickly develop and customize power management solutions for our customers in these markets.
Our Products and Services
Our broad portfolio of products and services addresses multiple high-growth, consumer-focused end markets. A key component of our product strategy is to supply multiple related product and service offerings to each of the end markets that we serve.
 
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Display Solutions
Display Driver Characteristics.    Display drivers deliver defined analog voltages and currents that activate pixels to exhibit images on displays. The following key characteristics determine display driver performance and end-market application:
 
 	Ÿ	 	Resolution and Number of Channels.    Resolution determines the level of detail displayed within an image and is defined by the number of pixels per line multiplied by the number of lines on a display. For large displays, higher resolution typically requires more display drivers for each panel. Display drivers that have a greater number of channels, however, generally require fewer display drivers for each panel and command a higher selling price per unit. Mobile displays, conversely, are typically single chip solutions designed to deliver a specific resolution. We cover resolutions ranging from QVGA (240RGB x 320) to DVGA (960RGB x 640).	
 
 	Ÿ	 	Color Depth.    Color depth is the number of colors that can be displayed on a panel. For example, for TFT-LCD panels, 262 thousand colors are supported by 6-bit source drivers; 16 million colors are supported by 8-bit source drivers; and 1 billion colors are supported by 10-bit and 12-bit source drivers.	
 
 	Ÿ	 	Operational Voltage.    Display drivers are characterized by input and output voltages. Source drivers typically operate at input voltages from 2.0 to 3.6 volts and output voltages between 4.5 and 18 volts. Gate drivers typically operate at input voltages from 2.0 to 3.6 volts and output voltages of up to 40 volts. Lower input voltage results in lower power consumption and electromagnetic interference, or EMI.	
 
 	Ÿ	 	Gamma Curve.    The relationship between the light passing through a pixel and the voltage applied to the pixel by the source driver is referred to as the gamma curve. The gamma curve of the source driver can correct some imperfections in picture quality in a process generally known as gamma correction. Some advanced display drivers feature up to three independent gamma curves to facilitate this correction.	
 
 	Ÿ	 	Driver Interface.    Driver interface refers to the connection between the timing controller and the display drivers. Display drivers increasingly require higher bandwidth interface technology to address the larger data transfer rate necessary for higher definition images. The principal types of interface technologies are transistor-to-transistor logic, or TTL, reduced swing differential signaling, or RSDS, advance intra panel I/F, or AIPI, mini-low voltage differential signaling, or m-LVDS, and ultra slim I/F, or USI.	
 
 	Ÿ	 	Package Type.    The assembly of display drivers typically uses chip-on-film, or COF, tape carrier package, or TCP, and COG package types.	
Large Display Solutions.    We provide display solutions for a wide range of flat panel display sizes used in LCD televisions, including high definition televisions, or HDTVs, LED TVs, 3D TVs, LCD monitors and mobile PCs.
Our large display solutions include source and gate drivers and timing controllers with a variety of interfaces, voltages, frequencies and packages to meet customers’ needs. These products include advanced technologies such as high channel count, with products in mass production to provide up to 960 channels. We also offer a distinctive interface technology known as LCDS, which supports thinner displays for mobile PCs. Our large display solutions are designed to allow customers to cost-effectively meet the increasing demand for high resolution displays. We focus extensively on reducing the die size of our large display drivers and other solutions products to reduce costs without having to migrate to smaller geometries. For example, we have implemented several solutions to reduce die size in large display drivers, such as optimizing design schemes and design rules and applying specific technologies that we have developed internally. We have recently introduced a number of new large display drivers with reduced die size.
 
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The table below sets forth the features of our products, both in mass production and in customer qualification, which is the final stage of product development, for large-sized displays:

Product	  	Key Features	  	Applications	
TFT-LCD Source Drivers	  	•    480 to 960 output channels	  	•    LCD monitors, including widescreens	
 	  	•    6-bit (262 thousand colors), 8-bit (16 million colors), 10-bit (1 billion colors)	  	•    Mobile PCs, including netbooks	
 	  	•    Output voltage ranging from 3.3V to 18V	  	•    Digital televisions, including LED TVs	
 	  	•    Low power consumption and low EMI	  	 	
 	  	•    Supports COF package types	  	 	
 	  	•    Supports RSDS, m-LVDS, AiPi*, USI* interface technologies	  	 	
 	  	•    Geometries of 0.15µm to 0.35µm	  	 	
 	 	 	
TFT-LCD Gate Drivers	  	•    272 to 768 output channels	  	•    LCD monitors, including widescreens	
 	  	•    Output voltage ranging up to 45V	  	•    Mobile PCs, including netbooks	
 	  	•    Supports COF and COG package types	  	•    Media tablets	
 	  	•    Geometries of 0.35µm	  	•    Digital televisions, including LED TVs	
 	 	 	
Timing Controllers	  	•    Product portfolio supports a wide range of resolutions	  	•    LCD monitors, including widescreens	
 	  	•    Supports m-LVDS, AiPi* interface technologies	  	•    Mobile PCs, including netbooks	
 	  	•    Input voltage ranging from 2.3V to 3.6V	  	 	
 	  	•    Geometries of 0.18µm	  	 	
 
*	In customer qualification stage	
Mobile Display Solutions.    Our mobile display solutions incorporate the industry’s most advanced display technologies, such as LTPS and AMOLED, as well as high-volume technologies such as a-Si (amorphous silicon) TFT. Our mobile display products offer specialized capabilities, including high speed serial interfaces, such as mobile display digital interface, or MDDI, and mobile industry processor interface, or MIPI, as well as multi-time programmable, or MTP, memories, using EEPROM and logic-based OTP memory. We focus extensively on reducing the die size of our mobile display drivers and other solutions products to reduce costs without having to migrate to smaller geometries. For example, we have implemented several solutions to reduce die size in mobile display drivers, such as optimizing design schemes and design rules and applying specific technologies that we have developed internally. Further, we are building a distinctive intellectual property portfolio that allows us to provide features that reduce power consumption, such as SMLC, ambient light-based brightness control, or LABC, automatic brightness control, or ABC, and automatic current limit, or ACL. This intellectual property portfolio will also support our power management product development initiatives, as we leverage our system level understanding of power efficiency.
 
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The following table summarizes the features of our products, both in mass production and in customer qualification, which is the final stage of product development, for mobile displays:

Product	  	Key Features	  	Applications	
LTPS	  	•    Resolutions of QVGA, WQVGA, VGA, WVGA*, DVGA*	  	•    Mobile phones
•    Game consoles	
 	  	•    Color depth ranging from 262 thousand to 16 million	  	 	
 	  	•    MDDI, MIPI interface	  	 	
 	  	•    EEPROM and logic-based OTP, separated gamma control	  	 	
 	 	 	
AMOLED	  	•    Resolutions of WQVGA, HVGA, WVGA, QHD*	  	•    Mobile phones
•    Game consoles
•    Digital still cameras
•    Personal digital assistants
•    Portable media players	
 	  	•    Color depth ranging from 262 thousand to 16 million	  	 	
 	  	•    Geometries of 0.11µm to 0.15µm	  	 	
 	  	•    MDDI, MIPI interface	  	 	
 	  	•    EEPROM and logic-based OTP	  	 	
 	  	•    ABC, ACL	  	 	
 	 	 	
a-Si TFT	  	•    Resolutions of QVGA, WQVGA, HVGA, WVGA, WSVGA, HD	  	•    Mobile phones
•    Game consoles
•    Netbooks
•    Portable navigation devices	
 	  	•    Color depth ranging from 262 thousand to 16 million	  	 	
 	  	•    MDDI, MIPI interface	  	 	
 	  	•    Content adaptive brightness control, or CABC	  	 	
 	  	•    LVDS, I(2)C, DCDC	  	 	
 	  	•    Separated gamma control	  	 	
 
*	In customer qualification stage	
Power Solutions
We develop, manufacture and market power management solutions for a wide range of end market customers. The products include MOSFETs, LED Drivers, DC-DC converters, analog switches and linear regulators, such as LDOs.
 
 	Ÿ	 	MOSFET.    Our MOSFETs include low-voltage Trench MOSFETs, 20V to 100V, and high-voltage Planar MOSFETs, 400V through 600V. MOSFETs are used in applications to switch, shape or transfer electricity under varying power requirements. The key application segments are mobile phones, LCD televisions, desktop computers and power supplies for consumer electronics and industrial equipment. MOSFETs allow electronics manufacturers to achieve specific design goals of high efficiency and low standby power consumption. For example, computing solutions focus on delivering efficient controllers and MOSFETs for power management in VCORE, DDR and chipsets for audio, video and graphics processing systems.	
 
 	Ÿ	 	LED Drivers.    LED driver solutions serve the fast-growing LCD panel backlighting market for LCD televisions, LCD monitors and mobile PCs. Our products are designed to provide high efficiency and wide input voltage range as well as PWM dimming for accurate white LED dimming control.	
 
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 	Ÿ	 	DC-DC Converters.    We plan to release DC-DC converters targeting mobile applications and high power applications like LCD televisions, set-top boxes, DVD/Blu-ray players and display modules. We expect our DC-DC converters will meet customer green power requirements by featuring wide input voltage ranges, high efficiency and small size.	
 
 	Ÿ	 	Analog Switches and Linear Regulators.    We also provide analog switches and linear regulators for mobile applications. Our products are designed for high efficiency and low power consumption in mobile applications.	
Our power management solutions enable customers to increase system stability and reduce heat dissipation and energy use, resulting in cost savings for our customers and consumers, as well as environmental benefits. Our in-house process technology capabilities and eight-inch wafer production lines increase efficiency and contribute to the competitiveness of our products.
The following table summarizes the features of our products, both in mass production and in customer qualification, which is the final stage of product development:

Product	 	Key Features	 	Applications	 	
Low Voltage MOSFET	 	•    V(ds)(V) options of 20V—100V	 	•    Mobile phones
•    Desktop computers
•    Mobile PCs
•    Digital TVs	 	
 	 	•    R(ds)(on) options of Max 5m W —50m  W  at 10V	 	 	 	
 	 	 	 	 	 	 	
 	 	•    Advanced 0.35µm Trench MOSFET Process	 	 	 	 	
 	 	•    High cell density of 268Mcell/inch(2)	 	 	 	 	
 	 	•    Advanced packages to enable reduction of PCB mounting area	 	 	 	 	
 	 	 	 	 	
High Voltage MOSFET	 	•    Voltage options of 400, 500, and 600V	 	•    Power supplies for consumer electronics
•    Industrial charger and adaptors
•    Lighting (ballast, HID, LED)
•    Industrial equipment	 	 	
 	 	•    Drain current options of 1A—18A.	 	 	 	 	
 	 	•    R(ds)(on) options of 0.22~8.0 W (typical)	 	 	 	 	
 	 	 	 	 	 	 	
 	 	•    R(2)FET (rapid recovery) option to shorten reverse diode recovery time	 	 	 	 	
 	 	•    Zenor FET option for MOSFET protection for abnormal input	 	 	 	 	
 	 	•    Advanced 0.50µm Planar MOSFET Process	 	 	 	 	
 	 	 	 	 	
LED Drivers	 	•    High efficiency, wide input voltage range	 	•    LED backlights for digital TVs, LCD monitors and mobile PCs	 	 	
 	 	•    Proven 0.35µm BCDMOS process	 	 	 	 	
 	 	•    40V and 65V* modular BCDMOS	 	 	 	 	
 	 	•    OCP, SCP, OVP and UVLO protections	 	 	 	 	
 	 	•    Accurate LED current control and multi-channel matching	 	 	 	 	
 
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Product	 	Key Features	 	Applications	
 	 	•    Programmable current limit, boost up frequency	 	 	
 	 	 	
DC-DC Converters*	 	•    High efficiency, wide input voltage range	 	•    LCD TVs
•    Set-top boxes
•    DVD/Blu-ray players	
 	 	•    Proven 0.35µm BCDMOS process	 	 	
 	 	•    30V modular BCDMOS	 	 	
 	 	•    Fast load and line regulation	 	 	
 	 	•    Accurate output voltage	 	 	
 	 	•    OCP, SCP and thermal protections	 	 	
 	 	 	
Analog Switches	 	USB Switches	 	•    Mobile phones	
 	 	•    Low C(on), 7.0pF (typical) limits signal distortion	 	 	
 	 	•    Low R(on), 4.0 W (typical)	 	 	
 	 	•    0.35µm CMOS process	 	 	
 	 	Audio Switches	 	 	
 	 	•    Negative Swing Support	 	 	
 	 	•    Low R(on), 0.4 W (typical)	 	 	
 	 	•    High ESD protection, 13kV	 	 	
 	 	•    0.35µm CMOS process	 	 	
 	 	 	
Linear Regulators	 	•    Single and dual* LDOs	 	•    Mobile phones	
 	 	•    Low Noise Output Linear µCap LDO Regulator	 	 	
 	 	•    2.3V to 5.5V input voltage and 150mA, 300mA* output current	 	 	
 	 	•    Small package size of DFN type	 	 	
 	 	•    0.35µm CMOS process	 	 	
 
*	In customer qualification stage	
Semiconductor Manufacturing Services
We provide semiconductor manufacturing services to analog and mixed-signal semiconductor companies. We have approximately 240 process flows we offer to our semiconductor manufacturing services customers. We also often partner with key customers to jointly develop or customize specialized processes that enable our customers to improve their products and allow us to develop unique manufacturing expertise.
Our semiconductor manufacturing services offering is targeted at customers who require differentiated, specialty analog and mixed-signal process technologies such as high voltage CMOS, embedded memory and power. We refer to our approach of delivering specialized services to our customers as our application-specific technology, or AS Tech, strategy. We differentiate ourselves through the depth of our intellectual property portfolio, ability to customize process technology to meet the customers’ requirements effectively, long history in this business and reputation for excellence.
Our semiconductor manufacturing services customers typically serve high-growth and high-volume applications in the consumer, computing and wireless end markets. We strive to be the primary manufacturing source for our semiconductor manufacturing services customers.
 
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Process Technology Overview
 
 	Ÿ	 	Mixed-Signal.    Mixed-signal process technology is used in devices that require conversion of light and sound into electrical signals for processing and display. Our mixed-signal processes include advanced technologies such as low noise process using triple gate, which uses less power at any given performance level. MEMS process technology allows the manufacture of components that use electrical energy to generate a mechanical response. For example, MEMS devices are used in the accelerometers and gyroscopes of mobile phones.	
 
 	Ÿ	 	Power.    Power process technology, such as BCD, includes high voltage capabilities as well as the ability to integrate functionality such as self-regulation, internal protection, and other intelligent features. The unique process features such as deep trench isolation are suited for chip shrink and device performance enhancement.	
 
 	Ÿ	 	High Voltage CMOS.    High voltage CMOS process technology facilitates the use of high voltage levels in conjunction with smaller transistor sizes. This process technology includes several variations, such as bipolar processes, which use transistors with qualities well suited for amplifying and switching applications, mixed mode processes, which incorporate denser, more power efficient FETs, and thick metal processes.	
 
 	Ÿ	 	Non-Volatile Memory.    Non-volatile memory, or NVM, process technology enables the integration of non-volatile memory cells that allow retention of the stored information even when power is removed from the circuit. This type of memory is typically used for long-term persistent storage.	
The table below sets forth the key process technologies in Semiconductor Manufacturing Services currently in mass production:

Process	  	Technology	  	Device	  	End Markets	
Mixed-signal	  	•    0.13-0.8µm	  	•    Analog to digital converter	  	•    Consumer	
 	  	•    Multipurpose	  	•    Digital to analog converter	  	•    Wireless	
 	  	•    Low noise	  	•    Audio codec	  	•    Computing	
 	  	•    Ultra low power	  	•    Chipset	  	 	
 	  	•    Triple gate	  	 	  	 	
 	 	 	 	
Power	  	•    0.18-0.35µm	  	•    Power management	  	•    Consumer	
 	  	•    aBCD	  	•    Mobile PMIC	  	•    Wireless	
 	  	•    Deep Trench Isolation	  	•    LED drivers	  	•    Computing	
 	  	•    Trench MOSFET	  	 	  	 	
 	  	•    Planar MOSFET	  	 	  	 	
 	  	•    Schottky Diode	  	 	  	 	
 	  	•    Zener Diode	  	 	  	 	
High Voltage CMOS	  	•    0.13-2.0µm	  	•    Display drivers	  	•    Consumer	
 	  	•    5V-250V	  	•    CSTN drivers	  	•    Wireless	
 	  	•    Bipolar, Thick Metal	  	 	  	•    Computing	
 	 	 	 	
NVM	  	•    0.18-0.5µm	  	•    Microcontroller	  	•    Consumer	
 	  	•    EEPROM	  	•    Touch screen controller	  	•    Medical	
 	  	•    eFlash	  	•    Electronic tag	  	•    Automotive	
 	  	•    OTP	  	•    Hearing aid	  	 	
 
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Manufacturing and Facilities
Our manufacturing operations consist of three fabrication facilities located at two sites in Cheongju and Gumi in Korea. These sites have a combined capacity of approximately 136,000 eight-inch equivalent wafers per month. We manufacture wafers utilizing geometries ranging from 0.11 to 2.0 micron. The Cheongju facilities have three main buildings totaling 164,058 square meters devoted to manufacturing and development. The Gumi facilities have one main building with 41,022 square meters devoted to manufacturing, testing and packaging.
In addition to our fabrication facilities, we lease facilities in Seoul, Korea, Cupertino, California, and Osaka, Japan. Each of these facilities includes administration, sales and marketing and research and development functions. We lease sales and marketing offices at our subsidiaries in several other countries.
The ownership of our wafer manufacturing assets is an important component of our business strategy. Maintaining manufacturing control enables us to develop proprietary, differentiated products and results in higher production yields, as well as shortened design and production cycles. We believe our facilities are suitable and adequate for the conduct of our business for the foreseeable future and that we have sufficient production capacity to service our business as currently contemplated without significant capital investment.
A substantial majority of our assembly, test and packaging services for our Display Solutions business and all of such services for our Power Solutions business are outsourced with the balance handled in-house. Our independent providers of these services are located in Korea, China, Taiwan, Malaysia and Thailand. The relative cost of outsourced services, as compared to in-house services, depends upon many factors specific to each product and circumstance. However, we generally incur higher costs for outsourced services, which can result in lower margins.
We use processes that require specialized raw materials that are generally available from a limited number of suppliers. Tape is one of the process materials required for our display drivers. We continue to attempt to qualify additional suppliers for our raw materials.
Although we own our manufacturing facilities, we are party to a land lease and easement agreement with Hynix pursuant to which we lease the land for our facilities in Cheongju, Korea from Hynix for an indefinite term. Because we share certain facilities with Hynix, several services that are essential to our business are provided to us by or through Hynix under our general service supply agreement with Hynix. These services include electricity, bulk gases and de-ionized water, campus facilities and housing, wastewater and sewage management, environmental safety and certain utilities and infrastructure support services. The services agreement continues for an indefinite term subject to each party having a right to terminate in the event of an uncured breach by the other party.
Sales and Marketing
We focus our sales and marketing strategy on creating and strengthening our relationships with leading consumer electronics OEMs, as well as analog and mixed-signal semiconductor companies. We believe our close collaboration with customers allows us to align our product and process technology development with our customers’ existing and future needs. Because our customers often service multiple end markets, our product sales teams are organized by customers within the major geographies. We believe this facilitates the sale of products that address multiple end-market applications to each of our customers. Our semiconductor manufacturing services sales teams focus on marketing our services to analog and mixed-signal semiconductor companies that require specialty manufacturing processes.
 
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We sell our products through a direct sales force and a network of authorized agents and distributors. We have strategically located our sales and technical support offices near our customers. Our direct sales force consists primarily of representatives co-located with our design centers in Korea and Japan, as well as our local sales and support offices in Greater China and Europe. We have a network of agents and distributors in Korea, Japan, Europe and Greater China. With the expansion of our Power Solutions portfolio, we have added sales agents in Europe and the United States in 2010 and we expect to expand in 2011. For the year ended December 31, 2010 and the combined twelve-month period ended December 31, 2009, we derived 76% and 82% of net sales through our direct sales force, respectively, and 24% and 18% of net sales through our network of authorized agents and distributors, respectively.
Research and Development
Our research and development efforts focus on intellectual property, design methodology and process technology for our complex analog and mixed-signal semiconductor products and services. Research and development expenses for the year ended December 31, 2010, the combined twelve-month period ended December 31, 2009 and the year ended December 31, 2008 were $83.5 million, $70.9 million and $89.5 million, respectively, representing 10.8%, 12.7% and 14.9% of net sales, respectively.
Customers
We sell our display solutions and power solutions products to consumer electronics OEMs as well as subsystem designers and contract manufacturers. We sell our semiconductor manufacturing services to analog and mixed-signal semiconductor companies. For the year ended December 31, 2010 and the combined twelve-month period ended December 31, 2009, our ten largest customers accounted for 63% and 69% of our net sales, respectively, and we had one customer, LG Display, representing 16% and 26% of our consolidated net sales, for the year ended December 31, 2010 and the combined twelve-month period ended December 31, 2009, respectively. Substantially all of our sales to LG Display are in our Display Solutions segment and sales to LG Display represented 41% and 51% of net sales in our Display Solutions segment in the year ended December 31, 2010 and the combined twelve-month period ended December 31, 2009, respectively. Our relationships with some of our ten largest customers were and may continue to be adversely impacted by our reorganization proceedings. Some of these customers did not offer us the opportunity to compete for new design wins during the pendency of our reorganization proceedings. However, subsequent to our emergence from our reorganization proceedings we have again been provided an opportunity to compete for these projects. For the year ended December 31, 2010, we recorded revenues of $90.0 million from customers in the United States and $680.4 million from all foreign countries, of which 55.7% was from Korea, 23.1% from Taiwan, 8.4% from Japan and 9.3% from China, Hong Kong and Macau. For the combined twelve-month period ended December 31, 2009, we recorded revenues of $59.0 million from customers in the United States and $501.1 million from all foreign countries, of which 61.2% was from Korea, 18.5% from Taiwan, 7.6% from Japan and 9.6% from China, Hong Kong and Macau.
Intellectual Property
As of December 31, 2010, our portfolio of intellectual property assets included approximately 3,470 registered patents and 1,055 pending patent applications. Approximately 2,730 and 760 of our patents and pending patents are novel in that they are not a foreign counterpart of an existing patent or patent application. Because we file patents in multiple jurisdictions, we additionally have approximately 1,035 registered and pending patents that relate to identical technical claims in our base patent portfolio. Our patents expire at various times over the next 18 years. While these patents are in the aggregate important to our competitive position, we do not believe that any single registered or pending patent is material to us.
 
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We have entered into exclusive and non-exclusive licenses and development agreements with third parties relating to the use of intellectual property of the third parties in our products and our design processes, including licenses related to embedded memory technology, design tools, process simulation tools, circuit designs and processor cores. Some of these licenses, including our agreements with Silicon Works Co., Ltd. and ARM Limited, are material to our business and may be terminated prior to the expiration of these licenses by the licensors should we fail to cure any breach under such licenses. Our license with Silicon Works Co., Ltd. relates to our large display drivers and our license from ARM Limited primarily relates to product lines in our Semiconductor Manufacturing Services business. The loss of either license could have a material adverse impact on our results of operations. Additionally, in connection with the Original Acquisition, Hynix retained a perpetual license to use the intellectual property that we acquired from Hynix in the Original Acquisition. Under this license, Hynix and its subsidiaries are free to develop products that may incorporate or embody intellectual property developed by us prior to October 2004.
Competition
We operate in highly competitive markets characterized by rapid technological change and continually advancing customer requirements. Although no one company competes with us in all of our product lines, we face significant competition in each of our market segments. Our competitors include other independent and captive manufacturers and designers of analog and mixed-signal integrated circuits including display driver and power management semiconductor devices, as well as companies providing specialty manufacturing services.
We compete based on design experience, manufacturing capabilities, the ability to service customer needs from the design phase through the shipping of a completed product, length of design cycle and quality of technical support and sales personnel. Our ability to compete successfully will depend on internal and external variables, both within and outside of our control. These variables include the timeliness with which we can develop new products and technologies, product performance and quality, manufacturing yields, capacity availability, customer service, pricing, industry trends and general economic trends.
Employees
Our worldwide workforce consisted of 3,337 employees (full- and part-time) as of December 31, 2010, of which 391 were involved in sales, marketing, general and administrative, 394 were in research and development (including 205 with advanced degrees), 109 were in quality, reliability and assurance and 2,443 were in manufacturing (comprised of 351 in engineering and 2,092 in operations). As of December 31, 2010, 2,208 employees, or approximately 66.2% of our workforce, were represented by the MagnaChip Semiconductor Labor Union, which is a member of the Federation of Korean Metal Workers Trade Unions. We believe our labor relations are good.
Environmental
Our operations are subject to a variety of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate, governing, among other things, air emissions, wastewater discharges, the generation, use, handling, storage and disposal of, and exposure to, hazardous substances (including asbestos) and waste, soil and groundwater contamination and employee health and safety. These laws and regulations are complex, constantly changing and have tended to become more stringent over time. For example, the Korean government is planning to adopt the Asbestos Safety Management Act and Emission Trading Act which we expect will result in additional compliance obligations and costs. There can be no assurance that we have been or will be in compliance with all these laws and regulations, or that we will not incur material costs or liabilities in
 
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connection with these laws and regulations in the future. The adoption of new environmental, health and safety laws, any 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.
Legal Proceedings
We are subject to lawsuits and claims that arise in the ordinary course of business and intellectual property litigation and infringement claims. Intellectual property litigation and infringement claims, in particular, could cause us to incur significant expenses or prevent us from selling our products. We are currently not involved in any legal proceedings the outcome of which we believe would have a material adverse effect on our business, financial condition or results of operations.
Segments
For a description of our business and the distribution of our assets by geographic regions and reporting segments, see note 23 to the consolidated financial statements for MagnaChip Semiconductor Corporation for the year ended December 31, 2010 included elsewhere in this prospectus.
 
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MANAGEMENT
Directors and Executive Officers and Corporate Governance
The following table is a list of the current directors and executive officers of MagnaChip and their respective ages as of December 31, 2010:

Name	  	Age	 	  	Position	
Sang Park	  	 	63	  	  	Chairman of the Board of Directors and Chief Executive Officer	
Tae Young Hwang	  	 	54	  	  	Chief Operating Officer and President	
Brent Rowe	  	 	49	  	  	Executive Vice President, Worldwide Sales	
Heung Kyu Kim	  	 	47	  	  	Executive Vice President and General Manager, Power Solutions Division	
Margaret Sakai	  	 	53	  	  	Senior Vice President and Chief Financial Officer	
Tae Jong Lee	  	 	48	  	  	Senior Vice President and General Manager, Corporate Engineering	
John McFarland	  	 	44	  	  	Senior Vice President, General Counsel and Secretary	
Michael Elkins	  	 	42	  	  	Director	
Randal Klein	  	 	45	  	  	Director	
R. Douglas Norby	  	 	74	  	  	Director	
Gidu Shroff	  	 	65	  	  	Director	
Steven Tan	  	 	34	  	  	Director	
Nader Tavakoli	  	 	52	  	  	Director	
Sang Park, Chairman of the Board of Directors and Chief Executive Officer.    Mr. Park became our Chairman of the board of directors and Chief Executive Officer on January 1, 2007, after serving as President, Chief Executive Officer and director since May 2006. Mr. Park served as an executive fellow for iSuppli Corporation from January 2005 to May 2006. Prior to joining iSuppli, he was founder and president of SP Associates, a consulting services provider for technology companies, from September 2003 to December 2004. Mr. Park served as Chief Executive Officer of Hynix from May 2002 to March 2003, and as Chief Operating Officer and President of the Semiconductor Division of Hynix from July 1999 to April 2002. Prior to his service at Hynix, Mr. Park was Vice President of Procurement Engineering at IBM in New York from 1995 to 1999, and he held various positions in procurement and operations at Hewlett Packard in California from 1979 to 1995. Our board of directors has concluded that Mr. Park should serve as a director and as chairman of the board of directors based on his extensive experience as an executive, investor and director in our industry and his experience and insight as our Chief Executive Officer.
Tae Young Hwang, Chief Operating Officer and President.    Mr. Hwang became our Chief Operating Officer and President in November 2009. He previously served as our Executive Vice President, Manufacturing Division, and General Manager, Display Solutions from January 2007, and our Executive Vice President of Manufacturing Operations from October 2004. Prior to that time, Mr. Hwang served as Hynix’s Senior Vice President of Manufacturing Operations, System IC, from 2002 to 2003. From 1999 to 2001, he was Vice President of Cheongju Operations for Hynix. Mr. Hwang holds a B.S. degree in Mechanical Engineering from Pusan National University and an M.B.A. from Cheongju University.
Brent Rowe, Executive Vice President, Worldwide Sales.    Mr. Rowe became our Executive Vice President, Worldwide Sales in December 2010, after serving as our Senior Vice President, Worldwide Sales since April 2006. Prior to joining our company, Mr. Rowe served at Fairchild Semiconductor International, Inc., a semiconductor manufacturer, as Vice President, Americas Sales and Marketing from August 2003 to October 2005; Vice President, Europe Sales and Marketing from
 
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August 2002 to August 2003; and Vice President, Japan Sales and Marketing from April 2002 to August 2002. Mr. Rowe holds a B.S. degree in Chemical Engineering from the University of Illinois.
Heung Kyu Kim, Executive Vice President and General Manager, Power Solutions Division.    Mr. Kim became our Executive Vice President and General Manager, Power Solutions Division, in December 2010, after serving as our Senior Vice President and General Manager, Corporate Engineering since July 2007. Prior to joining our company, Mr. Kim served at Fairchild Semiconductor International, Inc., a semiconductor manufacturer, as Vice President of the Power Conversion Product Line from July 2003 to June 2007, and as Director of Korea Sales and Marketing from April 1999 to June 2003. Mr. Kim holds a B.S. degree in Metallurgical Engineering from Korea University.
Margaret Sakai, Senior Vice President and Chief Financial Officer.    Ms. Sakai became our Senior Vice President, Finance, on November 1, 2006 and our Chief Financial Officer on April 10, 2009. Prior to joining our company, she served as Chief Financial Officer of Asia Finance and Vice President of Photronics, Inc., a manufacturer of reticles and photomasks for semiconductor and microelectronic applications, since November 2003. From June 1999 to October 2003, Ms. Sakai was Executive Vice President and Chief Financial Officer of PKL Corporation, a photomask manufacturer. From October 1995 to May 1999, Ms. Sakai served as Director of Finance of Acqutek International Limited, a lead-frame manufacturer, and from March 1992 to September 1995, Ms. Sakai served as Financial Manager at National Semiconductor Corporation. Ms. Sakai worked as an Audit Supervisor at Coopers & Lybrand from January 1988 to March 1992. Ms. Sakai is a Certified Public Accountant in the State of California and holds a B.A. degree in Accounting from Babson College.
Tae Jong Lee, Senior Vice President and General Manager, Corporate Engineering.    Mr. Lee became our Senior Vice President and General Manager, Corporate Engineering, in August 2009. He previously served as our Vice President, Corporate Engineering from September 2007. Prior to joining our company, Mr. Lee served as Director of the Technology Development Division, Chartered Semiconductor Manufacturing, in Singapore from 1999 to August 2007. Mr. Lee holds B.S. and M.S. degrees from Seoul National University, and a Ph.D in Physics from the University of Texas at Dallas.
John McFarland, Senior Vice President, General Counsel and Secretary.    Mr. McFarland became our Senior Vice President, General Counsel and Secretary in April 2006, after serving as Vice President, General Counsel and Secretary since November 2004. Prior to joining our company, Mr. McFarland served as a foreign legal consultant at Bae, Kim & Lee, a law firm, from August 2003 to November 2004 and an associate at Wilson Sonsini Goodrich & Rosati, P.C., a law firm, from August 2000 to July 2003. Mr. McFarland holds a B.A. degree in Asian Studies, conferred with highest distinction from the University of Michigan, and a J.D. degree from the University of California, Los Angeles, School of Law.
Michael Elkins, Director.    Mr. Elkins became our director in November 2009. Mr. Elkins joined Avenue in 2004 and is currently a Portfolio Manager of the Avenue U.S. Funds. In such capacity, Mr. Elkins is responsible for assisting with the direction of the investment activities of the Avenue U.S. strategy. Due to the percentage of our equity owned or controlled by Avenue, Avenue is considered our affiliate. Prior to joining Avenue, Mr. Elkins was a Portfolio Manager and Trader with ABP Investments US, Inc. While at ABP, he was responsible for actively managing high yield investments using a total return-special situations overlay strategy. Prior to ABP, Mr. Elkins served as a Portfolio Manager and Trader for UBK Asset Management, after joining the company as a High Yield Credit Analyst. Previously, Mr. Elkins was a Credit Analyst for both Oppenheimer & Co., Inc. and Smith Barney, Inc. Mr. Elkins has served on the board of directors of Vertis Communication, an advertising services company, since October 2008, Milacron LLC, a plastics-processing technologies and industrial fluids supplier, since April 2009, Ion Media Networks, Inc., a broadcast television station group, since December 2009 and American Media, Inc., a media brands and magazine publishing company, since December 2010. Mr. Elkins serves on the board of directors of each of these companies, all of which are private companies, in connection with a reorganization or refinancing
 
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involving affiliates of Avenue and serves as a result of his position with Avenue. Mr. Elkins holds a B.A. in Marketing from George Washington University and an M.B.A. in Finance from the Goizueta Business School at Emory University. Mr. Elkins was appointed to our board of directors by Avenue pursuant to our plan of reorganization and pursuant to our Fifth Amended and Restated Limited Liability Company Operating Agreement, which we refer to as our Operating Agreement. Our board of directors has concluded that Mr. Elkins should serve on the board based upon his more than 15 years of investment portfolio management experience, including over 10 years investing in technology companies, including the semiconductor sector.
Randal Klein, Director.    Mr. Klein became our director in November 2009. Mr. Klein joined Avenue, our affiliate, in 2004 and is currently a Portfolio Manager at Avenue focused on investments in trade claims and vendor financing. Previously, he was a Senior Vice President of the Avenue U.S. Funds. In such capacity, Mr. Klein was responsible for managing restructuring activities and identifying, analyzing and modeling investment opportunities for the Avenue U.S. strategy. Prior to joining Avenue, Mr. Klein was a Senior Vice President at Lehman Brothers, where his responsibilities included restructuring advisory work, financial sponsors coverage, mergers and acquisitions and corporate finance. Prior to Lehman, Mr. Klein worked in sales, marketing and engineering as an aerospace engineer for The Boeing Company. Mr. Klein holds a B.S. in Aerospace Engineering, conferred with Highest Distinction from the University of Virginia, and an M.B.A. in Finance from the Wharton School of the University of Pennsylvania. Mr. Klein was appointed to our board of directors by Avenue pursuant to our plan of reorganization and pursuant to our Operating Agreement. Our board of directors has concluded that Mr. Klein should serve on the board based upon his 16 years of experience as a financial advisor and investment manager.
R. Douglas Norby, Director and Chairman of the Audit Committee.    Mr. Norby became our director and Chairman of the Audit Committee in March 2010. Mr. Norby retired from full time employment in July 2006. Mr. Norby previously served as our director and Chairman of the Audit Committee from May 2006 until October 2008. Mr. Norby served as Senior Vice President and Chief Financial Officer of Tessera Technologies, Inc., a public semiconductor intellectual property company, from July 2003 to January 2006. Mr. Norby worked as a management consultant with Tessera from May 2003 until July 2003 and from January 2006 to July 2006. Mr. Norby served as Chief Financial Officer of Zambeel, Inc., a data storage systems company, from March 2002 until February 2003, and as Senior Vice President and Chief Financial Officer of Novalux, Inc., an optoelectronics company, from December 2000 to March 2002. Prior to his tenure with Novalux, Inc., Mr. Norby served as Executive Vice President and Chief Financial Officer of LSI Logic Corporation from November 1996 to December 2000. Mr. Norby is a director of Alexion Pharmaceuticals, Inc., STATS ChipPAC Ltd. and Ikanos Communications, Inc. Mr. Norby was a director of Intellon Corporation from May 2007 to December 2009. Mr. Norby received a B.A. degree in Economics from Harvard University and an M.B.A. from Harvard Business School. Our board of directors has concluded that Mr. Norby should serve on our board based upon his extensive experience as a chief financial officer, his extensive experience in accounting and his experience as a public company director and audit committee chair.
Gidu Shroff, Director.    Mr. Shroff became our director in March 2010. Mr. Shroff retired from full time employment in July 2009. Mr. Shroff served in various positions at Intel Corporation from 1980 to July 2009. He served as a Corporate Vice President from January 2002 to July 2009, as Vice President of Materials from December 1997 to January 2002, and as General Manager of Outsourcing from January 1990 until December 1997. Mr. Shroff holds a B.S. in Metallurgy from Poona Engineering University in India, an M.S. in Materials Science from Stanford University and an M.B.A. from Santa Clara University. Our board of directors has concluded that Mr. Shroff should serve on the board based upon his extensive experience in the semiconductor industry.
Steven Tan, Director.    Mr. Tan became our director in November 2009. Mr. Tan joined Avenue, our affiliate, in 2005 and is currently a Vice President of the Avenue U.S. Funds. In such capacity,
 
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Mr. Tan is responsible for identifying and analyzing investment opportunities in the technology and telecommunications sectors for the Avenue U.S. strategy. Previously, Mr. Tan was a research analyst in the Avenue Event Driven Group where he was responsible for investments related to long/short equity, special situations and risk arbitrage. Prior to Avenue, Mr. Tan worked at Wasserstein Perella & Co., an investment and merchant bank, where he was a Mergers & Acquisitions analyst with the Industrial Group focusing on the automotive and industrial sectors. Mr. Tan holds a B.A. in Mathematics and Economics from Wesleyan University and an M.B.A. from the Harvard Business School. Mr. Tan was appointed to our board of directors by Avenue pursuant to our plan of reorganization and pursuant to our Operating Agreement. Our board of directors has concluded that Mr. Tan should serve on the board based on his five years of experience as an analyst and investment manager.
Nader Tavakoli, Director.    Mr. Tavakoli became our director in November 2009. Mr. Tavakoli has been Chairman and Chief Executive Officer of EagleRock Capital Management, a private investment firm based in New York City since January 2002. Prior to founding EagleRock, Mr. Tavakoli was a portfolio manager at Odyssey Partners, Highbridge Capital and Cowen and Co. Mr. Tavakoli holds a B.A. in History from Montclair State University and a J.D. from Rutgers School of Law. Our board of directors has concluded that Mr. Tavakoli should serve on the board based upon his extensive investing experience.
Involvement in Certain Legal Proceedings
Sang Park was the Chairman of our board of directors and Chief Executive Officer and Tae Young Hwang, Brent Rowe, Heung Kyu Kim, Margaret Sakai, Tae Jong Lee and John McFarland were each officers during our Chapter 11 reorganization proceedings. R. Douglas Norby was one of our directors until October 2008. Mr. Norby was also an officer of Novalux, Inc., a private company, which filed a voluntary petition for reorganization under Chapter 11 in March 2003, approximately one year after Mr. Norby’s departure from Novalux, Inc.
Board Composition
Our bylaws will provide that our board of directors will consist of seven members. Mr. Park, our Chief Executive Officer, is the Chairman of our board of directors. Messrs. Elkins, Klein, and Tan have been designated to serve on our board by our largest equity holder, which consists of funds affiliated with Avenue Capital Management II, L.P. Avenue has the right to appoint a majority of our board pursuant to our Operating Agreement which will terminate upon the completion of the corporate conversion. Messrs. Norby, Shroff and Tavakoli serve as independent directors elected by a majority vote of the directors then in office at the time of their election in accordance with our Operating Agreement. A majority of our board is not currently independent as defined under SEC and NYSE rules. In accordance with applicable rules of the NYSE, we are relying upon an exception that does not require us to satisfy the requirement that a majority of our board be independent until one year following initial listing. We expect that prior to the one year anniversary of our initial NYSE listing, the composition of our board will be changed such that a majority of our directors will be independent. If we fail to comply with the NYSE listing rules, our common stock could be delisted from the NYSE.
Upon the completion of this offering, our board of directors will be divided into three classes with staggered three-year terms as follows:
 
 	Ÿ	 	Class I directors will be Messrs. Norby and Shroff, and their terms will expire at the annual general meeting of stockholders to be held in 2012;	
 
 	Ÿ	 	Class II directors will be Messrs. Klein and Tavakoli, and their terms will expire at the annual general meeting of stockholders to be held in 2013; and	
 
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 	Ÿ	 	Class III directors will be Messrs. Elkins, Park and Tan, and their terms will expire at the annual general meeting of stockholders to be held in 2014.	
Audit Committee
Our audit committee consists of Mr. Norby as Chairman and Messrs. Klein and Tavakoli. Our board of directors has determined that Mr. Norby is an audit committee financial expert as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act. Our board has also determined that Messrs. Norby and Tavakoli are “independent” as that term is defined in both Rule 303A of the NYSE rules and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, upon the closing of this offering, will each be an “independent director” as that term is defined in Rule 303A of the NYSE rules. In making this determination, our board of directors considered the relationships that Messrs. Norby and Tavakoli have with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including any beneficial ownership of our equity. The board has determined that Mr. Klein is not an independent director. In accordance with applicable rules of the NYSE, we are relying upon an exception that allows us to phase in our compliance with the independent audit committee requirement as follows, (i) one independent member at the time of listing; (ii) a majority of independent members within 90 days of listing; and (iii) all independent members within one year of listing. We expect that prior to the one year anniversary of our initial NYSE listing, Mr. Klein will resign from the audit committee and at least one new independent director will be appointed. If we fail to comply with the NYSE listing rules, our common stock could be delisted from the NYSE.
Compensation Committee
The compensation committee of the board has overall responsibility for evaluating and approving our executive officer and director compensation plans, policies and programs, as well as all equity-based compensation plans and policies. Our compensation committee consists of Messrs. Elkins, Klein and Tavakoli. Our board has determined that Mr. Tavakoli is “independent” under NYSE and SEC rules. In making this determination, our board of directors considered the relationships that Mr. Tavakoli has with our company and all other facts and circumstances our board of directors deemed relevant in determining his independence, including any beneficial ownership of our equity. The board has determined that Messrs. Elkins and Klein are not independent directors. In accordance with applicable rules of the NYSE, we are relying upon an exception that allows us to phase in our compliance with the independent compensation committee requirement as follows, (i) one independent member at the time of listing; (ii) a majority of independent members within 90 days of listing; and (iii) all independent members within one year of listing. We expect that prior to the applicable dates, the composition of our compensation committee will be changed such that we will be in compliance with the independent compensation committee requirement.
Nominating and Governance Committee
The nominating and governance committee has the responsibility to identify qualified individuals to become members of the board, to oversee an annual evaluation of the board of directors and its committees, to periodically review and recommend to the board any proposed changes to our corporate governance guidelines and to monitor our corporate governance structure. We expect that our nominating and corporate governance committee will consist of Messrs. Elkins, Shroff and Tan as of the effectiveness of the offering. Our board has determined that Mr. Shroff is “independent” under NYSE and SEC rules. In making this determination, our board of directors considered the relationships that Mr. Shroff has with our company and all other facts and circumstances our board of directors deemed relevant in determining his independence, including any beneficial ownership of our equity. The board has determined that Messrs. Elkins and Tan are not independent directors. In accordance
 
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with applicable rules of the NYSE, we are relying upon an exception that allows us to phase in our compliance with the independent nominating and corporate governance committee requirement as follows, (i) one independent member at the time of listing; (ii) a majority of independent members within 90 days of listing; and (iii) all independent members within one year of listing. We expect that prior to the applicable dates, the composition of our nominating and corporate governance committee will be changed such that we will be in compliance with the independent nominating and corporate governance committee requirement.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees. We will provide a copy of our Code of Business Conduct and Ethics without charge to any person upon written request made to our Senior Vice President, General Counsel and Secretary at c/o MagnaChip Semiconductor, Ltd., 891 Daechi-dong, Gangnam-gu, Seoul, 135-738, Korea. Our Code of Business Conduct and Ethics is also available on our website at www.magnachip.com.
Assessment of Risk
Our board of directors believes that our compensation programs are designed such that they will not incentivize unnecessary risk-taking. The base salary component of our compensation program is a fixed amount and does not depend on performance. Our cash incentive program takes into account multiple factors, thus diversifying the risk associated with any single performance factor, and we believe it does not incentivize our executive officers to focus exclusively on short-term outcomes. Our equity awards are limited by the terms of our equity plans to a fixed maximum specified in the plan, and are subject to vesting to align the long-term interests of our executive officers with those of our equityholders.
Compensation Discussion and Analysis
Executive Compensation
Compensation Philosophy and Objectives
The compensation committee of our board of directors, or the Committee, has overall responsibility for administering our compensation program for our “named executive officers.” The Committee’s responsibilities consist of evaluating, approving and monitoring our executive officer and director compensation plans, policies and programs, as well as each of our equity-based compensation plans and policies. Prior to 2010, compensation decisions were made by the entire board of directors and for the discussion that follows, references to the Committee during such period refer to the entire board. For 2010, our named executive officers who continue to serve as executive officers were:
 
 	Ÿ	 	Sang Park, Chairman of the Board of Directors and Chief Executive Officer;	
 
 	Ÿ	 	Tae Young Hwang, Chief Operating Officer and President;	
 
 	Ÿ	 	Brent Rowe, Executive Vice President, Worldwide Sales;	
 
 	Ÿ	 	Margaret Sakai, Senior Vice President and Chief Financial Officer; and	
 
 	Ÿ	 	John McFarland, Senior Vice President, General Counsel and Secretary.	
The Committee seeks to establish total compensation for executive officers that is fair, reasonable and competitive. The Committee evaluates our compensation packages to ensure that:
 
 	Ÿ	 	we maintain our ability to attract and retain superior executives in critical positions;	
 
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 	Ÿ	 	our executives are incentivized and rewarded for aggressive corporate growth, achievement of long-term corporate objectives and individual performance that meets or exceeds our expectations without encouraging unnecessary risk-taking; and	
 
 	Ÿ	 	compensation provided to critical executives remains competitive relative to the compensation paid to similarly situated executives of companies in the semiconductor industry.	
The Committee believes that the most effective executive compensation packages align executives’ interests with those of our unitholders by rewarding performance that exceeds specific annual, long-term and strategic goals that are intended to improve unitholder value. These objectives include the achievement of financial performance goals and progress on projects that our board of directors anticipates will lead to future growth, as discussed more fully below.
The information set forth below in this Compensation Discussion and Analysis describes the Committee’s general philosophy and historical approach.
Role of Executive Officers in Compensation Decisions
For named executive officers other than our chief executive officer, we have historically sought and considered input from our chief executive officer in making determinations regarding executive compensation. Our chief executive officer annually reviews the performance of our other named executive officers. Our chief executive officer subsequently presents conclusions and recommendations regarding such officers, including proposed salary adjustments and incentive amounts, to the Committee. The Committee then takes this information into account when it makes final decisions regarding any adjustments or awards.
The review of performance by the Committee and our chief executive officer of other executive officers is both an objective and subjective assessment of each executive’s contribution to our performance, leadership qualities, strengths and weaknesses and the individual’s performance relative to goals set by the Committee or our chief executive officer, as applicable. The Committee and our chief executive officer do not systematically assign a weight to the factors, and may, in their discretion, consider or disregard any one factor which, in their sole discretion, is important to or irrelevant for a particular executive.
The Committee’s annual determinations regarding executive compensation are subject to the terms of the respective service agreements between us and the named executive officers (as set forth in more detail below). In addition to the annual reviews, the Committee also typically considers compensation changes upon a named executive officer’s promotion or other change in job responsibility. Neither our chief executive officer nor any of our other executives participates in deliberations relating to their own compensation.
Role of Compensation Consultants
The Committee has the authority to retain the services of third-party executive compensation specialists in connection with the establishment of cash and equity compensation and related policies. Historically, we have engaged compensation consultants to provide information and recommendations relating to executive pay and equity compensation or otherwise obtained third party compensation surveys. In light of the financial challenges we were facing, we did not use a compensation consultant, or review any formal industry data, in connection with setting 2009 executive compensation. The Committee did not retain a compensation consultant for 2010 and has not retained a compensation consultant for 2011.
 
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Timing of Compensation Decisions
At the end of each fiscal year, our chief executive officer will review the performance of the other executive officers and present his conclusions and recommendations to the Committee. At that time and throughout the year, the Committee will also evaluate the performance of our chief executive officer, which is measured in substantial part against our consolidated financial performance. In January of the following fiscal year, the Committee will then assess the overall functioning of our compensation plans against our goals, and determine whether any changes to the allocation of compensation elements, or the structure or level of any particular compensation element, are warranted.
In connection with this process, our Committee generally establishes the elements of its performance-based cash bonus plan for the upcoming year. With respect to newly hired employees, our practice is typically to approve equity grants at the first meeting of the Committee following such employee’s hire date. We do not have any program, plan or practice to time equity award grants in coordination with the release of material non-public information. From time to time, additional equity awards may be granted to executive officers during the fiscal year. For example, in December 2009, our executive officers were granted restricted unit bonuses and nonstatutory options for common units, as further described below.
Elements of Compensation
In making decisions regarding the pay of the named executive officers, the Committee looks to set a total compensation package for each officer that will retain high-quality talent and motivate executives to achieve the goals set by our board of directors. Our 2010 compensation package was composed of the following elements:
 
 	Ÿ	 	annual base salary;	
 
 	Ÿ	 	short-term cash incentives;	
 
 	Ÿ	 	long-term equity incentives;	
 
 	Ÿ	 	a benefits package that is generally available to all of our employees; and	
 
 	Ÿ	 	expatriate and other executive benefits.	
Determination of Amount of Each Element of Compensation
General Background
Historically, the Committee has taken a variety of factors into consideration when determining changes to overall compensation levels and levels of individual annual compensation elements, as further described below. In the beginning of 2009, however, the Committee assessed the overall functioning of our compensation plans against our goals, and, due to our financial condition and impending reorganization proceedings, determined no changes from the prior year to the allocation of compensation elements, or the structure or level of any particular compensation element, were warranted for 2009. Subsequently, in connection with our emergence from our reorganization proceedings, the Committee made certain determinations with respect to executive compensation. Accordingly, unless otherwise referenced in the context of our emergence from our reorganization proceedings and the Committee’s compensation decisions made thereafter, the below disclosure is a general discussion of the manner in which the Committee has made decisions regarding compensation levels in prior years, and the underlying reasons for those decisions.
The Committee seeks to establish a total cash compensation package for our named executive officers that is competitive with the compensation reflected in compensation data for similarly-situated executives in the peer group reviewed by the Committee, subject to adjustments based on each
 
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executive’s experience and performance. Historically, based on the recommendations provided by outside advisors, our review of industry specific survey data and the professional and market experience of our Committee members, we measured total cash compensation for our named executive officers against cash compensation paid to executives at similarly situated companies which we determined to be our select peer group. Base salaries for our named executive officers were benchmarked to median levels for companies in the select peer group, and were adjusted upward or downward for performance, and short-term cash incentives were put in place to provide for opportunities that may result in higher than median levels of cash compensation as compared to our select peer group if, and depending upon the extent to which, our performance and that of our named executive officers exceeded expectations and the goals established by the Committee for the year in question.
Historically, our select peer group has included other major Korean based semiconductor companies, including Fairchild Korea, Dongbu Hitek, ChipPac Korea, Hynix Semiconductor and KEC Corporation. In addition, we also reviewed compensation data from Towers Watson Korea, an independent compensation consultant, which surveyed the companies listed below, to assess how compensation for our select peer group related to compensation paid to executives in a broader range of technology companies.
 
 	•	 	Accenture	
 
 	•	 	Advanced Energy Industries	
 
 	•	 	Advanced Micro Devices	
 
 	•	 	Advanced Semiconductor Engineering	
 
 	•	 	Agilent Technologies	
 
 	•	 	Alcatel-Lucent	
 
 	•	 	ARM Embedded Technologies	
 
 	•	 	AT&T	
 
 	•	 	Austriamicrosystems	
 
 	•	 	Blizzard	
 
 	•	 	Bombardier Transportation	
 
 	•	 	BT	
 
 	•	 	CA	
 
 	•	 	Cadence Design Systems	
 
 	•	 	Cisco Systems	
 
 	•	 	CJ Internet	
 
 	•	 	Convergys	
 
 	•	 	Corning	
 
 	•	 	CSR	
 
 	•	 	Daewoo	
 
 	•	 	Dell	
 
 	•	 	EMC	
 
 	•	 	Epic Games	
 
 	•	 	Fairchild Semiconductor	
 
 	•	 	Gemalto	
 
 	•	 	GE Sensing	
 
 	•	 	Gravity	
 
 	•	 	GXS	
 
 	•	 	Hanbit Soft & T3 Entertainment	
 
 	•	 	Hitachi Data Systems	
 
 	•	 	IMS Health	
 
 	•	 	Intel	
 
 	•	 	JC Entertainment	
 
 	•	 	Lenovo	
 
 	•	 	Lexmark International	
 
 	•	 	LG-CNS	
 
 	•	 	LS Cable	
 
 	•	 	Microsoft	
 
 	•	 	Nanometrics	
 
 	•	 	NCR	
 
 	•	 	NCsoft	
 
 	•	 	Neowiz Games	
 
 	•	 	NetApp	
 
 	•	 	Nokia	
 
 	•	 	Omgeo	
 
 	•	 	Parametric Technology	
 
 	•	 	Phoenix Technologies	
 
 	•	 	RF Micro Devices	
 
 	•	 	Rockwell Collins	
 
 	•	 	Samsung SDS	
 
 	•	 	SanDisk	
 
 	•	 	SAS Institute	
 
 	•	 	Sigma Aldrich	
 
 	•	 	Softmax	
 
 	•	 	Sony Computer Entertainment	
 
 	•	 	Tele Atlas	
 
 	•	 	Thomson Reuters	
 
 	•	 	UL	
 
 	•	 	Verizon Business	
 
 	•	 	Wemade Entertainment	
 
 	•	 	Western Digital	
 
 	•	 	Wolfson Microelectronics	
 
 	•	 	Xilinx	
 
 	•	 	Yahoo!	
The Committee makes annual determinations regarding cash incentive compensation based on our annual operating plan, which is adopted in the December preceding each fiscal year, including the expected performance of our business in the coming fiscal year. The Committee makes all equity compensation decisions for our officers based on existing compensation arrangements for other of our executives at the same level of responsibility and based on our review of the select peer group with a view to maintaining internal consistency and parity.
 
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Equity awards are not tied to base salary or cash incentive amounts and will constitute lesser or greater proportions of total compensation depending on the fair value of the awards. The Committee, relying on the professional and market experience of our Committee members, generally seeks to set equity awards at median levels of equity compensation at the select peer group companies. The Committee does not apply a formula or assign relative weight in making its determination. Instead, it makes a subjective determination after considering all information collectively.
The Committee may approve additional incentive payments or equity compensation grants from time to time during the year in its discretion.
Base Salary
Base salary is the guaranteed element of an employee’s annual cash compensation. Changes in base salary may be approved by the Committee for an executive if the median levels of base salary compensation for similarly-situated executives in our select peer group have changed, and may be further adjusted based upon the employee’s long-term performance, skill set and the value of that skill. The Committee evaluates the performance of each named executive officer on an annual basis based on the accomplishment of performance objectives that were established at the beginning of the prior fiscal year as well as its own subjective evaluation of the officer’s performance. In making its evaluation, the Committee makes a subjective qualitative assessment of the officer’s contribution to our performance during the preceding year, including leadership, success in attaining particular goals of a division for which that officer has responsibility, our overall financial performance and such other criteria as the Committee may deem relevant, including input from our Chief Executive Officer. The Committee then makes a subjective decision regarding any changes in base salary based on these factors and the data from our select peer group. The Committee does not systematically assign weights to any of the factors it considers, and may, in its discretion, ignore any factors or deem any one factor to have greater importance for a particular executive officer.
Based upon our financial condition at the time, the Committee determined not to change compensation arrangements at the beginning of 2009. The current base salaries of the Company’s named executive officers compare to the median of the Company’s select peer group as follows: Mr. Park is slightly above, Mr. Hwang is slightly below, Ms. Sakai is slightly above, and Mr. Rowe and Mr. McFarland are generally in line. Our employees, including our executive officers, voluntarily accepted a 20% reduction in base salary from 2008 levels from January to June 2009, as part of austerity measures implemented to assist in our recovery. Mr. Park voluntarily accepted a 40% reduction in base salary from January to March 2009, and a 20% reduction from April to June 2009. In June 2009, our board of directors approved a one-time payment of 10% of base salary paid from April to June 2009 to all employees who voluntarily accepted pay reductions earlier in the year, which group included all of our named executive officers. This amount is reported as salary in the Summary Compensation Table below. We restored salaries to 2008 levels in July 2009. In December 2009, as a reward for the successful completion of our reorganization proceedings, our board of directors approved a one-time payment of 30% of then monthly base salary to all employees who voluntarily accepted pay reductions earlier in the year, which group included all of our named executive officers. The amount paid to named executive officers for 2009 are reported as bonus in the Summary Compensation Table below. The Committee also granted additional special discretionary incentives to Mr. Hwang, Mr. Rowe, Ms. Sakai and Mr. McFarland in 2009, as described in more detail below. No additional special discretionary incentives were granted to our named executive officers in 2010.
Cash Incentives
Short-term cash incentives comprise a significant portion of the total target compensation package and are designed to reward executives for their contributions to meeting and exceeding our
 
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goals and to recognize and reward our executives in achieving these goals. Incentives are designed as a percentage of base salary and are awarded based on individual performance and our achievement of the annual, long-term and strategic quantitative goals set by our Committee.
Given our financial position at the beginning of 2009, we did not modify the annual targets for our cash incentive plans for 2009. As a result, our short-term cash incentive plan was effectively suspended for the year. In December 2009, our board of directors implemented a cash incentive plan effective as of January 1, 2010, which we call the Profit Sharing Plan. Each of our employees is eligible to participate in the Profit Sharing Plan, and our board of directors intends for the Profit Sharing Plan to incentivize our named executive officers, officers and employees to exceed expectations throughout our entire fiscal year. Our board of directors has empowered the Committee to administer the Profit Sharing Plan.
Under the Profit Sharing Plan, the Committee will review our business plan in December of each year and determine an annual consolidated Adjusted EBITDA target, or the Base Target, for the upcoming fiscal year and set the targeted amount to be awarded to our named executive officers and employees, or the Profit Share, for meeting the Base Target and for achievement in excess of the Base Target.
The Base Target is calculated as a percentage of our forecasted gross annual revenue for the upcoming fiscal year. We determine our revenue forecast by looking at several factors, including existing orders from our customers, quarterly and annual forecasts from our customers, our product roadmap and how it corresponds with our projected customer needs, and the overall industry forecasts for the semiconductor market. The Committee’s goal is to set a Base Target that is difficult but not unreasonable to achieve. To determine the percentage of gross annual revenue for purposes of setting the Base Target, the Committee, in consultation with our board of directors, first determines a range of Adjusted EBITDA growth and gross margin that is competitive based upon the select peer group and will ensure that we build unitholder value, then sets a percentage such that the forecasted Adjusted EBITDA growth and gross margin is within that range. See “Prospectus Summary—Summary Historical and Unaudited Pro Forma Consolidated Financial Data” for a discussion of how we define and why we use Adjusted EBITDA.
Each named executive officer receives as a Profit Share a set percentage of their annual base salary once the Base Target is achieved. Executives with target annual incentive opportunities set forth in their employment agreements will be eligible to receive the target percentage set forth in such agreements. In the event we exceed the Base Target, we may pay to our named executive officers (together with all of our eligible employees) their pro rata portion of an additional Profit Share of 25% of our annual consolidated Adjusted EBITDA in excess of the Base Target. For 2010, Sang Park received a Profit Share of $543,926, Tae Young Hwang received a Profit Share of $247,164, Brent Rowe received a Profit Share of $223,200, Margaret Sakai received a Profit Share of $157,052 and John McFarland received a Profit Share of $116,847.
We pay the Profit Share during the normal pay period in the January following the conclusion of each fiscal year for which the Profit Share is calculated, and the Profit Share is only payable to those executives who have been employed by us during the entire fiscal year for which the Profit Share is calculated and who are employed by us on the Profit Share payment date, provided that the Profit Share is payable pro rata to any named executive officers who begin their employment during the fiscal year for which the Profit Share is calculated.
The Committee retains the sole discretion to (i) authorize the payment of the Profit Share in December of the relevant fiscal year when the Committee believes the Base Target will be achieved, (ii) pay Profit Shares when we achieve slightly less than the Base Target, and (iii) make interim Profit Share payments during the fiscal year. In addition to the Profit Sharing Plan, the Committee retains the right to grant discretionary incentives to our named executive officers as a reward for extraordinary
 
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performance. For example, Mr. Hwang, Ms. Sakai and Mr. McFarland were paid a discretionary incentive in December 2009 in recognition of their role in our successful reorganization proceedings. These amounts were not based upon any numerical or formulaic factors, but rather were determined by the Committee based upon a subjective assessment of their respective individual contributions and are reported in the Summary Compensation Table in the column labeled “Bonus.” In addition, Messrs. Park and Rowe were each entitled to fixed bonuses pursuant to their employment agreements subject to continued employment. In the case of Mr. Park, he elected to forego $298,000 of the bonus otherwise payable to him in order for such amounts to be available for bonuses to other executives, including discretionary bonuses paid to Mr. Hwang, Ms. Sakai and Mr. McFarland.
For 2010, the implementation of the Profit Sharing Plan was modified to provide our employees with an opportunity to share in our success earlier in the fiscal year than under the existing Profit Sharing Plan. In addition to setting the Base Target, two interim targets for our first and second fiscal quarters were set. We made Profit Share payments in the first normal pay period following the conclusion of each of our first two fiscal quarters. The total Profit Share payable for meeting the Base Target for 2010 was capped for each named executive officer at his or her respective percentage of annual base salary, such that the amount of any Profit Share paid for 2010 performance after the end of 2010 was offset by the Profit Share paid during 2010 for reaching each of the quarterly targets. In addition, for 2010, our named executive officers were not eligible to earn the additional Profit Share of 25% of our annual consolidated Adjusted EBITDA in excess of the Base Target even though we exceeded the Base Target. As a result, for 2010, our named executive officers were only entitled to receive a cash incentive equal to the Profit Share paid to each named executive officer disclosed above. In 2010, under the Profit Sharing Plan, we paid bonuses to our named executive officers in April and July 2010 and in January 2011.
For 2011, the implementation of the Profit Sharing Plan has been modified to set an interim target that will be paid during the first normal pay period following the conclusion of our second fiscal quarter of 2011. In addition, our named executive officers (and all of our other employees) will not be eligible to earn the additional Profit Share of 25% of our annual consolidated Adjusted EBITDA in excess of the Base Target even if we exceed the Base Target or the interim target.
Equity Compensation
In addition to cash incentives, we offer equity incentives as a way to enhance the link between the creation of unitholder value and executive incentive compensation and to give our executives appropriate motivation and rewards for achieving increases in enterprise value. Under our 2009 Common Unit Plan, our board of directors granted options to acquire MagnaChip Semiconductor LLC common units and restricted unit bonus awards. Awards under our 2009 Common Unit Plan will be converted into options for common stock and restricted common stock of MagnaChip Semiconductor Corporation upon our corporate conversion. Such options vest in installments over three years following grant, with approximately one-third of the restricted unit awards vested at grant and the remainder vesting in two subsequent annual installments, as set forth in more detail below.
Under our 2011 Equity Incentive Plan, which will replace the 2009 Common Unit Plan immediately following our corporation conversion, the Committee may grant participants stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock-based and cash-based awards. In granting equity awards, the Committee may establish any conditions or restrictions it deems appropriate. Stock options and stock appreciation rights must have exercise prices at least equal to the fair market value of the stock at the time of their grant pursuant to the 2011 Equity Incentive Plan. Following the completion of this offering, the fair market value of the stock at the time of grant will generally be the closing price of a share of stock as quoted on the national or regional securities exchange or quotation system constituting the primary market for
 
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the stock on the date any grant is made. Prior to the exercise of a stock option or stock appreciation or settlement of an award denominated in units, the holder has no rights as a stockholder with respect to the stock subject to the award, including voting rights and the right to receive dividends. Participants receiving restricted stock awards are stockholders and have both voting rights and the right to receive dividends, except that dividends paid on unvested shares may remain subject to forfeiture until vested. Award vesting ceases upon termination of employment, and vested options and stock appreciation rights remain exercisable only for a limited period following such termination.
The Committee considers granting additional equity compensation in the event of new employment, a promotion or change in job responsibility or a change in median levels of equity compensation for similarly-situated executives at companies in our select peer group or in its discretion to reward or incentivize individual officers. The option award levels vary among participants based on their job grade and position. The Committee generally seeks to award equity compensation at levels consistent with the median levels for executives at companies in our select peer group, and will also make subjective determinations regarding adjustments to award amounts in light of factors such as the available pool, individual performance and role of executives. For example, the Committee may adjust the size of an award for an individual executive above the option award level for his or her position if the Committee determines that the executive has provided exceptional performance, or may increase the option award level for a position above the median level reflected in the select peer group if the position is considered by the Committee to be more critical to our long-term success. The Committee will generally maintain substantially equivalent award levels for executives at equivalent job grades. Stock option awards are not tied to base salary or cash incentive amounts.
As a result of our reorganization proceedings, all previously outstanding common and preferred units and options held by our named executive officers were cancelled. In December 2009, we granted new options to our executives with the option award amounts generally determined based upon the median levels of our select peer group. Thirty-four percent of the common units subject to the options vested and became exercisable on the first anniversary of grant date, with 8 or 9% of the common units subject to the options vesting on completion of each three-month period thereafter through December 2012. In December 2009, in recognition of services provided in guiding us through our reorganization proceedings, our board of directors also granted each of our current named executive officers a restricted unit bonus in addition to an option. The amount of the restricted unit bonuses were not based upon any numerical or formulaic factors, nor based upon any comparative peer group, data or the number of options granted, but rather were determined based upon our board of directors’ subjective assessment of individual contributions to the successful completion of the reorganization proceedings. We granted restricted unit bonuses in order to provide our executives with an equity incentive with a built-in gain equal to the value of the units as of the date of grant while still incentivizing them to contribute toward increasing our enterprise value. See “Grant of Plan-Based Awards” below for information regarding the number and value of units granted to each named executive officer. Thirty-four percent of each restricted unit bonus vested upon grant, with the remaining portion vesting in equal installments on the first and second anniversary of the grant date. No equity incentives were granted to our named executive officers in 2010.
Upon the recommendation of our board of directors or chief executive officer, or otherwise, the Committee may in the future consider granting additional performance-based equity incentives.
Perquisites and Other Benefits
We provide the named executive officers with perquisites and other personal benefits, including expatriate benefits, that the Committee believes are reasonable and consistent with our overall compensation program to better enable us to attract and retain superior employees for key positions. Generally perquisites are determined based upon what the Committee considers to be the most
 
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customary perquisites offered by the select peer group and are not based upon a median cost for specific perquisites or for the perquisites in aggregate. The Committee determines the level and types of expatriate benefits for the executive officers based on local market surveys taken by our human resources group. These surveys are not limited to our select peer group, but include a broad range of non-Korea based companies with significant operations in Korea. Attributed costs of the personal benefits for the named executive officers are as set forth in the Summary Compensation Table below.
Mr. Park, Ms. Sakai and Mr. McFarland were expatriates during all of 2010 and received expatriate benefits commensurate with market practice in Korea. These perquisites, which were determined on an individual basis, included housing allowances, relocation allowances, insurance premiums, reimbursement for the use of a car, home leave flights, living expenses, tax equalization payments and tax advisory services, each as we deemed appropriate.
In addition, pursuant to the Employee Retirement Benefit Security Act, certain executive officers resident in Korea with one or more years of service are entitled to severance benefits upon the termination of their employment for any reason. For purposes of this section, we call this benefit “statutory severance.” The base statutory severance is approximately one month of base salary per year of service. Mr. Hwang, Ms. Sakai and Mr. McFarland accrue statutory severance.
Summary Compensation Table
The following table sets forth certain information concerning the compensation earned during the years ended December 31, 2008, 2009 and 2010, of our named executive officers:

Name and Principal Position	 	Year	 	 	Salary
($)(1)	 	 	Bonus
($)	 	 	Stock
Awards
($)(2)	 	 	Option
Awards
($)(2)	 	 	Change in
Pension
Value
and Non-
qualified
Deferred
Compen-
sation
Earnings
($)(3)	 	 	All Other
Compen-
sation
($)	 	 	Total
($)	 	 	
Sang Park	 	 	2010	  	 	 	482,164	  	 	 	543,926	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	325,576	(4) 	 	 	1,351,666	  	 	
Chairman and
Chief Executive Officer	 	 	2009	  	 	 	979,611	(5) 	 	 	11,262	  	 	 	1,769,600	  	 	 	488,070	  	 	 	 	 	 	 	314,785	(6) 	 	 	3,563,328	  	 	
 	 	 	2008	  	 	 	442,128	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	351,897	(7) 	 	 	794,025	  	 	 	
 	 	 	 	 	 	 	 	 	 	 	
Tae Young Hwang,	 	 	2010	  	 	 	275,129	  	 	 	249,706	(8) 	 	 	 	 	 	 	 	 	 	 	105,346	  	 	 	26,422	(9) 	 	 	656,604	  	 	 	
Chief Operating
Officer and President	 	 	2009	  	 	 	189,748	  	 	 	106,544	  	 	 	663,600	  	 	 	305,044	  	 	 	119,541	  	 	 	10,884	(10) 	 	 	1,395,361	  	 	 	
 	 	 	2008	  	 	 	212,307	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	99,095	  	 	 	20,293	(11) 	 	 	331,695	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Brent Rowe	 	 	2010	  	 	 	261,499	  	 	 	223,200	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12,914	(12) 	 	 	497,614	  	 	 	 	
Executive Vice President,
Worldwide Sales	 	 	2009	  	 	 	398,554	(13) 	 	 	70,500	  	 	 	442,400	  	 	 	183,026	  	 	 	 	 	 	 	12,231	(14) 	 	 	1,106,711	  	 	 	 	
 	 	 	2008	  	 	 	226,308	  	 	 	176,000	(15) 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	25,673	(16) 	 	 	427,981	  	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Margaret Sakai	 	 	2010	  	 	 	272,072	  	 	 	157,052	  	 	 	 	 	 	 	 	 	 	 	28,152	  	 	 	250,039	(17) 	 	 	707,314	  	 	 	 	 	
Senior Vice President,
Chief Financial Officer	 	 	2009	  	 	 	238,347	  	 	 	46,549	  	 	 	265,440	  	 	 	73,211	  	 	 	12,143	  	 	 	163,668	(18) 	 	 	799,358	  	 	 	 	 	
 	 	 	2008	  	 	 	250,934	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	37,683	  	 	 	180,025	(19) 	 	 	468,642	  	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
John McFarland,	 	 	2010	  	 	 	201,774	  	 	 	116,847	  	 	 	 	 	 	 	 	 	 	 	27,344	  	 	 	72,531	(20) 	 	 	418,495	  	 	 	 	 	 	
Senior Vice President,
General Counsel and
Secretary	 	 	2009	  	 	 	172,229	  	 	 	44,764	  	 	 	265,440	  	 	 	48,807	  	 	 	14,369	  	 	 	99,615	(21) 	 	 	645,224	  	 	 	 	 	 	
 	 	 	2008	  	 	 	191,147	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	21,492	  	 	 	79,790	(22) 	 	 	292,429	  	 	 	 	 	 	 	

Note: Amounts set forth in the above table that were originally paid in Korean won from January 1 to October 25, 2009 and during the fiscal year ended December 31, 2008 have been converted into U.S. dollars using average exchange rates during the respective periods. After October 25, 2009, a monthly average exchange rate was used.
Footnotes:
 
(1)	Includes one-time payment of 10% of base salary paid from April to June 2009 to all employees that voluntarily accepted pay reductions earlier in the year, including $22,204, $4,897, $6,000 and $6,415 paid to Mr. Park, Mr. Hwang, Mr. Rowe and Ms. Sakai, respectively.	
 
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(2)	Represents the grant date fair value with respect to the fiscal year determined in accordance with FASB ASC 718. See “Note 4 Summary of Significant Accounting Policies—Stock/Unit-Based Compensation,” and “Note 19 Equity Incentive Plans,” to the MagnaChip Semiconductor Corporation audited consolidated financial statements for the year ended 2010, the two months ended December 31, 2009, the ten months ended October 25, 2009 and the year ended 2008.	
(3)	Consists of statutory severance accrued during the year ended December 31, 2010, the two months ended December 31, 2009, the ten months ended October 25, 2009 and the year ended December 31, 2008, as applicable. See the section subtitled “Compensation Discussion and Analysis” for a description of the statutory severance benefit.	
(4)	Includes the following personal benefits paid to Mr. Park: (a) $142,390, which is the annual aggregate monthly pro rata amount of prepaid housing expenses for Mr. Park’s housing lease; (b) $29,716 for insurance premiums; (c) $44,485 for other personal benefits (including reimbursement of the use of a car, home leave flights, living expenses, personal tax advisory expenses, and other personal benefits); (d) $83,042 of reimbursement for the difference between the actual tax Mr. Park already paid and the hypothetical tax he had to pay for the fiscal year 2009; and (e) $25,944 for reimbursement of Korean tax.	
(5)	Includes a fixed one-time bonus payment of $602,631 made in December 2009 pursuant to Mr. Park’s Amended and Restated Service Agreement. Mr. Park elected to forego $298,000 of the bonus payable pursuant to his service agreement in order for such amounts to be available for bonuses to other executives.	
(6)	Includes the following personal benefits paid to Mr. Park: (a) $125,073, which is the annual aggregate monthly pro rata amount of prepaid housing expenses for Mr. Park’s housing lease; (b) $28,386 for insurance premiums; (c) $48,319 for other personal benefits (including reimbursement of the use of a car, home leave flights, living expenses and personal tax advisory expenses); (d) $89,252 of reimbursement for the difference between the actual tax Mr. Park already paid and the hypothetical tax he had to pay for the fiscal year 2008; and (e) $23,755 for reimbursement of Korean tax.	
(7)	Includes the following personal benefits paid to Mr. Park: (a) $70,838, which is the aggregate monthly pro rata amount of prepaid housing expenses for Mr. Park’s housing lease for six months, $82,828, which is the total monthly rental payments for seven months’ rent for Mr. Park’s housing, and $8,192, which is the imputed benefit to Mr. Park from a refundable deposit held by the lessor of Mr. Park’s housing during the lease term; (b) $27,290 for insurance premiums; (c) $35,787 for other personal benefits (including reimbursement of the use of a car, home leave flights and personal tax advisory expenses); (d) $78,913 of reimbursement for the difference between the actual tax Mr. Park already paid and the hypothetical tax he had to pay for the fiscal year 2006 and 2007; (e) $24,962 for Mr. Park’s living expenses; and (f) $23,087 for reimbursement of Korean tax and employee fringe benefits.	
(8)	Includes a longevity bonus of $2,543 paid to Mr. Hwang in August 2010.	
(9)	Includes the following personal benefits paid to Mr. Hwang: (a) $12,875 for reimbursement of the use of a car; (b) $2,103 for other personal benefits; and (c) $11,444 for insurance premiums.	
(10)	Includes the following personal benefits paid to Mr. Hwang: (a) $7,832 for reimbursement of the use of a car; and (b) $3,052 for insurance premiums.	
(11)	Includes the following personal benefits paid to Mr. Hwang: (a) $9,541 for reimbursement of the use of a car; (b) $9,070 for insurance premiums; and (c) $1,682 for employee fringe benefits.	
(12)	Includes the following personal benefits paid to Mr. Rowe: $12,914 for insurance premiums.	
(13)	Includes a $176,000 fixed non-discretionary payment under Mr. Rowe’s offer letter (as supplemented), pursuant to which in 2007 Mr. Rowe elected to receive a $528,000 advance on his first three years of potential annual bonus payments at a rate of 80% of base pay. Effective as of April 2009, the right to receive the bonus became fixed and was no longer discretionary.	
(14)	Includes the following personal benefits paid to Mr. Rowe: (a) $1,597 for reimbursement of the use of a car; and (b) $10,634 for insurance premiums.	
(15)	Under Mr. Rowe’s offer letter (as supplemented), in 2007, Mr. Rowe elected to receive a $528,000 advance on his first three years of potential annual bonus payments at a rate of 80% of base pay. One-third of this amount ($176,000) was earned in 2008.	
(16)	Includes the following personal benefits paid to Mr. Rowe: (a) $1,983 for reimbursement of the use of a car; (b) $13,027 for insurance premiums; and (c) $10,663 for personal tax advisory expenses.	
(17)	Includes the following personal benefits paid to Ms. Sakai: (a) $93,364, which is the annual aggregate monthly pro rata amount of prepaid housing expenses for Ms. Sakai’s housing lease; (b) $53,945 for reimbursement of tuition expenses for Ms. Sakai’s children; (c) $26,019 for Ms. Sakai’s home leave flights; (d) $30,016 for insurance premiums; (e) $16,478 for other personal benefits (including reimbursement of the use of a car, living expenses, personal tax advisory expenses, and other personal benefits); (f) $18,305 of reimbursement for the difference between the actual tax Ms. Sakai already paid and the hypothetical tax she had to pay for the fiscal year 2009; and (g) $11,911 for reimbursement of Korean tax.	
(18)	Includes the following personal benefits paid to Ms. Sakai: (a) $25,590, which is the total monthly rental payments for four months rent for MS. Sakai’s housing, and $32,650, which is the imputed benefit to Ms. Sakai from a refundable deposit held by the lessor of Ms. Sakai’s housing during the lease term; (b) $33,735 for reimbursement of tuition expenses for Ms. Sakai’s children; (c) $21,352 for Ms. Sakai’s home leave flights; (d) $28,238 for insurance premiums; (e) $8,568 for other personal benefits (including reimbursement of the use of a car, personal tax advisory expenses, and communication expenses); and (f) $13,535 for reimbursement of Korean tax.	
(19)	Includes the following personal benefits paid to Ms. Sakai: (a) $61,438, which is the imputed benefit to Ms. Sakai from a refundable deposit held by the lessor of Ms. Sakai’s housing during the lease term; (b) $38,046 for reimbursement of tuition expenses for Ms. Sakai’s children; (c) $23,420 for Ms. Sakai’s home leave flights; (d) $27,211 for insurance premiums; (e) $21,460 for other personal benefits (including reimbursement of the use	
 
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 	of a car, personal tax advisory expenses, and communication expenses); and (f) $8,450 for reimbursement of Korean tax and employee fringe benefits.	
(20)	Includes the following personal benefits paid to Mr. McFarland: (a) $25,920 for reimbursement of tuition expenses for Mr. McFarland’s child; (b) $7,418 of reimbursement for the difference between the actual tax Mr. McFarland already paid and the hypothetical tax he had to pay for the fiscal year 2009; (c) $21,830 for insurance premiums; (d) $8,204 for other personal benefits (including reimbursement of the use of a car, personal tax advisory expenses and other personal benefits); and (e) $9,159 for reimbursement of Korean tax.	
(21)	Includes the following personal benefits paid to Mr. McFarland: (a) $23,351 for reimbursement of tuition expenses for Mr. McFarland’s child; (b) $19,978 of reimbursement for the difference between the actual tax Mr. McFarland already paid and the hypothetical tax he had to pay for the fiscal year 2008; (c) $20,227 for insurance premiums; (d) $1,089 for other personal benefits (including reimbursement of the use of a car and personal tax advisory expenses); and (e) $34,970 for reimbursement of Korean tax.	
(22)	Includes the following personal benefits paid to Mr. McFarland: (a) $21,334 for reimbursement of tuition expenses for Mr. McFarland’s child; (b) $13,382 of reimbursement for the difference between the actual tax Mr. McFarland already paid and the hypothetical tax he had to pay for the fiscal year 2007; (c) $19,736 for insurance premiums paid; (d) $12,296 for other personal benefits (including reimbursement of the use of a car and personal tax advisory expenses); and (e) $13,042 for reimbursement of Korean tax and employee fringe benefits.	
Grants of Plan-Based Awards
No stock and option awards nor other plan-based awards were granted during the year ended December 31, 2010 to our named executive officers.

Outstanding Equity Awards at Fiscal Year End 2010(1)	 	
 	  	Option Awards	 	  	Unit Awards	 	
Name	  	Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable	 	  	Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(2)	 	  	Option
Exercise
Price ($)(3)	 	  	Option
Expiration
Date	 	  	Number of
Shares or
Units of
Stock
That Have
Not
Vested
(#)(4)	 	  	Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(5)	 	
Sang Park	  	 	95,200	  	  	 	184,800	  	  	 	5.88	  	  	 	12/8/2019	  	  	 	92,400	  	  	 	1,478,400	  	
Tae Young Hwang	  	 	59,500	  	  	 	115,500	  	  	 	5.88	  	  	 	12/8/2019	  	  	 	34,650	  	  	 	554,400	  	
Brent Rowe	  	 	35,700	  	  	 	69,300	  	  	 	5.88	  	  	 	12/8/2019	  	  	 	23,100	  	  	 	369,600	  	
Margaret Sakai	  	 	14,280	  	  	 	27,720	  	  	 	5.88	  	  	 	12/8/2019	  	  	 	13,860	  	  	 	221,760	  	
John McFarland	  	 	9,520	  	  	 	18,480	  	  	 	5.88	  	  	 	12/8/2019	  	  	 	13,860	  	  	 	221,760	  	
 
(1)	All of our outstanding common and preferred units and outstanding options as of November 9, 2009 were terminated as of November 9, 2009 pursuant to our reorganization proceedings.	
(2)	An installment of 34% of the shares of common stock subject to the options vested and became exercisable on December 8, 2010, an additional 9% of the options vest on the completion of the next period of three months, an additional 8% of the options vest upon the completion of each of the next three periods of three months, an additional 9% of the options vest upon the completion of the next period of three months, and an additional 8% of the options vest upon the completion of each of the next three periods of three months.	
(3)	The option exercise price at the time of grant was $1.16 per common unit, or $9.28 after giving effect to the corporate conversion. On April 19, 2010, we made a distribution to our unitholders of $0.4254 per common unit, which resulted in the option exercise price being reduced to $0.7346 per common unit, or $5.88 after giving effect to the corporate conversion.	
(4)	The restrictions on the shares of common stock lapse on December 8, 2011 as to 33% of the total amount of restricted shares of common stock originally awarded.	
(5)	The reported value represents the product of multiplying the number of shares of unvested common stock by the value of our common stock on an as converted basis as of December 31, 2010, the last day of our fiscal year. As there was no public market for our outstanding common equity on December 31, 2010, we have assumed that the fair market value on December 31, 2010 was $16.00, which represents the midpoint of the range set forth on the cover page of this prospectus.	
 
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Option Exercises and Stock Vested at Fiscal Year End 2010(1)	 	
Name	  	Number of
Shares
Acquired on
Vesting
(#)(2)	 	  	Value Realized
on Vesting
($)(3)	 	
Sang Park	  	 	92,400	  	  	 	1,478,400	  	
Tae Young Hwang	  	 	34,650	  	  	 	554,400	  	
Brent Rowe	  	 	23,100	  	  	 	369,600	  	
John McFarland	  	 	13,860	  	  	 	221,760	  	
Margaret Sakai	  	 	13,860	  	  	 	221,760	  	
 
(1)	All of our outstanding common and preferred units and outstanding options as of November 9, 2009 were terminated as of November 9, 2009 pursuant to our reorganization proceedings.	
(2)	The restrictions on the awards lapsed on December 8, 2010 as to 33% of the total number of restricted shares of common stock originally awarded.	
(3)	The reported value represents the product of multiplying the number of vested shares by the value of our shares as of the date of vesting determined on an as converted basis. As there was no public market for our outstanding common equity on December 8, 2010, the date of vesting, we have assumed that the fair market value on December 8, 2010 was $16.00, which represents the midpoint of the range set forth on the cover page of this prospectus.	
MagnaChip Semiconductor LLC 2009 Common Unit Plan
All of our outstanding common and preferred units and options and related plans were terminated as of November 9, 2009 pursuant to our reorganization proceedings. Following our emergence from our reorganization proceedings, in December 2009, our board of directors adopted, and our equityholders approved, the MagnaChip Semiconductor LLC 2009 Common Unit Plan, which we refer to as the 2009 Plan. The 2009 Plan provides for the grant of nonstatutory options, restricted unit bonus and purchase right awards, and deferred unit awards to employees and consultants of our company and our subsidiaries and to members of our board of directors. However, only options and restricted unit bonus awards have been granted under the 2009 Plan. Subject to adjustment in the event of certain changes in capital structure, the maximum aggregate number of MagnaChip Semiconductor LLC common units that are available for grant under the 2009 Plan is 30,000,000. Units subject to awards that expire, are forfeited or otherwise terminate will again be available for grant under the 2009 Plan.
In connection with our corporate conversion, we will assume the rights and obligations of MagnaChip Semiconductor LLC under the 2009 Plan and convert MagnaChip Semiconductor LLC common unit options and restricted common units outstanding under the 2009 Plan into options to acquire a number of shares of our common stock and shares of restricted common stock at a ratio of eight-for-one on substantially equivalent terms and conditions. Based upon our common units outstanding as of December 31, 2010, and after giving effect to the corporate conversion, there would have been outstanding under the 2009 Plan options to purchase 1,957,760 shares of common stock, at a weighted average exercise price of $6.33 per share. The 2009 Plan will terminate immediately following our corporate conversion, and no additional options or other equity awards may be granted under the 2009 Plan following its termination. However, options granted under the 2009 Plan prior to its termination will remain outstanding until they are either exercised or expire.
The 2009 Plan is administered by the Committee. Subject to the provisions of the 2009 Plan, the Committee determines in its discretion the persons to whom and the times at which awards are granted, the sizes of such awards, and all of their terms and conditions. All awards are evidenced by a written agreement between us and the holder of the award. The Committee has the authority to construe and interpret the terms of the 2009 Plan and awards granted under it.
In the event of a change in control of our company, the vesting of all outstanding awards held by participants whose employment has not previously terminated will accelerate in full. In addition, the
 
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Committee has the authority to require that outstanding awards be assumed or replaced with substantially equivalent awards by the successor corporation or to cancel the outstanding awards in exchange for a payment in cash or other property equal to the fair market value of restricted units or the excess, if any, of the fair market value of the units subject to an option over the exercise price per unit of such option.
2011 Equity Incentive Plan
Our 2011 Equity Incentive Plan, or the 2011 Plan, which was approved by our board of directors in March 2010 and amended and restated by our board of directors in February 2011 to reflect that the 2011 Plan will become effective in 2011, will be effective upon our corporate conversion, subject to its approval by our equityholders, which is expected prior to the closing of this offering.
A number of shares of our common stock equal to the total number of shares of common stock (as adjusted by the conversion ratio in the corporate conversion) remaining available for grant under the 2009 Plan upon its termination immediately following the corporate conversion will be initially authorized and reserved for issuance under the 2011 Plan. As of December 31, 2010, 890,300 shares of common stock were reserved for future issuance under the 2009 Plan. This reserve will automatically increase on January 1, 2012 and each subsequent anniversary through 2021, by an amount equal to the smaller of 2% of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or an amount determined by our board of directors. The number of shares authorized for issuance under the 2011 Plan will also be increased from time to time by up to that number of shares of common stock (as adjusted by the conversion ratio in corporate conversion) remaining subject to options and restricted stock awards outstanding under the 2009 Plan at the time of its termination immediately following the corporate conversion that expire or terminate or are forfeited for any reason after the effective date of the 2011 Plan. Appropriate adjustments will be made in the number of authorized shares and other numerical limits in the 2011 Plan and in outstanding awards to prevent dilution or enlargement of participants’ rights in the event of a stock split or other change in our capital structure. Shares subject to awards granted under our 2011 Plan which expire, are repurchased, or are cancelled or forfeited will again become available for issuance under the 2011 Plan. The shares available will not be reduced by awards settled in cash. Shares withheld to satisfy tax withholding obligations will not again become available for grant. The gross number of shares issued upon the exercise of stock appreciation rights or options exercised by means of a net exercise or by tender of previously owned shares will be deducted from the shares available under the 2011 Plan.
Awards may be granted under the 2011 Plan to our employees, including officers, directors, or consultants or those of any present or future parent or subsidiary corporation or other affiliated entity. While we may grant incentive stock options only to employees, we may grant nonstatutory stock options, stock appreciation rights, restricted stock purchase rights or bonuses, restricted stock units, performance shares, performance units and cash-based awards or other stock-based awards to any eligible participant.
The 2011 Plan is administered by the Committee. Subject to the provisions of the 2011 Plan, the Committee determines in its discretion the persons to whom and the times at which awards are granted, the sizes of such awards, and all of their terms and conditions. All awards are evidenced by a written agreement between us and the holder of the award. The Committee has the authority to construe and interpret the terms of the 2011 Plan and awards granted under it.
In the event of a change in control as described in the 2011 Plan, the acquiring or successor entity may assume or continue all or any awards outstanding under the 2011 Plan or substitute substantially equivalent awards. Any awards which are not assumed or continued in connection with a
 
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change in control or are not exercised or settled prior to the change in control will terminate effective as of the time of the change in control. The Committee may provide for the acceleration of vesting of any or all outstanding awards upon such terms and to such extent as it determines, except that the vesting of all awards held by members of our board of directors who are not employees will automatically be accelerated in full. The 2011 Plan also authorizes the Committee, in its discretion and without the consent of any participant, to cancel each or any outstanding award denominated in shares upon a change in control in exchange for a payment to the participant with respect to each share subject to the cancelled award of an amount equal to the excess of the consideration to be paid per share of common stock in the change in control transaction over the exercise price per share, if any, under the award.
2011 Employee Stock Purchase Plan
Our 2011 Employee Stock Purchase Plan, or the Purchase Plan, which was approved by our board of directors in March 2010 and amended and restated by our board of directors in February 2011 to reflect that the Purchase Plan will become effective in 2011, subject to its approval by our equityholders, will become effective upon the commencement of this offering.
A number of shares of our common stock equal to 2% of the number of shares of common stock estimated to be outstanding immediately after completion of this offering, including the exercise of the underwriters’ option to purchase additional shares will be initially authorized and reserved for sale under the Purchase Plan. In addition, the Purchase Plan provides for an automatic annual increase in the number of shares available for issuance under the plan on January 1 of each year beginning in 2012 and continuing through and including January 1, 2021 equal to the lesser of (i) 1% of our then issued and outstanding shares of common stock on the immediately preceding December 31, (ii) a number of shares of our common stock equal to 2% of the number of shares of common stock estimated to be outstanding immediately after completion of this offering, including the exercise of the underwriters’ option to purchase additional shares or (iii) a number of shares as our board may determine. Appropriate adjustments will be made in the number of authorized shares and in outstanding purchase rights to prevent dilution or enlargement of participants’ rights in the event of a stock split or other change in our capital structure. Shares subject to purchase rights which expire or are canceled will again become available for issuance under the Purchase Plan.
Our employees and employees of any parent or subsidiary corporation designated by the Committee are eligible to participate in the Purchase Plan if they are customarily employed by us for more than 20 hours per week and more than five months in any calendar year. However, an employee may not be granted a right to purchase stock under the Purchase Plan if: (i) the employee immediately after such grant would own stock possessing 5% or more of the total combined voting power or value of all classes of our capital stock or of any parent or subsidiary corporation, or (ii) the employee’s rights to purchase stock under all of our employee stock purchase plans would accrue at a rate that exceeds $25,000 in value for each calendar year of participation in such plans.
The Purchase Plan is implemented through a series of sequential offering periods, generally three months in duration beginning on the first trading days of February, May, August, and November each year. However, the Committee may establish an offering period to commence on the effective date of the Purchase Plan that will end on a date determined by the Committee. The Committee is authorized to establish additional or alternative concurrent, sequential or overlapping offering periods and offering periods having a different duration or different starting or ending dates, provided that no offering period may have a duration exceeding 27 months.
Amounts accumulated for each participant, generally through payroll deductions, are credited toward the purchase of shares of our common stock at the end of each offering period at a price
 
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generally equal to 95% of the fair market value of our common stock on the purchase date. Prior to commencement of an offering period, the Committee is authorized to change the purchase price discount for that offering period, but the purchase price may not be less than 85% of the lower of the fair market value of our common stock at the beginning of the offering period or on the purchase date.
No participant may purchase under the Purchase Plan in any calendar year shares having a value of more than $25,000 measured by the fair market value per share of our common stock on the first day of the applicable offering period. Prior to the beginning of any offering period, the Committee may alter the maximum number of shares that may be purchased by any participant during the offering period or specify a maximum aggregate number of shares that may be purchased by all participants in the offering period. If insufficient shares remain available under the plan to permit all participants to purchase the number of shares to which they would otherwise be entitled, the Committee will make a pro rata allocation of the available shares. Any amounts withheld from participants’ compensation in excess of the amounts used to purchase shares will be refunded, without interest.
In the event of a change in control, an acquiring or successor corporation may assume our rights and obligations under the Purchase Plan. If the acquiring or successor corporation does not assume such rights and obligations, then the purchase date of the offering periods then in progress will be accelerated to a date prior to the change in control as specified by the Committee, but the number of shares subject to outstanding purchase rights shall not be adjusted.
Agreements with Executives and Potential Payments Upon Termination or Change in Control
We are obligated to make certain payments to our named executive officers upon termination or a change in control as further described below.
Sang Park.    We are party to an Amended and Restated Services Agreement, dated as of May 8, 2008, with Mr. Park pursuant to which he serves as our Chairman and Chief Executive Officer. Under the agreement, Mr. Park was to receive an initial base salary of $450,000 and a one-time performance bonus payment of $900,000. Mr. Park is also entitled to an annual incentive award of 100% of his annual salary based upon the achievement of performance goals, provided that the actual bonus paid may be higher or lower dependent on over- or under-achievement of his performance goals, as determined by the Committee. Mr. Park is entitled to customary employee benefits and certain expatriate, repatriation and international service benefits, including relocation benefits, tax equalization benefits, the cost of housing accommodations and expenses, transportation benefits and repatriation benefits. Pursuant to the agreement Mr. Park was granted options to purchase restricted common units but they were subsequently terminated in connection with our reorganization proceedings. The restated service agreement also contains customary non-competition and non-solicitation covenants lasting two and three years, respectively, from the date of termination of employment and confidentiality covenants of unlimited duration.
If Mr. Park’s employment is terminated without Cause or if he resigns for good reason, Mr. Park is entitled to receive (i) payment of all salary and benefits accrued up to the date of termination, (ii) payment of his then-current base salary for twelve months, (iii) the annual incentive award to which Mr. Park would have been entitled for the year in which his employment terminates, (iv) twelve months’ accelerated vesting on outstanding equity awards and a twelve-month post-termination equity award exercise period, and (v) continued participation for Mr. Park and his eligible dependents in our benefit plans for twelve months, including certain international service benefits.
If such termination occurs within nine months of a change in control, Mr. Park is entitled to receive (i) payment of all salary and benefits accrued and unpaid up to the date of termination, (ii) payment of his then-current base salary for twenty-four months, (iii) the annual incentive award to
 
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which Mr. Park would have been entitled for the year in which his employment terminates, (iv) two years’ accelerated vesting on outstanding equity awards, other than awards granted pursuant to the 2009 Plan, which accelerate in full, (v) a twelve-month post-termination equity award exercise period, and (vi) continued participation for Mr. Park and his eligible dependents in our benefit plans for two years, including certain international service benefits.
The severance described above payable to Mr. Park upon his termination without Cause or in connection with a change in control shall be reduced to the extent that we pay any statutory severance payments to Mr. Park pursuant to the Korean Commercial Code or any other statute.
As used in the agreement, the term “Cause” means the termination of Mr. Park’s employment because of (i) a failure by Mr. Park to substantially perform his customary duties (other than such failure resulting from incapacity due to physical or mental illness); (ii) Mr. Park’s gross negligence, intentional misconduct or material fraud in the performance of Mr. Park’s employment; (iii) Mr. Park’s conviction of, or plea of nolo contendre to, a felony or to a crime involving fraud or dishonesty; (iv) a judicial determination that Mr. Park committed fraud or dishonesty against any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity; or (v) Mr. Park’s material violation of the agreement or of one or more of the material policies applicable to his employment. Resignation for “good reason” means a resignation upon any of the following events that remains uncured for 30 days after Mr. Park delivers a demand to us: (i) a salary reduction other than a reduction of less than 10% applied to our other officers, (ii) material reduction in benefits, (iii) failure to provide housing, (iv) nature or status of Mr. Park’s authorities, duties or responsibilities are materially and adversely altered, (v) removal from our board of directors without cause, or (vi) Mr. Park is not reappointed as Chief Executive Officer following our initial public offering.
In the event we terminate Mr. Park’s employment due to Disability, Mr. Park shall be entitled to (i) payment of his Salary and accrued vacation up to and including the date of termination, (ii) payment of any unpaid expense reimbursements, (iii) the prorated amount of any cash incentive to which Mr. Park would have been entitled, and (iv) other benefits due to Mr. Park through his termination date. As used in the agreement, the term “Disability” means that the we determine that due to physical or mental illness or incapacity, whether total or partial, Mr. Park is substantially unable to perform his duties for a period of 180 consecutive days or shorter periods aggregating 180 days during any period of 365 consecutive days.
In the event of Mr. Park’s death while employed by us, Mr. Park’s estate or named beneficiary shall be entitled to (i) payment of Mr. Park’s salary and accrued vacation up to and including the date of termination, (ii) payment of any unpaid expense reimbursements, (iii) the prorated amount of any cash incentive to which Mr. Park would have been entitled, and (iv) other benefits due to Mr. Park through his termination date.
Tae Young Hwang.    We entered into an Entrustment Agreement with Mr. Hwang, effective as of October 1, 2004, under which he serves as our Chief Operating Officer and President, with an initial base salary of 220 million Korean won per year and with a target annual incentive bonus to be determined by management based on performance. Mr. Hwang is entitled to customary employee benefits and expatriate benefits. The agreement also contains customary non-competition covenants lasting one year from the date of termination of employment and confidentiality covenants of unlimited duration.
If Mr. Hwang’s employment is terminated for any reason, he is entitled to statutory severance payments pursuant to the Korean Commercial Code.
Brent Rowe.    We entered into an Offer Letter with Mr. Rowe, dated as of March 7, 2006, pursuant to which Mr. Rowe serves as our Executive Vice President, Worldwide Sales, with an initial
 
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base salary of $220,000 per year, a sign on bonus of $50,000 and with a target annual incentive bonus opportunity of 80% of his base salary. Mr. Rowe is entitled to customary employee benefits. Pursuant to the Offer Letter, Mr. Rowe received an initial grant of options to purchase our common units, but the grant was subsequently terminated in connection with our reorganization proceedings.
If Mr. Rowe’s employment is terminated without cause, he is entitled to a severance payment equal to six months’ salary.
Margaret Sakai.    We entered into an Offer Letter with Ms. Sakai, dated as of September 5, 2006, pursuant to which Ms. Sakai served as our Senior Vice President, Finance, with an initial base salary of $250,000 per year and with a target annual incentive bonus opportunity of 50% of her base salary. Ms. Sakai’s title was changed to Senior Vice President and Chief Financial officer in 2009. Ms. Sakai is entitled to customary employee benefits and expatriate benefits. Pursuant to her Offer Letter, Ms. Sakai received an initial grant of options to purchase our common units, but the grant was subsequently terminated in connection with our reorganization proceedings.
If Ms. Sakai’s employment is terminated by us without cause, Ms. Sakai is entitled to receive payment of all salary and benefits accrued and unpaid up to the date of termination, continued payment of her salary for six months at the rate in effect on the date of termination, payment of a prorated portion of the annual incentive bonus for the year in which termination occurs and paid benefits for Ms. Sakai and her dependents for six months. The severance payable to Ms. Sakai under her Offer Letter will be reduced to the extent we make any statutory severance payments to Ms. Sakai pursuant to the Korean Commercial Code or any other statute.
John McFarland.    We are party to a Service Agreement, dated as of April 1, 2006, with Mr. McFarland pursuant to which he serves as our Senior Vice President, General Counsel and Secretary. Under the agreement, Mr. McFarland was eligible to receive an initial base salary of 175 million Korean won per year, with a target annual incentive bonus opportunity of 50% of his base salary. Mr. McFarland is entitled to customary employee benefits and certain expatriate, repatriation and international service benefits. Mr. McFarland received an initial grant of options to purchase our common units, but the grant was subsequently terminated in connection with our reorganization proceedings. The agreement also contains customary non-competition and non-solicitation covenants lasting one and two years, respectively, from the date of termination of employment and confidentiality covenants of unlimited duration.
Pursuant to the agreement, if Mr. McFarland’s employment is terminated for any reason other than Disability, death or Cause, he shall be entitled to (i) payment of all salary and benefits accrued up to the date of termination, (ii) a severance payment, consisting of the continuation of his then current salary for a period of six months, (iii) six months of paid benefits for Mr. McFarland and his eligible dependents and (iv) the prorated amount of any cash incentive to which Mr. McFarland would have been entitled. The severance payable to Mr. McFarland under his agreement will be reduced to the extent we make any statutory severance payments to Mr. McFarland pursuant to the Korean Commercial Code or any other statute.
In the event we terminate Mr. McFarland’s employment due to Disability, Mr. McFarland shall be entitled to (i) payment of his then current salary up to and including the date of termination, (ii) the dollar value of all accrued and unused vacation benefits based upon Mr. McFarland’s most recent level of salary, (iii) any cash incentive amount actually earned but not previously paid to Mr. McFarland, (iv) payment of any unpaid expense reimbursements, and (v) the prorated amount of any cash incentive to which Mr. McFarland would have been entitled. As used in the agreement, the term “Disability” means that we reasonably determine that due to physical or mental illness or incapacity, whether total or partial, Mr. McFarland is substantially unable to perform his duties for a period of 180 consecutive days or shorter periods aggregating 180 days during any period of 365 consecutive days.
 
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In the event of Mr. McFarland’s death while employed by us, Mr. McFarland’s estate or named beneficiary shall be entitled to (i) payment of Mr. McFarland’s then current salary up to and including the date of termination, (ii) the dollar value of all accrued and unused vacation benefits based upon Mr. McFarland’s then current salary, (iii) any cash incentive amount actually earned but not previously paid to Mr. McFarland, (iv) payment of any unpaid expense reimbursements, and (v) the prorated amount of any cash incentive to which Mr. McFarland would have been entitled.
If Mr. McFarland’s employment is terminated for Cause, he will be entitled to receive payment of all salary and benefits and unreimbursed expenses accrued up to the date of termination and will not be entitled to any other compensation. As used in the agreement, the term “Cause” has substantially the same definition as that in Mr. Park’s agreement.
Potential Payments upon Termination or Change in Control.
Termination.    Our named executive officers are eligible to receive certain payments and benefits in connection with certain service termination events pursuant to the terms of our employment agreements with them, as further described under the section entitled “Agreements with Executives and Potential Payments Upon Termination or Change in Control.” The terms “cause” and “resignation for good reason” used below have the meanings given to them in the applicable agreements with us.
Change in Control.    Mr. Park is entitled to receive certain payments and benefits in connection with a change in control of our company pursuant to our employment agreement with him, as further described under the section entitled “Agreements with Executives and Potential Payments Upon Termination or Change in Control.” In addition, in the event of a change in control of our company, the vesting of all outstanding awards issued under the 2009 Plan held by participants whose employment has not previously terminated will accelerate in full. In addition, the Committee has the authority to require that outstanding awards be assumed or replaced with substantially equivalent awards by the successor corporation or to cancel the outstanding awards in exchange for a payment in cash or other property equal to the fair market value of restricted units or the excess, if any, of the fair market value of the units subject to an option over the exercise price per unit of such option. For purposes of the foregoing, a “change in control” is generally defined as the acquisition by a person or entity of more than 51% of the combined voting power of our then outstanding voting securities or a sale or transfer of all or substantially all of our consolidated assets to a person or entity that is not our affiliate. The offering will not constitute a change of control for the purposes of these provisions.
 
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The following table presents our estimate of the dollar value of the payments and benefits payable to our named executive officers upon the occurrence of the following events, assuming that each such event occurred on December 31, 2010. The disclosure in the following table does not include:
 
 	Ÿ	 	any accrued benefits that were earned and payable as of December 31, 2010, including any short-term cash incentive amounts earned by, or any discretionary bonus amounts payable to, the executive officer for 2010 performance; or	
 
 	Ÿ	 	payments and benefits to the extent they are provided generally to all salaried employees and do not discriminate in scope, terms or operation in favor of the named executive officers.	

Name	  	Event	 	 	Cash
Severance
Payment
($)(1)	 	  	Continuation
of Benefits
($)(2)	 	 	Value of
Equity
Award
Acceleration
($)(3)	 	  	Total
($)	 	
Sang Park	  	 	(a	)(4) 	 	 	450,000	  	  	 	325,576	(5) 	 	 	3,348,576	  	  	 	4,124,152	  	
 	  	 	(b	)(4) 	 	 	900,000	  	  	 	651,152	(6) 	 	 	3,348,576	  	  	 	4,899,728	  	
 	  	 	(c	) 	 	 	—	  	  	 	—	  	 	 	3,348,576	  	  	 	3,348,576	  	
 	 	 	 	 	 	
Tae Young Hwang	  	 	(c	) 	 	 	—	  	  	 	—	  	 	 	1,723,260	  	  	 	1,723,260	  	
 	 	 	 	 	 	
Brent Rowe	  	 	(a	) 	 	 	110,000	  	  	 	—	  	 	 	—	  	  	 	110,000	  	
 	  	 	(c	) 	 	 	—	  	  	 	—	  	 	 	1,070,916	  	  	 	1,070,916	  	
 	 	 	 	 	 	
Margaret Sakai	  	 	(a	) 	 	 	130,000	  	  	 	125,019	(7) 	 	 	—	  	  	 	255,019	  	
 	  	 	(c	) 	 	 	—	  	  	 	—	  	 	 	502,286	  	  	 	502,286	  	
 	 	 	 	 	 	
John McFarland	  	 	(a	) 	 	 	94,210	  	  	 	36,265	(8) 	 	 	—	  	  	 	130,475	  	
 	  	 	(c	) 	 	 	—	  	  	 	—	  	 	 	408,778	  	  	 	408,778	  	
 
(a)	Termination without cause in absence of change in control	
(b)	Termination without cause within 9 months following a change in control	
(c)	Change in control	
(1)	Represents cash severance payments payable to our named executive officers pursuant to our employment agreements with them, prior to giving effect to the terms thereof relating to the Employee Retirement Benefit Security Act of Korea. Other than Mr. Rowe, who is entitled to a lump sum cash severance payment, cash severance payments are paid monthly in accordance with our regular payroll procedures.	
 	Pursuant to the Employee Retirement Benefit Security Act, Mr. Hwang, Ms. Sakai and Mr. McFarland are entitled to certain statutory severance benefits from us upon the termination of their employment with us for any reason. See “Management—Compensation Discussion and Analysis—Perquisites and Other Benefits” for additional information. For these executives, the amounts reflected in this column would be reduced to the extent we are obligated to make these statutory severance payments.	
(2)	Calculated assuming the continuation of benefits for the applicable period at the same dollar value of 2010 benefits.	
(3)	Reflects the aggregate value of the accelerated vesting of the named executive officer’s unvested options and restricted common units, as applicable.	
 
 	With respect to options issued under our 2009 Plan outstanding as of December 31, 2010, the amounts were calculated by multiplying (i) the number of outstanding options to purchase common stock subject to award vesting on December 31, 2010 by (ii) the fair market value of our common stock as of December 31, 2010. As there was no public market for our outstanding common equity on December 31, 2010, we have assumed that the fair market value on December 31, 2010 was $16.00, which represents the midpoint of the range set forth on the cover page of this prospectus.	
 
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 	Because all of our restricted common units issued under the 2009 Plan outstanding as of December 31, 2010 were issued without any required monetary payment, the amounts were calculated by multiplying (i) the number of outstanding restricted common stock subject to award vesting on December 31, 2010 by (ii) the fair market value of our common stock as of December 31, 2010. As there was no public market for our outstanding common equity on December 31, 2010, we have assumed that the fair market value on December 31, 2010 was $16.00, which represents the midpoint of the range set forth on the cover page of this prospectus.	
 
(4)	Reflected benefits are also payable in connection with Mr. Park’s resignation for good reason. See “Management—Agreements with Executives and Potential Payments Upon Termination or Change in Control—Sang Park.”	
(5)	Represents the aggregate value of the continuation of health insurance benefits for Mr. Park and his eligible dependents for twelve months following the date of termination. Mr. Park is also entitled to tax equalization benefits, tax preparation services, the reimbursement of costs associated with one home leave flight and, for a period of twelve months post-termination, international health insurance benefits, paid housing and the use of a car and a driver.	
(6)	Represents the aggregate value of the continuation of health insurance benefits for Mr. Park and his eligible dependents for twenty-four months following the date of termination. Mr. Park is also entitled to tax equalization benefits, tax preparation services, the reimbursement of costs associated with two home leave flights and, for a period of twenty-four months post-termination, international health insurance benefits, paid housing and the use of a car and a driver.	
(7)	Represents the aggregate value of the continuation of health insurance benefits for Ms. Sakai and her eligible dependents for six months following the date of termination. Ms. Sakai is also entitled to tax equalization benefits, tax preparation services, reimbursement of costs associated with one home leave flight and, for a period of six months post-termination, paid housing, the use of a car and a driver and child tuition benefits.	
(8)	Represents the aggregate value of continuation of health insurance benefits for Mr. McFarland and his eligible dependents for six months following the date of termination. Mr. McFarland is also entitled to tax equalization, tax preparation services and, for a period of six months post-termination, child tuition benefits.	
Pension Benefits for the Fiscal Year Ended December 31, 2010
Pursuant to the Employee Retirement Benefit Security Act, certain executive officers resident in Korea with one or more years of service are entitled to severance benefits upon the termination of their employment for any reason. The base statutory severance accrues at the rate of approximately one month of base salary per year of service and is calculated on a monthly basis based upon the officer’s salary for the prior three-month period. Accordingly, if the named executive officers in the following table had retired on the last day of our fiscal year ended December 31, 2010, they would have been entitled to the statutory severance payments described below. Assuming no change in the applicable law, each of these executives will continue to accrue additional statutory severance benefits at the rate described above until his or her service with us terminates.

Name	  	Plan Name	  	Number
of Years
of Credited
Service (#)	 	 	Present
Value of
Accumulated
Benefit ($)	 	  	Payments
During
the Last
Fiscal Year	 	
Tae Young Hwang	  	Statutory Severance with Multiplier for Partial Period	  	 	15	(1) 	 	 	812,334	  	  	 	—	  	
Margaret Sakai	  	Statutory Severance	  	 	4	  	 	 	98,832	  	  	 	—	  	
John McFarland	  	Statutory Severance	  	 	6	  	 	 	111,188	  	  	 	—	  	
 
Footnote:
 
(1)	Mr. Hwang accrued severance for his fifteen years of service at MagnaChip and its predecessor corporation. Although the minimum legal severance accrual is one month of base salary per year	
 
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 	of service, Mr. Hwang was eligible for accrual of a multiple of two to three months of base salary per year of service during approximately the first ten of his fifteen years of service, or $447,654 in aggregate.	
Nonqualified Deferred Compensation
We do not maintain any nonqualified deferred compensation plans.
Director Compensation for the Fiscal Year Ended December 31, 2010

Name	  	Fees
Earned
or Paid
in Cash
($)	 	 	Stock
Awards
($)(1)	 	 	Option
Awards
($)(1)	 	 	Total
($)	 	
R. Douglas Norby	  	 	55,000	(2) 	 	 	—	  	 	 	166,180	(3) 	 	 	221,180	  	
Gidu Shroff	  	 	50,000	(4) 	 	 	—	  	 	 	166,180	(3) 	 	 	216,180	  	
Nader Tavakoli	  	 	50,000	(4) 	 	 	318,000	(5) 	 	 	166,180	(3) 	 	 	534,180	  	
Michael Elkins(6)	  	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	
Randal Klein(6)	  	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	
Steven Tan(6)	  	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	
Footnotes:
 
(1)	Represents grant date fair value determined in accordance with FASB ASC 718. See “Note 4 Summary of Significant Accounting Policies Stock/Unit-Based Compensation,” and “Note 19 Equity Incentive Plans,” to the MagnaChip Semiconductor Corporation audited consolidated financial statements for the year ended December 31, 2010, the two months ended December 31, 2009, the ten months ended October 25, 2009 and the year ended 2008.	
(2)	Consists of an annual retainer of $50,000 paid to independent non-employee directors plus an additional $5,000 paid for serving as the chairman of our audit committee pursuant to our director compensation policy adopted in March 2010.	
(3)	Consists of an option grant to an independent non-employee director to purchase 25,000 shares of common stock issued in March 2010 under the 2009 Plan at an exercise price of $16.96 per share pursuant to our director compensation policy adopted in March 2010. On April 19, 2010, the option exercise price was adjusted pursuant to the terms of the 2009 Plan to $13.56 per share as a result of the $130.7 million cash distribution made to our unitholders in April 2010.	
(4)	Consists of an annual retainer of $50,000 paid to independent non-employee directors pursuant to our director compensation policy adopted in March 2010.	
(5)	Consists of a grant of 18,750 shares of restricted common stock issued in March 2010 under the 2009 Plan for services as a director to date.	
(6)	This director did not receive any compensation in 2010.	
Further Information Regarding Director Compensation Table
In March 2010, we issued to our director Nader Tavakoli 18,750 shares of restricted common stock pursuant to the 2009 Plan for service as a director to date. In March 2010, we also adopted a new director compensation policy. Under the new policy, each of our independent directors is entitled to receive an annual fee of $50,000. In addition, the chairman of our audit committee is entitled to an additional fee of $5,000. We expect to issue each independent director an option to purchase 25,000 shares of common stock, which shall vest on the same terms as option grants to our other grantees. In March 2010, pursuant to this policy, we issued options to purchase 25,000 shares of common stock to each of our directors R. Douglas Norby, Gidu Shroff and Nader Tavakoli pursuant to the 2009 Plan at an exercise price of $16.96 per share.
 
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Compensation Committee Interlocks and Insider Participation
We do not anticipate that any of the members of the Compensation Committee will have been an officer or employee of our company during the last fiscal year. During 2010, decisions regarding executive officer compensation were made by our full board of directors. Mr. Sang Park, Chairman of our board of directors and our Chief Executive Officer, participated in deliberations of our board of directors regarding the determination of compensation of our executive officers other than himself. None of our executive officers currently serves, or in the past has served, as a member of the board of directors or the compensation committee of any entity that has one or more executive officers serving on our board of directors.
 
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PRINCIPAL AND SELLING STOCKHOLDERS
Selling Stockholders
The following table and accompanying footnotes set forth information regarding the beneficial ownership of our common stock by each of the following selling stockholders based on the outstanding common units of MagnaChip Semiconductor LLC as of December 31, 2010 as adjusted to reflect the corporate conversion.
As of December 31, 2010, MagnaChip Semiconductor LLC’s outstanding securities consisted of 307,215,516 common units, options to purchase 15,662,080 common units and warrants to purchase 15,000,000 common units and, after giving effect to the corporate conversion, we would have had outstanding 38,401,985 shares of common stock, options to purchase 1,957,760 shares of common stock and warrants to purchase 1,875,017 shares of common stock.
The amounts and percentages of common stock beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he or she has no economic interest.
The information set forth in the table below is based on information provided by or on behalf of the selling stockholders.

Name and Address
of Beneficial Owner	 	Shares of
Common Stock
Beneficially
Owned
Prior to
Offering(1)	 	 	Shares of
Common
Stock  Being
Offered	 	 	Shares of
Common
Stock
Subject to
Underwriters’
Option	 	 	Shares of
Common Stock
Beneficially
Owned Following
Offering
Assuming No
Exercise of
Underwriters’
Option(1)	 	 	Shares of
Common Stock
Beneficially
Owned Following
Offering
Assuming
Exercise of
Underwriters’
Option in Full(1)	 	 	
 	 	Amount	 	 	Percent	 	 	 	 	 	 	 	 	Amount	 	 	Percent	 	 	Amount	 	 	Percent	 	 	 	 	 	 	 	 	
Avenue Special Situations Fund V, L.P.(2)(3)(4)	 	 	11,117,266	  	 	 	28.7	% 	 	 	2,660,130	  	 	 	399,019	  	 	 	8,457,136	  	 	 	21.3	% 	 	 	8,058,117	  	 	 	20.3	% 	 	 	 	 	 	 	 	
Avenue Special Situations Fund IV, L.P.(2)(3)(5)	 	 	8,807,283	  	 	 	22.8	% 	 	 	2,121,415	  	 	 	318,212	  	 	 	6,685,868	  	 	 	16.9	% 	 	 	6,367,656	  	 	 	16.1	% 	 	 	 	 	 	 	 	
Avenue International Master, L.P.(2)(3)(6)	 	 	4,446,037	  	 	 	11.6	% 	 	 	1,073,316	  	 	 	160,997	  	 	 	3,372,721	  	 	 	8.6	% 	 	 	3,211,724	  	 	 	8.1	% 	 	 	 	 	 	 	 	
Avenue-CDP Global Opportunities Fund, L.P.(2)(3)(7)	 	 	1,513,085	  	 	 	3.9	% 	 	 	363,718	  	 	 	54,558	  	 	 	1,149,367	  	 	 	2.9	% 	 	 	1,094,809	  	 	 	2.8	% 	 	 	 	 	 	 	 	
Avenue Investments, L.P.(2)(3)(8)	 	 	1,482,257	  	 	 	3.9	% 	 	 	357,810	  	 	 	53,671	  	 	 	1,124,447	  	 	 	2.9	% 	 	 	1,070,776	  	 	 	2.7	% 	 	 	 	 	 	 	 	
Southpaw Credit Opportunity Master Fund, L.P(9)(10)	 	 	2,860,659	  	 	 	7.4	% 	 	 	701,709	  	 	 	105,256	  	 	 	2,158,950	  	 	 	5.5	% 	 	 	2,053,694	  	 	 	5.2	% 	 	 	 	 	 	 	 	
Wilshire Institutional Master Fund SPC—Wilshire Southpaw Opportunity Segregated Portfolio(9)(11)	 	 	72,379	  	 	 	*	  	 	 	17,754	  	 	 	2,663	  	 	 	54,625	  	 	 	*	  	 	 	51,962	  	 	 	*	  	 	 	 	 	 	 	 	
GPC 76, LLC(9)(12)	 	 	11,367	  	 	 	*	  	 	 	2,788	  	 	 	418	  	 	 	8,579	  	 	 	*	  	 	 	8,161	  	 	 	*	  	 	 	 	 	 	 	 	
Tennenbaum Multi-Strategy Fund SPV (Cayman) Ltd.(13)	 	 	2,588,756	  	 	 	6.7	% 	 	 	635,013	  	 	 	95,252	  	 	 	1,953,743	  	 	 	5.0	% 	 	 	1,858,491	  	 	 	4.7	% 	 	 	 	 	 	 	 	
O’Connor Capital Structure Opportunity Master Limited ‡(14)	 	 	1,591,791	  	 	 	4.1	% 	 	 	390,461	  	 	 	58,569	  	 	 	1,201,330	  	 	 	3.1	% 	 	 	1,142,761	  	 	 	2.9	% 	 	 	 	 	 	 	 	
 
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Name and Address
of Beneficial Owner	 	Shares of
Common Stock
Beneficially
Owned
Prior to
Offering(1)	 	 	Shares of
Common
Stock  Being
Offered	 	 	Shares of
Common
Stock
Subject to
Underwriters’
Option	 	 	Shares of
Common Stock
Beneficially
Owned
Following
Offering
Assuming No
Exercise of
Underwriters’
Option(1)	 	 	Shares of
Common Stock
Beneficially
Owned
Following
Offering
Assuming
Exercise of
Underwriters’
Option in Full(1)	 	 	
 	 	Amount	 	 	Percent	 	 	 	 	 	 	 	 	Amount	 	 	Percent	 	 	Amount	 	 	Percent	 	 	 	 	 	 	 	 	
Deutsche Bank Securities Inc. †(15)	 	 	669,226	  	 	 	1.7	% 	 	 	28,527	  	 	 	4,280	  	 	 	640,699	  	 	 	1.6	% 	 	 	636,419	  	 	 	1.6	% 	 	 	 	 	 	 	 	
Carlyle Strategic Partners LP(16)	 	 	533,668	  	 	 	1.4	% 	 	 	130,907	  	 	 	19,636	  	 	 	402,761	  	 	 	1.0	% 	 	 	383,125	  	 	 	1.0	% 	 	 	 	 	 	 	 	
Caspian Capital Partners, L.P.(17)	 	 	83,516	  	 	 	*	  	 	 	19,317	  	 	 	2,898	  	 	 	64,199	  	 	 	*	  	 	 	61,301	  	 	 	*	  	 	 	 	 	 	 	 	
Mariner LDC(18)	 	 	83,516	  	 	 	*	  	 	 	19,317	  	 	 	2,898	  	 	 	64,199	  	 	 	*	  	 	 	61,301	  	 	 	*	  	 	 	 	 	 	 	 	
Quattro Fund, Ltd(19)	 	 	93,392	  	 	 	*	  	 	 	22,909	  	 	 	3,436	  	 	 	70,483	  	 	 	*	  	 	 	67,047	  	 	 	*	  	 	 	 	 	 	 	 	
Quattro Distressed Opportunities Fund LP(20)	 	 	20,013	  	 	 	*	  	 	 	4,909	  	 	 	737	  	 	 	15,104	  	 	 	*	  	 	 	14,367	  	 	 	*	  	 	 	 	 	 	 	 	
 
 *	Less than one percent.	
 †	The selling stockholder is a wholly-owned subsidiary of Deutsche Bank AG and will be deemed an “underwriter” within the meaning of the Securities Act of 1933, as amended, with respect to its shares.	
 ‡	The selling stockholder is an affiliate of a broker-dealer and has certified that it acquired the shares of common stock in the ordinary course of business, with no arrangement or understanding with any person to distribute such shares.	
(1)	Includes any outstanding shares of common stock held and, to the extent applicable, shares issuable upon the exercise or conversion of any securities that are exercisable or convertible within 60 days of December 31, 2010.	
(2)	Affiliated with the Company as described in “Certain Relationships and Related Transactions.” As described in “Management,” three of our directors, Messrs. Elkins, Klein and Tan are employed by Avenue.	
(3)	The following entities and person are collectively referred to in this table as the “Avenue Capital Group”: (i) Avenue Investments, L.P. (“Avenue Investments”), (ii) Avenue International Master, L.P. (“Avenue International Master”), (iii) Avenue International, Ltd. (“Avenue International”), the sole limited partner of Avenue International Master, (iv) Avenue International Master GenPar, Ltd. (“Avenue International GenPar”), the general partner of Avenue International Master, (v) Avenue Partners, LLC (“Avenue Partners”), the general partner of Avenue Investments and the sole shareholder of Avenue International GenPar, (vi) Avenue-CDP Global Opportunities Fund, L.P. (“CDP Global”), (vii) Avenue Global Opportunities Fund GenPar, LLC (“CDP Global GenPar”), the general partner of CDP Global, (viii) Avenue Special Situations Fund IV, L.P. (“Avenue Fund IV”), (ix) Avenue Capital Partners IV, LLC (“Avenue Capital IV”), the general partner of Avenue Fund IV, (x) GL Partners IV, LLC (“GL IV”), the managing member of Avenue Capital IV, (xi) Avenue Special Situations Fund V, L.P. (“Avenue Fund V”), (xii) Avenue Capital Partners V, LLC (“Avenue Capital V”), the general partner of Avenue Fund V, (xiii) GL Partners V, LLC (“GL V”), the managing member of Avenue Capital V, (xiv) Avenue Capital Management II, L.P. (“Avenue Capital II”), the investment advisor to Avenue Investments, Avenue International Master, CDP Global, Avenue Fund IV and Avenue Fund V (collectively, the “Avenue Funds”), (xv) Avenue Capital Management II GenPar, LLC (“GenPar”), the general partner of Avenue Capital II, and (xvi) Marc Lasry, the managing member of GenPar, GL V, GL IV, CDP Global GenPar and Avenue Partners and a director of Avenue International GenPar.	
    	Prior to the offering, the Avenue Capital Group beneficially owns 27,365,928 shares of common stock, including 555,961 shares of common stock the Avenue Capital Group may receive through the exercise of outstanding warrants.	
    	The Avenue Funds have the sole power to vote and dispose of the shares of common stock and warrants held by them. Avenue International, Avenue International GenPar, Avenue Partners, CDP Global GenPar, Avenue Capital IV, GL IV, Avenue Capital V, GL V, Avenue Capital II, GenPar and Marc Lasry have the shared power to vote and dispose of the shares of common stock and warrants held by the Avenue Funds, all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest.	
(4)	Prior to the offering, Avenue Fund V beneficially owns 11,117,266 shares of common stock, including 272,715 shares of common stock issuable upon the exercise of warrants held by Avenue Fund V. The securities owned by Avenue Fund V may also be deemed to be beneficially owned by Avenue Capital V, its general partner; GL V, the managing member of Avenue Capital V; Avenue Capital II, its investment adviser; GenPar, the general partner of Avenue Capital II; and Mr. Lasry, the managing member of GenPar and GL V; all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding Avenue Fund V, please see footnote (3).	
(5)	Prior to the offering, Avenue Fund IV beneficially owns 8,807,283 shares of common stock, including 158,910 shares of common stock issuable upon the exercise of warrants held by Avenue Fund IV. The securities owned by Avenue Fund IV may also be deemed to be beneficially owned by Avenue Capital IV, its general partner; GL IV, the managing member of Avenue Capital IV; Avenue Capital II, its investment adviser; GenPar, the general partner of Avenue Capital II; and Mr. Lasry, the managing member of GenPar and GL IV; all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding Avenue Fund IV, please see footnote (3).	
(6)	Prior to the offering, Avenue International Master beneficially owns 4,446,037 shares of common stock, including 70,448 shares of common stock issuable upon the exercise of warrants held by Avenue International Master. The securities owned by Avenue International Master may also be deemed to be beneficially owned by Avenue International, its sole limited partner; Avenue International GenPar, its general partner; Avenue Partners, the sole shareholder of Avenue International GenPar; Avenue Capital II, its investment adviser; GenPar, the general partner of Avenue Capital II; and Mr. Lasry, the managing member of GenPar and Avenue Partners and a director of Avenue International GenPar; all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding Avenue International Master, please see footnote (3).	
 
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(7)	Prior to the offering, CDP Global beneficially owns 1,513,085 shares of common stock, including 30,315 shares of common stock issuable upon the exercise of warrants held by CDP Global. The securities owned by CDP Global may also be deemed to be beneficially owned by CDP Global GenPar, its general partner; Avenue Capital II, its investment adviser; GenPar, the general partner of Avenue Capital II; and Mr. Lasry, the managing member of GenPar and CDP Global GenPar; all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding CDP Global, please see footnote (3).	
(8)	Prior to the offering, Avenue Investments beneficially owns 1,482,257 shares of common stock, including 23,573 shares of common stock issuable upon the exercise of warrants held by Avenue Investments. The securities owned by Avenue Investments may also be deemed to be beneficially owned by Avenue Partners, its general partner; Avenue Capital II, its investment adviser; GenPar, the general partner of Avenue Capital II; and Mr. Lasry, the managing member of GenPar and Avenue Partners; all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding Avenue Investments, please see footnote (3).	
(9)	Prior to the offering, Southpaw Asset Management LP (“Southpaw Management”) may be deemed to beneficially own 2,944,405 shares of common stock as it serves as the discretionary investment manager or investment adviser for Southpaw Credit Opportunity Master Fund, L.P. (“Southpaw Master Fund”), Wilshire Institutional Master Fund SPC—Wilshire Southpaw Opportunity Segregated Portfolio (“Wilshire Opportunity Segregated Portfolio”) and GPC 76, LLC (“GPC 76,” and together with Southpaw Master Fund and Wilshire Opportunity Segregated Portfolio, the “Southpaw Client Accounts”). The securities deemed beneficially owned by Southpaw Management may be deemed beneficially owned by Southpaw Holdings LLC (“Southpaw Holdings”), which is the general partner of Southpaw Management, and by each of Kevin Wyman and Howard Golden, who are principals of Southpaw Holdings.	
    	For the avoidance of doubt, none of Southpaw Management, Southpaw Holdings, or Messrs. Wyman and Golden hold common stock for their personal accounts, and each reports beneficial ownership of securities held by the Southpaw Client Accounts due solely to the fact that such persons have the ability to vote and/or dispose of the common stock held by Southpaw Client Accounts.	
(10)	Prior to the offering, Southpaw Master Fund beneficially owns 2,860,659 shares of common stock. The securities owned by Southpaw Master Fund may also be deemed beneficially owned by Southpaw Management, in its capacity as the investment manager of Southpaw Master Fund, and Southpaw GP LLC (“Southpaw GP”), in its capacity as general partner of Southpaw Master Fund. The shares deemed beneficially owned by Southpaw Management may also be deemed beneficially owned by Southpaw Holdings, which is the general partner of Southpaw Management, and by each of Kevin Wyman and Howard Golden, who are principals of Southpaw Holdings and Southpaw GP, all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding Southpaw Management, please see footnote (9).	
(11)	Prior to the offering, Wilshire Opportunity Segregated Portfolio beneficially owns 72,379 shares of common stock. The securities owned by Wilshire Opportunity Segregated Portfolio may also be deemed beneficially owned by Southpaw Management, in its capacity as the investment adviser of Wilshire Opportunity Segregated Portfolio. The shares deemed beneficially owned by Southpaw Management may also be deemed beneficially owned by Southpaw Holdings, which is the general partner of Southpaw Management, and by each of Kevin Wyman and Howard Golden, who are principals of Southpaw Holdings, all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding Southpaw Management, please see footnote (9).	
(12)	Prior to the offering, GPC 76 beneficially owns 11,367 shares of common stock. The securities owned by GPC 76 may also be deemed beneficially owned by Southpaw Management, in its capacity as the investment adviser of GPC 76. The shares deemed beneficially owned by Southpaw Management may also be deemed beneficially owned by Southpaw Holdings, which is the general partner of Southpaw Management, and by each of Kevin Wyman and Howard Golden, who are principals of Southpaw Holdings, all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding Southpaw Management, please see footnote (9).	
(13)	Prior to the offering, Tennenbaum Multi-Strategy Fund SPV (Cayman) Ltd. (“Tennenbaum Cayman SPV”) beneficially owns 2,588,756 shares of common stock. Tennenbaum Capital Partners, LLC, as the investment manager of Tennenbaum Cayman SPV, and Eric Pagel, as the director of Tennenbaum Cayman SPV, may each be deemed to be the beneficial owner of the common stock held by Tennenbaum Cayman SPV. Tennenbaum Capital Partners, LLC and Mr. Pagel disclaim beneficial ownership of this common stock, except to the extent of their pecuniary interest therein.	
(14)	Prior to the offering, O’Connor Capital Structure Opportunity Master Limited beneficially owns 1,591,791 shares of common stock. UBS O’Connor LLC is the investment manager for O’Connor Capital Structure Opportunity Master Limited and, as such, has the ability to direct decisions made by O’Connor Capital Structure Opportunity Master Limited. UBS O’Connor LLC is a wholly owned subsidiary of UBS AG, a publicly held entity traded on the New York Stock Exchange. UBS O’Connor LLC and UBS AG both disclaim any beneficial ownership, except to the extent of their respective pecuniary interest, if any. Both the selling stockholder and UBS O’Connor LLC are associated with the following FINRA members: UBS Financial Services Inc., UBS Financial Services Incorporated of Puerto Rico, UBS Fund Services (USA) LLC, UBS Global Asset Management (US) Inc. and UBS Securities LLC. The selling stockholder, UBS O’Connor LLC and UBS AG are also affiliated with UBS Securities LLC, a registered broker-dealer, and an underwriter in this offering.	
 
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(15)	Prior to the offering, Deutsche Bank Securities Inc. beneficially owns 660,272 shares of common stock, including 551,720 shares of common stock issuable upon the exercise of warrants held by it. Deutsche Bank Securities Inc. is an indirect wholly-owned subsidiary of Deutsche Bank AG, a publicly held entity. Deutsche Bank Securities Inc. is an underwriter in this offering.	
(16)	Prior to the offering, Carlyle Strategic Partners, L.P. beneficially owns 533,668 shares of common stock. Carlyle Strategic Partners, L.P. is controlled by its general partner, CSP General Partner, L.P., a Delaware limited liability company. The sole general partner of CSP General Partner, L.P. is TC Group CSP, L.L.C., a limited liability company that is wholly owned by TC Group Investment Holdings, L.P. The sole general partner of TC Group Investment Holdings, L.P. is TCG Holdings II, L.P. The sole general partner of TCG Holdings II, L.P. is DBD Investors V, L.L.C. The managing member of DBD Investors V, L.L.C. is DBD Investors V Holdings, L.L.C. Accordingly, each of CSP General Partner, L.P., TC Group CSP, L.L.C., TC Group Investment Holdings, L.P., TCG Holdings II, L.P., DBD Investors V, L.L.C. and DBD Investors V Holdings, L.L.C may be deemed to be beneficial owners of such shares of common stock. DBD Investors V Holdings, L.L.C. has investment discretion and dispositive power over such shares of common stock. DBD Investors V Holdings, L.L.C. is controlled by its managing members, William E. Conway, Jr., Daniel A. D’Aniello and David M. Rubenstein, and all action relating to the investment and disposition of such shares of common stock requires their approval, based on a majority vote. William E. Conway, Jr., Daniel A. D’Aniello and David M. Rubenstein each disclaim beneficial ownership of such shares of common stock.	
(17)	Prior to the offering, Caspian Capital Partners, L.P. beneficially owns 83,516 shares of common stock. Mariner Investment Group, LLC (“Mariner”), an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, furnishes investment advice to several pooled investment vehicles exempt from the Investment Company Act of 1940, and serves as investment manager to certain other separate accounts. In its role as investment adviser, Mariner, and William J. Michaelcheck, as chairman of Mariner, possess voting and/or investment power over the securities that are owned by the selling stockholder. Mariner and Mr. Michaelcheck disclaim beneficial ownership of these shares of common stock, except to the extent of their pecuniary interest therein.	
(18)	Prior to the offering, Mariner LDC beneficially owns 83,516 shares of common stock. Mariner Investment Group, LLC (“Mariner”), an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, furnishes investment advice to several pooled investment vehicles exempt from the Investment Company Act of 1940, and serves as investment manager to certain other separate accounts. In its role as investment adviser, Mariner, and William J. Michaelcheck, as chairman of Mariner, possess voting and/or investment power over the securities that are owned by the selling stockholder. Mariner and Mr. Michaelcheck disclaim beneficial ownership of these shares of common stock, except to the extent of their pecuniary interest therein.	
(19)	Prior to the offering, Quattro Fund, Ltd. beneficially owns 93,392 shares of common stock. Brian Swain, as the managing member of Quattro Global Capital, LLC, the investment adviser to the selling stockholder, has voting and investment control over these securities. Quattro Global Capital, LLC and Mr. Swain disclaim any beneficial ownership, except to the extent of their respective pecuniary interest.	
(20)	Prior to the offering, Quattro Distressed Opportunities Fund LP beneficially owns 20,013 shares of common stock. Brian Swain, as the managing member of Quattro Global Capital, LLC, the investment adviser to the selling stockholder, has voting and investment control over these securities. Quattro Global Capital, LLC and Mr. Swain disclaim any beneficial ownership over the securities held by the selling stockholder, except to the extent of their respective pecuniary interest.	
Each of the selling stockholders will acquire the shares of common stock to be sold by such stockholders in this offering pursuant to the conversion of common units of MagnaChip Semiconductor LLC into common shares of MagnaChip Semiconductor Corporation pursuant to the corporate conversion, which will occur prior to the effectiveness of the registration statement of which this prospectus is a part. Such selling stockholders acquired such common units under our plan of reorganization in November 2009. In accordance with our plan of reorganization, in exchange for the claims, (i) holders of our Floating Rate Second Priority Senior Secured Notes due 2011, or the Floating Rate Notes, and 6  7 / 8 % Second Priority Senior Secured Notes due 2011, or the 6  7 / 8 % Notes, received their pro rata share of newly issued common units equal to five percent of the then outstanding common units, which was equal to 29.667627 common units (approximately 3.7 shares of common stock following the corporate conversion) per $1,000 principal amount of Floating Rate Notes and 30.498559 common units (approximately 3.8 shares of common stock following the corporate conversion) per $1,000 principal amount of 6  7 / 8 % Notes, and (ii) the holders of our 8% Senior Subordinated Notes due 2014, or the Subordinated Notes, received their pro rata share of (a) newly issued common units equal to one percent of the then outstanding common units, which was equal to 12 common units (approximately 1.5 shares of common stock following the corporate conversion) per
 
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$1,000 principal amount of Subordinated Notes and (b) warrants to purchase five percent of MagnaChip Semiconductor LLC’s then outstanding equity, which was equal to 60 warrants (approximately 7.5 warrants following the corporate conversion) per $1,000 principal amount of Subordinated Notes.
In addition, under our plan of reorganization, holders of the Floating Rate Notes and the 6 7/8% Notes who were accredited investors received a pro-rata right to participate in an offering of up to $35 million in new common units, which we refer to as the rights offering, which was equal to 84% of the outstanding common units following the completion of the rights offering at a price per common unit of $0.14 or $1.12 per share after reflecting the corporate conversion. Subject to certain conditions, Avenue agreed to purchase any unsubscribed common units. In consideration of this obligation, Avenue received a backstop fee equal to 10% of the then outstanding common units, or 3,750,000 shares of common stock. No additional cash consideration was paid by Avenue for the 3,750,000 shares received as a backstop fee. In addition, Avenue acquired 176,131,368 common units, or 22,016,423 shares of common stock after reflecting the corporate conversion, in the rights offering at a price per common unit of $0.14 or $1.12 per share of common stock. Avenue also received 4,260,449 common units, or 532,557 shares of common stock after reflecting the corporate conversion, in exchange for the release of their claims on the Floating Rate Notes, 3,198,353 common units, or 399,795 shares of common stock after reflecting the corporate conversion, in exchange for the release of their claims on the 6  7 / 8 % Notes and 889,536 common units, or 111,192 shares of common stock after reflecting the corporate conversion, in exchange for the release of their claims on the Subordinated Notes. Tennenbaum Multi-Strategy Fund SPV (Cayman) Ltd., or Tennenbaum, acquired 19,540,080 common units, or 2,442,510 shares of common stock after reflecting the corporate conversion, in the rights offering at a price per common unit of $0.14 or $1.12 per share of common stock and received 445,014 common units, or 55,627 shares of common stock after reflecting the corporate conversion, in exchange for the release of its claims on the Floating Rate Notes and 724,951 common units, or 90,619 shares of common stock after reflecting the corporate conversion, in exchange for the release of its claims on the 6  7 / 8 % Notes. Southpaw Credit Opportunity Master Fund LP acquired 21,613,032 common units, or 2,701,629 shares of common stock after reflecting the corporate conversion, in the rights offering at a price per common unit of $0.14 or $1.12 per share of common stock and received 1,272,237 common units, or 159,030 shares of common stock after reflecting the corporate conversion, in exchange for the release of their claims on the Floating Rate Notes. Wilshire Institutional Master Fund SPC—Wilshire Southpaw Opportunity Segregated Portfolio acquired 546,840 common units, or 68,355 shares of common stock after reflecting the corporate conversion, in the rights offering at a price per common unit of $0.14 or $1.12 per share of common stock and 32,189 common units, or 4,024 shares of common stock after reflecting the corporate conversion, in exchange for the release of their claims on the Floating Rate Notes. GPC 76, LLC received 90,931 common units, or 11,367 shares of common stock after reflecting the corporate conversion, in exchange for the release of their claims on the Floating Rate Notes.
Principal Stockholders
The following table sets forth information regarding the beneficial ownership of our outstanding common stock after giving effect to the corporate conversion by: (1) each person or entity known to us to beneficially own more than 5% of any class of our outstanding securities; (2) each member of our board of directors; (3) each of our named executive officers; and (4) all of the members of our board of directors and executive officers, as a group. As of December 31, 2010, our outstanding securities consisted of 38,401,985 shares of common stock, options to purchase 1,957,760 shares of common stock and warrants to purchase 1,875,017 shares of common stock.
The amounts and percentages of equity interests beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a
 
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person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he or she has no economic interest.
Except as indicated by footnote, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Unless otherwise indicated, the address of each person listed in the table below is c/o MagnaChip Semiconductor Ltd., 1 Hyang jeong-dong, Hungduk-gu, Cheongju-si, 361-725, Korea.

Name and Address of Beneficial Owner	  	Amount and
Nature of
Beneficial
Ownership(1)	 	  	Percent of
Class(1)	 	
Principal Stockholders	  	 	 	 	  	 	 	 	
Funds managed by Avenue Capital Management II, L.P(2)	  	 	27,365,928	  	  	 	70.2	% 	
Funds and accounts managed by Southpaw Asset Management LP(3)	  	 	2,944,405	  	  	 	7.7	% 	
Tennenbaum Multi-Strategy Fund SPV (Cayman) Ltd.(4)	  	 	2,588,756	  	  	 	6.7	% 	
Directors and Executive Officers	  	 	 	 	  	 	 	 	
Sang Park(5)	  	 	375,200	  	  	 	*	  	
Tae Young Hwang(6)	  	 	164,500	  	  	 	*	  	
Brent Rowe(7)	  	 	105,700	  	  	 	*	  	
Margaret Sakai(8)	  	 	56,280	  	  	 	*	  	
John McFarland(9)	  	 	51,520	  	  	 	*	  	
Michael Elkins(10)	  	 	—	  	  	 	—	  	
Randal Klein(10)	  	 	—	  	  	 	—	  	
Steven Tan(10)	  	 	—	  	  	 	—	  	
Nader Tavakoli(11)	  	 	18,750	  	  	 	*	  	
R. Douglas Norby	  	 	—	  	  	 	—	  	
Gidu Shroff	  	 	—	  	  	 	—	  	
Directors and executive officers as a group (13 persons)(12)	  	 	868,410	  	  	 	2.2	% 	
 
 *	Less than one percent.	
(1)	Includes any outstanding common stock held and, to the extent applicable, shares issuable upon the exercise or conversion of any securities that are exercisable or convertible within 60 days of December 31, 2010.	
(2)	The following entities and person are collectively referred to in this table as the “Avenue Capital Group”: (i) Avenue Investments, L.P. (“Avenue Investments”), (ii) Avenue International Master, L.P. (“Avenue International Master”), (iii) Avenue International, Ltd. (“Avenue International”), the sole limited partner of Avenue International Master, (iv) Avenue International Master GenPar, Ltd. (“Avenue International GenPar”), the general partner of Avenue International Master, (v) Avenue Partners, LLC (“Avenue Partners”), the general partner of Avenue Investments and the sole shareholder of Avenue International GenPar, (vi) Avenue-CDP Global Opportunities Fund, L.P. (“CDP Global”), (vii) Avenue Global Opportunities Fund GenPar, LLC (“CDP Global GenPar”), the general partner of CDP Global, (viii) Avenue Special Situations Fund IV, L.P. (“Avenue Fund IV”), (ix) Avenue Capital Partners IV, LLC (“Avenue Capital IV”), the general partner of Avenue Fund IV, (x) GL Partners IV, LLC (“GL IV”), the managing member of Avenue Capital IV, (xi) Avenue Special Situations Fund V, L.P. (“Avenue Fund V”), (xii) Avenue Capital Partners V, LLC (“Avenue Capital V”), the general partner of Avenue Fund V, (xiii) GL Partners V, LLC (“GL V”), the managing member of Avenue Capital V, (xiv) Avenue Capital	
 
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 	Management II, L.P. (“Avenue Capital II”), the investment advisor to Avenue Investments, Avenue International Master, CDP Global, Avenue Fund IV and Avenue Fund V (collectively, the “Avenue Funds”), (xv) Avenue Capital Management II GenPar, LLC (“GenPar”), the general partner of Avenue Capital II, and (xvi) Marc Lasry, the managing member of GenPar, GL V, GL IV, CDP Global GenPar and Avenue Partners and a director of Avenue International GenPar.	
    	The Avenue Capital Group beneficially owns 27,365,928 shares of common stock, including the 555,961 shares of common stock the Avenue Capital Group may receive through the exercise of outstanding warrants.	
    	The Avenue Funds have the sole power to vote and dispose of the common stock and warrants held by them. Avenue International, Avenue International GenPar, Avenue Partners, CDP Global GenPar, Avenue Capital IV, GL IV, Avenue Capital V, GL V, Avenue Capital II, GenPar and Marc Lasry have the shared power to vote and dispose of the common stock and warrants held by the Avenue Funds, all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. The address for all of the Avenue Funds is 399 Park Avenue, 6th Floor, New York, NY 10022.	
    	Avenue Fund V beneficially owns 11,117,266 shares of common stock, or 28.7%, which represents 10,844,551 shares of common stock and 272,715 shares of common stock issuable upon the exercise of warrants held by Avenue Fund V. The securities owned by Avenue Fund V may also be deemed to be beneficially owned by Avenue Capital V, its general partner; GL V, the managing member of Avenue Capital V; Avenue Capital II, its investment adviser; GenPar, the general partner of Avenue Capital II; and Mr. Lasry, the managing member of GenPar and GL V; all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding Avenue Fund V, please see above.	
    	Avenue Fund IV beneficially owns 8,807,283 shares of common stock, or 22.8%, which represents 8,648,373 shares of common stock and 158,910 shares of common stock issuable upon the exercise of warrants held by Avenue Fund IV. The securities owned by Avenue Fund IV may also be deemed to be beneficially owned by Avenue Capital IV, its general partner; GL IV, the managing member of Avenue Capital IV; Avenue Capital II, its investment adviser; GenPar, the general partner of Avenue Capital II; and Mr. Lasry, the managing member of GenPar and GL IV; all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding Avenue Fund IV, please see above.	
    	Avenue International Master beneficially owns 4,446,037 shares of common stock, or 11.6%, which represents 4,375,589 shares of common stock and 70,448 shares of common stock issuable upon the exercise of warrants held by Avenue International Master. The securities owned by Avenue International Master may also be deemed to be beneficially owned by Avenue International, its sole limited partner; Avenue International GenPar, its general partner; Avenue Partners, the sole shareholder of Avenue International GenPar; Avenue Capital II, its investment adviser; GenPar, the general partner of Avenue Capital II; and Mr. Lasry, the managing member of GenPar and Avenue Partners and a director of Avenue International GenPar; all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding Avenue International Master, please see above.	
    	CDP Global beneficially owns 1,513,085 shares of common stock, or 3.9%, which represents 1,482,770 shares of common stock and 30,315 shares of common stock issuable upon the exercise of warrants held by CDP Global. The securities owned by CDP Global may also be deemed to be beneficially owned by CDP Global GenPar, its general partner; Avenue Capital II, its investment adviser; GenPar, the general partner of Avenue Capital II; and Mr. Lasry, the managing member of GenPar and CDP Global GenPar; all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding CDP Global, please see above.	
 
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    	Avenue Investments beneficially owns 1,482,257 shares of common stock, or 3.9%, which represents 1,458,684 shares of common stock and 23,573 shares of common stock issuable upon the exercise of warrants held by Avenue Investments. The securities owned by Avenue Investments may also be deemed to be beneficially owned by Avenue Partners, its general partner; Avenue Capital II, its investment adviser; GenPar, the general partner of Avenue Capital II; and Mr. Lasry, the managing member of GenPar and Avenue Partners; all of whom disclaim any beneficial ownership except to the extent of their respective pecuniary interest. For further information regarding Avenue Investments, please see above.	
(3)	Represents 2,944,405 shares of common stock that may be deemed to be beneficially owned by Southpaw Asset Management LP (“Southpaw Management”) as it serves as the discretionary investment manager for several funds and accounts (the “Managed Accounts”). The common stock deemed beneficially owned by Southpaw Management may be deemed beneficially owned by Southpaw Holdings LLC (“Southpaw Holdings”), which is the general partner of Southpaw Management, and by each of Kevin Wyman and Howard Golden, who are principals of Southpaw Holdings.	
    	Southpaw Credit Opportunity Master Fund, L.P (“Southpaw Master Fund”) beneficially owns 2,860,659 shares of common stock. The securities owned by Southpaw Master Fund may also be deemed beneficially owned by Southpaw Management, in its capacity as the investment manager of Southpaw Master Fund, and Southpaw GP LLC (“Southpaw GP”), in its capacity as general partner of Southpaw Master Fund. The shares deemed beneficially owned by Southpaw Management may also be deemed beneficially owned by Southpaw Holdings, which is the general partner of Southpaw Management, and by each of Kevin Wyman and Howard Golden, who are principals of Southpaw Holdings and Southpaw GP.	
    	The business address of each of Southpaw Master Fund, Southpaw Management, Southpaw GP, Southpaw Holdings, and Messrs. Wyman and Golden is 2 Greenwich Office Park, 1st floor, Greenwich, CT 06831. For the avoidance of doubt, none of Southpaw Management, Southpaw GP, Southpaw Holdings, or Messrs. Wyman and Golden hold common stock for their personal accounts, and each reports beneficial ownership of common stock held by Southpaw Master Fund and the Managed Accounts due solely to the fact that such persons have the ability to vote and/or dispose of the common stock held by Southpaw Master Fund and the Managed Accounts.	
(4)	Represents 2,588,756 shares of common stock held by Tennenbaum Multi-Strategy Fund SPV (Cayman) Ltd. (“Tennenbaum Cayman SPV”). Tennenbaum Capital Partners, LLC as the investment manager of Tennenbaum Cayman SPV, and Eric Pagel, as the director of Tennenbaum Cayman SPV, may each be deemed to be the beneficial owner of the common stock held by such principal stockholder. Tennenbaum Capital Partners, LLC and Mr. Pagel, however, disclaim beneficial ownership of these shares of common stock, except to the extent of their pecuniary interest therein. The address for Tennenbaum Cayman SPV is 2951 28th Street, Suite 1000, Santa Monica, CA 90405.	
(5)	Represents 280,000 shares of common stock, of which 92,400 are subject to a right of repurchase by MagnaChip, and 95,200 shares of common stock that will have vested pursuant to an option grant and are exercisable as of March 1, 2011.	
(6)	Represents 105,000 shares of common stock, of which 34,650 are subject to a right of repurchase by MagnaChip, and 59,500 shares of common stock that will have vested pursuant to an option grant and are exercisable as of March 1, 2011.	
(7)	Represents 70,000 shares of common stock, of which 23,100 are subject to a right of repurchase by MagnaChip, and 35,700 shares of common stock that will have vested pursuant to an option grant and are exercisable as of March 1, 2011.	
(8)	Represents 42,000 shares of common stock, of which 13,860 are subject to a right of repurchase by MagnaChip, and 14,280 shares of common stock that will have vested pursuant to an option grant and are exercisable as of March 1, 2011.	
(9)	Represents 42,000 shares of common stock, of which 13,860 are subject to a right of repurchase by MagnaChip, and 9,520 shares of common stock that will have vested pursuant to an option grant and are exercisable as of March 1, 2011.	
(10)	The address for Messrs. Elkins, Klein and Tan is 399 Park Avenue, 6th Floor, New York, NY 10022.	
(11)	Represents 18,750 shares of common stock.	
(12)	Represents 613,750 shares of common stock, of which 196,350 are subject to a right of repurchase by MagnaChip, and 254,660 shares of common stock that will have vested pursuant to option grants and are exercisable as of March 1, 2011.	
 
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Code of Business Conduct and Ethics
Under our Code of Business Conduct and Ethics, all conflicts of interest and related party transactions involving our directors or executive officers must be reviewed and approved in writing by our full board of directors. In the approval process, the approving authority will review all aspects of the conflict of interest or related party transaction, including but not limited to: (i) compliance with laws, rules and regulations, (ii) the adverse affect on our business and results of operations, (iii) the adverse affect on our relationships with third parties such as customers, vendors and potential investors, (iv) the benefit to the director, officer or employee at issue, and (v) the creation of morale problems among other employees. Our board of directors will only approve those related party transactions that, in light of known circumstances, are in, or are not inconsistent with, our best interests.
Senior Debt
Avenue Investments, L.P. (one of the Funds affiliated with Avenue Capital Management II, L.P., which is, together with other affiliates, our majority stockholder, and an affiliate of our directors Messrs. Elkins, Klein and Tan) was a lender under our senior secured credit facility. On November 6, 2009, in connection with the reorganization proceedings, our senior secured credit agreement was amended and restated to, among other things, reduce the outstanding principal amount from $95 million to $61.8 million, pursuant to which we repaid $33.2 million in principal, $22.6 million of which was paid to Avenue Investments, L.P. As of December 31, 2009, the outstanding indebtedness under our senior secured credit facility was $61.8 million, of which $42.1 million was held by Avenue Investments, L.P. As of December 31, 2009, the interest rate for all borrowings under the senior secured credit facility was 6 month LIBOR plus 12% per annum and we accrued $1.2 million in interest under the senior secured credit facility as of December 31, 2009, of which $0.8 million was accrued for Avenue Investments, L.P. Other Funds affiliated with Avenue Capital Management II, L.P. participated in the loan from Avenue Investments, L.P. under our senior secured credit agreement pursuant to a master participation agreement. Our senior secured credit agreement was repaid in April 2010 with a portion of the proceeds from our $250 million senior notes offering, $42.8 million of which was paid to Avenue Investments, L.P., including $0.9 million of accrued interest. Avenue purchased $35 million in principal amount of our $250 million senior notes. See “Description of Certain Indebtedness” for additional information.
Issuance of Common Stock
Prior to the completion of the corporate conversion, all of our outstanding equity securities were issued in the form of units by MagnaChip Semiconductor LLC. The following paragraphs discuss the number of shares of our common stock that will be issued in conversion of the units upon the completion of the corporate conversion.
In connection with our plan of reorganization, Avenue received an aggregate of 1,043,544 shares of common stock and warrants to purchase up to an aggregate of 555,961 shares of common stock in exchange for the release of claims relating to outstanding indebtedness in an aggregate principal amount of approximately $322.6 million. Avenue also acquired 22,016,423 shares of common stock at $1.12 per share pursuant to a $35 million rights offering that we completed in November 2009 and an additional 3,750,000 shares of common stock for providing a backstop service in agreeing to purchase any unsubscribed units in the offering.
In connection with our plan of reorganization, Tennenbaum Multi-Strategy Fund SPV (Cayman) Ltd., or Tennenbaum, received 146,246 shares of common stock in exchange for the release of claims relating to approximately the principal amount of $38.8 million of outstanding indebtedness. Tennenbaum also acquired 2,442,510 shares of common stock in the rights offering.
 
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In connection with our plan of reorganization, Southpaw Credit Opportunity Master Fund LP, or Southpaw Master Fund, received 159,030 shares of common stock in exchange for the release of their claims relating to approximately the principal amount of $42.9 million of outstanding indebtedness. Southpaw Master Fund also acquired 2,701,629 shares of common stock in the rights offering. Wilshire Institutional Master Fund SPC—Wilshire Southpaw Opportunity Segregated Portfolio, or Wilshire Institutional, received 4,024 shares of common stock in exchange for the release of their claims relating to approximately the principal amount of $1.1 million of outstanding indebtedness. Wilshire Institutional also acquired 68,355 shares of common stock in the rights offering. Lastly, GPC 76, LLC received 11,367 shares of common stock in exchange for the release of their claims relating to approximately the principal amount of $3.1 million of outstanding indebtedness.
Registration Rights Agreement
On November 9, 2009, we entered into a registration rights agreement with the holders of MagnaChip Semiconductor LLC’s common units issued in our reorganization proceedings, including Avenue, where we granted them registration rights with respect to our common stock. See “Description of Capital Stock—Registration Rights.”
Notes Registration Rights Agreement
In connection with the original issuance and sale of the senior notes, we entered into an exchange and registration rights agreement, dated as of April 9, 2010, with the initial purchasers of the senior notes pursuant to which we agreed to file, and thereafter filed, with the SEC a registration statement covering a registered exchange offer by us for the senior notes and a shelf registration statement covering resales of senior notes by certain holders, including Avenue.
Warrant Agreement
On November 9, 2009, we entered into a warrant agreement with American Stock Transfer & Trust Company, LLC whereby we issued warrants to purchase an aggregate of 1,875,017 shares of common stock pursuant to the reorganization proceedings to certain former creditors, which included Avenue.
 
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our certificate of incorporation and our bylaws are summaries and are qualified by reference to the certificate of incorporation and the bylaws that will be in effect upon the closing of this offering. We have filed copies of these documents with the SEC as exhibits to our registration statement of which this prospectus forms a part. The descriptions of the common stock and preferred stock reflect changes to our capital structure that will occur prior to and upon the closing of this offering.
Upon the closing of this offering, our authorized capital stock will consist of 150,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of undesignated preferred stock, par value $0.01 per share, the rights and preferences of which may be established from time to time by our board of directors.
As of December 31, 2010, after giving effect to the corporate conversion, we had issued and outstanding 38,401,985 shares of common stock held by 136 holders of record. We also had outstanding options to purchase 1,957,760 shares of common stock at a weighted average exercise price of $6.33 per share and warrants to purchase 1,875,017 shares of common stock at an exercise price of $15.76 per share.
Prior to the effectiveness of the registration statement of which this prospectus is a part, we will consummate the corporate conversion. As part of the corporate conversion:
 
 	Ÿ	 	all of the outstanding common units of MagnaChip Semiconductor LLC will be automatically converted into shares of our common stock at a ratio of eight-for-one;	
 
 	Ÿ	 	each outstanding option to purchase common units of MagnaChip Semiconductor LLC will be automatically converted into an option to purchase 0.125 shares of our common stock at a weighted average exercise price of $6.33 per share; and	
 
 	Ÿ	 	each outstanding warrant to purchase common units of MagnaChip Semiconductor LLC will be automatically converted into a warrant to purchase 0.125 shares of our common stock at a weighted average exercise price of $15.76 per share.	
The following description summarizes the terms of our capital stock. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, you should refer to our certificate of incorporation and bylaws, as in effect immediately following the closing of this offering, copies of which have been filed as exhibits to the registration statement of which this prospectus is a part.
Common Stock
Assuming the automatic conversion of all of the common units of MagnaChip Semiconductor LLC for our common stock prior to the closing of this offering, there will be 39,351,985 shares of our common stock outstanding upon the closing of this offering. MagnaChip Semiconductor LLC has reserved an aggregate of 3,750,000 shares of common stock for issuance to current and future directors, employees and consultants of MagnaChip Semiconductor LLC and its subsidiaries pursuant to the MagnaChip Semiconductor LLC 2009 Common Unit Plan. Of this amount, at December 31, 2010, 1,957,760 shares of common stock were subject to outstanding options, 890,300 were available for future issuance and no shares of common stock have been purchased in connection with the exercise of previously issued options. Following the offering, 1,680,190 shares of our common stock will be reserved for issuance under our 2011 Equity Incentive Plan and 2011 Employee Stock Purchase Plan, based in part on the number of shares of common stock reserved for issuance under our 2009 Plan as of December 31, 2010. See “Management—Grants of Plan-Based Awards—2011 Equity Incentive Plan.” MagnaChip Semiconductor LLC issued warrants to purchase
 
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an aggregate of 1,875,017 shares of common stock (after giving effect to the corporate conversion) pursuant to the reorganization proceedings, which are subject to a warrant agreement dated November 9, 2009 between us and American Stock Transfer & Trust Company, LLC, our warrant agent. At December 31, 2010, 1,875,017 shares of common stock were subject to outstanding warrants and no shares of common stock had been purchased in connection with the exercise of previously issued warrants.
Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Our stockholders do not have cumulative voting rights in the election of directors. Except as required by law or our certificate of incorporation and bylaws, the vote of a majority of the shares represented in person or by proxy at any meeting at which a quorum is present will be sufficient for the transaction of any business at a meeting. Subject to preferences held by, or that may be granted to, any outstanding shares of preferred stock, holders of our common stock will be entitled to receive ratably those dividends as may be declared by our board of directors out of funds legally available for such distributions, as well as any other distributions made to our stockholders. See “Dividend Policy.” In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in all of our assets remaining after we pay our liabilities and any liquidation preferences granted to the holders of outstanding shares of preferred stock. Holders of our common stock have no preemptive or other subscription or conversion rights. There are no redemption or sinking fund provisions applicable to our common stock. All shares of our common stock that will be outstanding at the time of the completion of the offering will be fully paid and non-assessable.
Preferred Stock
Our certificate of incorporation authorizes the issuance of 5,000,000 shares of blank check preferred stock with such designation, rights and preferences as may be determined from time to time by our board of directors. No shares of preferred stock are being issued or registered in this offering. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of common stock. The preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of us. Although we do not currently intend to issue any shares of preferred stock, there can be no assurance that we will not do so in the future.
Registration Rights
Upon the closing of this offering, holders of 28,949,289 shares of our common stock will be entitled to certain rights with respect to the registration of their shares under the Securities Act.
Demand Registration Rights.    Commencing 90 days following the completion of a firm commitment underwritten public offering of our securities pursuant to an effective registration statement filed by us under the Securities Act resulting in gross proceeds of at least $75.0 million to us, any holder who is a party to the equity registration rights agreement has the right to demand that we file a registration statement covering the resale of its common stock, provided that a minimum of 20% of the common stock covered by the equity registration rights agreement are included in such request, subject to a maximum of four such demands in the aggregate for all holders and to other specified exceptions. After we become eligible for the use of SEC Form S-3, any holder who is a party to the equity registration rights agreement, has the right to demand that we file with the SEC a registration statement under SEC Form S-3 or any similar short-form registration statement covering the shares of common stock held by these stockholders to be offered to the public, subject to specified exceptions. At the request of the holders, a demand registration may be a shelf registration pursuant to Rule 415 of the Securities Act.
 
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The underwriters of any such offerings will have the right to limit the number of shares to be offered except that if a limit is imposed, then only shares held by holders who are parties to the registration rights agreement will be included in such offering and the number of shares to be included in such offering will be allocated pro rata among those same parties. In any event, we will not include any securities of any other person (including us) in any demand registration statement without the prior written consent of the holders of a majority of the shares of common stock covered by such demand registration statement.
In no event will we be required to effect more than one demand registration under the registration rights agreement within any three-month period (or within a given one-month period, in the case of any registration under Form S-3 or any similar short-form registration statement), and we will not be obligated to effect any demand registration unless the aggregate gross proceeds to be received from the sale of common stock equals or exceeds $10.0 million (or $1.0 million, in the case of any registration under Form S-3 or any similar short-form registration statement).
Piggyback Registration Rights.    If we register any equity securities for our own account for public sale, stockholders with registration rights will, with specified exceptions, have the right to include their shares in the registration statement. The underwriters of any underwritten offering will have the right to limit the number of such shares to be included in the registration statement if the inclusion of all common stock of the holders who are a party to the registration rights agreement proposed to be included in such offering would materially and adversely interfere with the successful marketing of our securities. Priority of inclusion in the registration shall be given first to us, second to stockholders with registration rights,  pro rata  on the basis of the relative number of securities requested to be registered by such stockholder, and third to any other participating person on such basis as we determine.
Expenses of Registration.    Other than underwriting fees, discounts, commissions, stock transfer taxes and fees and disbursements of legal counsel to participating holders (excluding the fees of one firm of legal counsel to all of the participating holders participating in an underwritten public offering), we will pay all expenses relating to demand registrations and all expenses relating to piggyback registrations.
Indemnification and Contribution.    The registration rights agreement contains indemnification and contribution arrangements between us and stockholders who are a party to the registration rights agreement with respect to each registration statement.
Anti-takeover Effects of Delaware Law and our Certificate of Incorporation and Bylaws
The provisions of Delaware law, our certificate of incorporation and our bylaws described below may have the effect of delaying, deferring or discouraging another party from acquiring control of us.
Delaware Law.    We will be subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. In general, those provisions prohibit a public Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless:
 
 	Ÿ	 	the transaction is approved by the board of directors before the date the interested stockholder attained that status;	
 
 	Ÿ	 	upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or	
 
 	Ÿ	 	on or after the date the business combination is approved by the board of directors and authorized at a meeting of stockholders, and not by written consent, by at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.	
 
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In general, Section 203 defines a business combination to include the following:
 
 	Ÿ	 	any merger or consolidation involving the corporation and the interested stockholder;	
 
 	Ÿ	 	any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;	
 
 	Ÿ	 	subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;	
 
 	Ÿ	 	any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or	
 
 	Ÿ	 	the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.	
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by any such entity or person.
A Delaware corporation may opt out of this provision by express provision in its original certificate of incorporation or by amendment to its certificate of incorporation or bylaws approved by its stockholders. However, we have not opted out of, and do not currently intend to opt out of, this provision. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us.
Charter and Bylaws.    Our certificate of incorporation and bylaws contain certain provisions that are intended to enhance the likelihood of continuity and stability in the composition of the board of directors and which may have the effect of delaying, deferring or preventing a future takeover or change in control of our company unless such takeover or change in control is approved by the board of directors, including:
 
 	Ÿ	 	Authorized but Unissued Preferred Stock.    Our board of directors is authorized to issue, without stockholder approval, preferred stock with such terms as the board of directors may determine. For more information, see “Description of Capital Stock—Preferred Stock.”	
 
 	Ÿ	 	Calling Special Stockholder Meetings.    Our bylaws provide that special meetings of our stockholders may be called only pursuant to the request of our board of directors, by the chairman of our board of directors, by our chief executive officer or by the holders of at least 25% of the voting power of all then outstanding shares of our common stock. In addition, stockholders may not fill vacancies on the board of directors and may not act by written consent.	
 
 	Ÿ	 	Advanced Notice Procedures.    Stockholders must timely provide advance notice, with specific requirements as to form and content, of nominations of directors or the proposal of business to be voted on at an annual meeting.	
 
 	Ÿ	 	Classified Board of Directors.    Our bylaws provide that our board of directors will be divided into three classes of directors, with the classes to be as nearly equal in number as possible. Prior to consummation of this offering, our board will assign each of the current members to their respective class as the board shall determine in its sole discretion, subject to the foregoing requirement that the classes be nearly equal in size. We anticipate we will have a classified board, with two directors in Class I, two directors in Class II and three directors in Class III. The members of each class will serve for a term expiring at the third succeeding annual meeting of stockholders. As a result, approximately one-third of our board will be elected each year. A	
 
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 	replacement director shall serve in the same class as the former director he or she is replacing. The classification of our board will have the effect of making it more difficult for stockholders to change the composition of our board.	
 
 	Ÿ	 	Other Board of Director Requirements.    Our authorized number of directors may be changed only by resolution of the board of directors and all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum. In addition, directors may only be removed for cause and then only by a vote of holders of a majority of the shares entitled to vote at an election of directors.	
 
 	Ÿ	 	Conflicts of Interest.    Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors or stockholders. Our certificate of incorporation renounces any interest or expectancy that we have in, or right to be offered an opportunity to participate in, specified business opportunities. Our certificate of incorporation provides that none of our non-employee directors, non-employee 5% or greater stockholders or their affiliates will have any duty to refrain from engaging in a corporate opportunity in the same or similar lines of business in which we or our affiliates now engage or propose to engage. In addition, in the event that any such director, stockholder or affiliate acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for us or our affiliates, such person will have no duty to communicate or offer such transaction or business opportunity to us and may take any such opportunity for themselves or offer it to another person or entity. Our certificate of incorporation does not renounce our interest in any business opportunity that is expressly offered to a director solely in his or her capacity as our director.	
 
 	Ÿ	 	Director and Officer Indemnification.    We will indemnify officers and directors against losses that they may incur in investigations and legal proceedings resulting from their services to us, which may include services in connection with takeover defense measures.	
 
 	Ÿ	 	Supermajority Voting Requirements.    The affirmative vote of the holders of at least 66 2/3% in voting power of all shares of our stock entitled to vote generally in the election of directors, voting together as a single class, is required in order for our stockholders to alter, amend or repeal the provisions of our bylaws or amend or repeal of certain provisions of our certificate of incorporation including the following:	
 
 	•	 	classified board (the election and term of our directors);	
 
 	•	 	the resignation and removal of directors;	
 
 	•	 	the provisions regarding competition and corporate opportunities;	
 
 	•	 	the provisions regarding stockholder action by written consent;	
 
 	•	 	the provisions regarding calling special meetings of stockholders;	
 
 	•	 	filling vacancies on our board and newly created directorships;	
 
 	•	 	the advance notice requirements for stockholder proposals and director nominations; and	
 
 	•	 	indemnification provisions.	
In addition, our certificate of incorporation grants our board the authority to amend and repeal our bylaws without a stockholder vote in any manner not inconsistent with the laws of the State of Delaware or our certificate of incorporation.
 
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Limitations on Liability and Indemnification of Officers and Directors
The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties. Our certificate of incorporation includes a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director, except to the extent such exemption from liability is not permitted by the DGCL.
Our certificate of incorporation and bylaws provide that we must indemnify our directors and officers to the fullest extent authorized by the DGCL. We are also expressly obligated to advance certain expenses (including attorneys’ fees and disbursements and court costs) and carry directors’ and officers’ insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers.
The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Listing
Our depositary shares and common stock have been approved for listing on the NYSE under the symbol “MX.”
Transfer Agent and Registrar; Warrant Agent
The transfer agent and registrar for our common stock and the warrant agent for our warrants is American Stock Transfer & Trust Company, LLC and its telephone number is (800) 937-5449.
 
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DESCRIPTION OF DEPOSITARY SHARES
General
All of the shares of common stock sold in this offering will be sold in the form of depositary shares. Each depositary share represents an ownership interest in one share of common stock and will be evidenced by a depositary receipt in the form described below. The shares of common stock represented by depositary shares will be deposited under a deposit agreement among MagnaChip Semiconductor Corporation, American Stock Transfer & Trust Company, LLC, as the depositary, and the holders from time to time of the depositary shares. Each holder of a depositary share will be entitled, through the depositary, to all the rights and preferences of the shares of common stock represented thereby.
To enable our unitholders to obtain the preferred income tax treatment for the corporate conversion, this offering has been structured so that each purchaser will purchase a combination of shares sold by us (primary shares) and shares sold by the selling stockholders (secondary shares) in a specified ratio. Each depositary share sold in this offering represents a fraction of a primary share and a fraction of a secondary share in such specified ratio. The offering of depositary shares will enable us and our unitholders to establish that each purchaser will purchase such fixed ratio of primary to secondary shares.
All of the shares of common stock sold in this offering will be deposited with the depositary prior to the completion of this offering. We then will issue the depositary shares to the underwriters via the depositary pursuant to the deposit agreement. A copy of the form of the deposit agreement has been filed as an exhibit to the registration statement of which this prospectus is a part.
Cancellation of Depositary Shares
On                     , 2011 (45 days after the date of this prospectus), each holder of depositary shares will be credited with a number of shares of common stock equal to the number of depositary shares held by such holder on that date, and the depositary shares will be canceled.
Fees and Expenses
Except as described under “Withdrawal,” we will pay all fees, charges and expenses of the depositary and any agent of the depositary, including any fees, charges and expenses payable in connection with the cancellation of the depositary shares on                     , 2011.
Dividends and Other Distributions
We do not expect to pay any dividends or other distribution prior to the cancellation of the depositary shares on                     , 2011.
Listing
Our depositary shares and common stock have been approved for listing on the New York Stock Exchange under the symbol “MX.” Before the cancellation of the depositary shares on                     , 2011, all of the shares of common stock sold in this offering will be deposited with the depositary and there will not be any separate public trading market for our shares of common stock, except as represented by the depositary shares and only the depositary shares will be listed on the New York Stock Exchange. After the cancellation of the depositary shares on                     , 2011, we expect that our shares of common stock will be listed on the New York Stock Exchange under the symbol “MX.”
 
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Withdrawal
Holders of depositary shares have the right to cancel their depositary shares and withdraw the underlying common shares at any time subject only to:
 
 	Ÿ	 	temporary delays caused by closing of our or the depositary’s transfer books;	
 
 	Ÿ	 	the payment of fees, charges, taxes and other governmental charges; or	
 
 	Ÿ	 	where deemed necessary or advisable by the depositary or us in good faith due to any requirement of any U.S. or foreign laws, government, governmental body or commission, any securities exchange on which the depositary shares are listed or governmental regulations relating to the depositary shares or the withdrawal of the underlying shares of common stock.	
However, until                     , 2011, our common stock will not be listed on any exchange. Therefore, until that date, it may be more difficult to dispose of our shares of common stock than it will be to dispose of our depositary shares.
If you elect to withdraw the shares of common stock underlying your depositary shares from the depositary, you will be required to pay any taxes or charges, such as stamp taxes or stock transfer taxes or fees, in connection with the withdrawal.
Form of Depositary Shares and Depositary Receipts
The depositary shares shall be issued in book-entry form and American Stock Transfer & Trust Company, LLC will serve as depositary. Ownership of the depositary shares shall be recorded in the depositary’s book-entry system. The depositary receipts shall be statements delivered by the depositary evidencing the depositary shares held under the terms of the deposit agreement and shall not be physical certificated depositary receipts. The shares of common stock sold in this offering will be issued in registered form and held by the depositary.
Limitations on Obligations and Liability
The deposit agreement expressly limits our and the depositary’s obligations and liability.
We and the depositary:
 
 	Ÿ	 	have agreed to perform our respective obligations specifically set forth in the deposit agreement without gross negligence or bad faith;	
 
 	Ÿ	 	are not liable if either of us by law or circumstances beyond our control is prevented from, or delayed in, performing any obligation under the deposit agreement, including, without limitation, requirements of any present or future law, regulation, governmental or regulatory authority or stock exchange of any applicable jurisdiction, any present or future provision of our certificate of incorporation and bylaws, on account of possible civil or criminal penalties or restraint, any provisions of or governing the deposited securities, any act of God, war or other circumstances beyond each of our control as set forth in the deposit agreement;	
 
 	Ÿ	 	are not liable if either of us exercises or fails to exercise the discretion permitted under the deposit agreement, the provisions of or governing the deposited shares of common stock or our certificate of incorporation and bylaws;	
 
 	Ÿ	 	are not liable for any action or inaction on the advice or information of legal counsel, accountants, any person presenting common shares for deposit, holders and beneficial owners (or authorized representatives) of depositary shares, or any person believed in good faith to be competent to give such advice or information;	
 
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 	Ÿ	 	are not liable for the inability of any holder to benefit from any distribution, offering, right or other benefit if made in accordance with the provisions of the deposit agreement;	
 
 	Ÿ	 	have no obligation to become involved in a lawsuit or other proceeding related to any deposited shares of common stock or the depositary shares or the deposit agreement on behalf of holders of depositary shares or on behalf of any other party;	
 
 	Ÿ	 	may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party; and	
 
 	Ÿ	 	shall not incur any liability for any indirect, special, punitive or consequential damages for any breach of the terms of the deposit agreement.	
The depositary and its agents will not incur any liability under the deposit agreement for the failure to determine that any action may be lawful or reasonably practicable, allowing any rights to lapse in accordance with the provisions of the deposit agreement, the failure or timeliness of any notice from us, the content of any information submitted to it by us for distribution to holders of depositary shares, any investment risk associated with the acquisition of an interest in our shares of common stock, the validity or worth of the deposited shares of common stock, any tax consequences that may result from ownership of depositary shares or shares of common stock, the creditworthiness of any third party and for any indirect, special, punitive or consequential damage. We also have agreed to indemnify the depositary under certain circumstances. The depositary may own and deal in any class of our securities, including the depositary shares.
Notwithstanding the foregoing, the deposit agreement does not limit our liability under federal securities laws.
 
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DESCRIPTION OF CERTAIN INDEBTEDNESS
On April 9, 2010, MagnaChip Semiconductor S.A. and MagnaChip Semiconductor Finance Company, or the Issuers, two of our wholly-owned subsidiaries, issued $250 million aggregate principal amount of 10.500% Senior Notes due 2018, or the senior notes. The senior notes mature on April 15, 2018, at which time the principal amount outstanding thereunder will be due and payable. The Issuers may issue additional senior notes from time to time under the indenture governing the senior notes, or the Indenture, subject to compliance with the terms of the Indenture.
Ranking
The senior notes are the Issuers’ general unsecured senior obligations, rank equally in right of payment with all of their existing and future unsecured senior indebtedness, are effectively subordinated to all their secured indebtedness, to the extent of the value of the collateral securing such indebtedness, and rank senior in right of payment to all of their subordinated indebtedness.
Interest
Interest on the senior notes accrues at the rate of 10.500% per annum and is payable semi-annually in arrears on April 15 and October 15 to the holders of the senior notes of record on the immediately preceding April 1 and October 1. Interest on the senior notes will be computed on the basis of a 360-day year comprised of twelve 30-day months. Special interest may accrue on the senior notes in certain circumstances if we fail to comply with our registration obligations with respect to the senior notes pursuant to an exchange and registration rights agreement. Any special interest on the senior notes will be payable in cash.
Guarantees
The obligations under the senior notes are fully and unconditionally guaranteed on an unsecured senior basis by us and all of our subsidiaries, other than our insignificant subsidiaries, as defined in the Indenture, our unrestricted subsidiaries, as defined in the Indenture, our subsidiaries organized under the laws of the People’s Republic of China, and MagnaChip Korea. The guarantees of the senior notes rank equally in right of payment with or senior to all indebtedness of us and all such subsidiaries. Such guarantees are effectively subordinated in right of payment to all secured indebtedness of us and all such subsidiaries, to the extent of the value of the collateral securing such indebtedness, and rank senior in right of payment to all of subordinated indebtedness of us and all such subsidiaries.
Optional Redemption
At any time prior to April 15, 2013, the Issuers may, on one or more occasions, redeem up to 35% of the aggregate principal amount of the senior notes with the net cash proceeds of certain qualified equity offerings by us, at a redemption price equal to 110.500% of the principal amount of the senior notes to be redeemed, plus accrued and unpaid interest and special interest, if any, to the redemption date.
Also, at any time prior to April 15, 2014, the Issuers may, on one or more occasions, redeem some or all of the senior notes at a redemption price equal to 100% of the principal amount of the senior notes redeemed, plus accrued and unpaid interest and special interest, if any, to the redemption date and a “make-whole” premium calculated as provided in the Indenture.
 
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In addition, on or after April 15, 2014, the Issuers may, on one or more occasions, redeem some or all of the senior notes at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and special interest, if any, to the redemption date, if redeemed during the twelve-month period beginning on April 15 of each of the years indicated below:

Year	  	Percentage	 	
2014	  	 	105.250	% 	
2015	  	 	102.625	% 	
2016 and thereafter	  	 	100.000	% 	
Change of Control
Upon the occurrence of a change of control, as defined in the Indenture, unless the Issuers have mailed a redemption notice with respect to the senior notes and do not default in the payment of the applicable redemption price or a third party makes a similar offer to purchase all of the senior notes, we must make an offer to purchase all of the senior notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and special interest, if any, to the date of purchase.
Asset Sales
The Indenture provides that we and our restricted subsidiaries (including MagnaChip Korea but excluding unrestricted subsidiaries, as defined in the Indenture) will not consummate an asset sale, as defined in the Indenture, unless certain conditions are met, including that the consideration received is at least equal to the fair market value of the assets sold, and that a specified percentage of such consideration is in the form of cash. If we do not use the sale proceeds in our business as specified in the Indenture, we must apply such proceeds to an offer to repurchase senior notes at a price in cash equal to 100% of the aggregate principal amount thereof plus accrued and unpaid interest and special interest, if any, to the repurchase date.
Additional Amounts; Redemption Upon Changes in Withholding Taxes
Payments on the senior notes are to be made without withholding or deduction for any current or future taxes, unless required by law. If such withholding is required, we will pay such additional amounts as are needed for the net amounts received by the holders of the senior notes to equal the amount that they would have received if the taxes had not been withheld. We may redeem all of the senior notes at a redemption price equal to the aggregate principal amount of the senior notes outstanding plus accrued and unpaid interest, special interest, if any, and the additional amounts due, if any, to the redemption date, if we are required to pay such amounts as a result of certain changes in law.
Covenants
The Indenture contains covenants that limit our ability and the ability of our restricted subsidiaries to:
 
 	Ÿ	 	declare or pay any dividend or make any payment or distribution on account of or purchase or redeem our capital stock or equity interests of our restricted subsidiaries;	
 
 	Ÿ	 	make any principal payment on, or redeem or repurchase, prior to any scheduled repayment, sinking fund payment or maturity, any subordinated indebtedness;	
 
 	Ÿ	 	make certain investments, including capital expenditures;	
 
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 	Ÿ	 	incur additional indebtedness and issue certain types of capital stock;	
 
 	Ÿ	 	create or incur any lien (except for permitted liens) that secures obligations under any indebtedness or related guarantee;	
 
 	Ÿ	 	merge with or into or sell all or substantially all of our assets to other companies;	
 
 	Ÿ	 	enter into certain types of transactions with affiliates;	
 
 	Ÿ	 	guarantee the payment of any indebtedness;	
 
 	Ÿ	 	enter into sale-leaseback transactions;	
 
 	Ÿ	 	enter into agreements that would restrict the ability of the restricted subsidiaries to make distributions with respect to their equity, to make loans to us or other restricted subsidiaries or to transfer assets to us or other restricted subsidiaries; and	
 
 	Ÿ	 	designate unrestricted subsidiaries.	
Certain of these covenant restrictions will be suspended during any time period that the senior notes are rated investment grade. The current rating of our senior notes is B2 by Moody’s and B+ by Standard and Poors, both of which are below investment grade.
Events of Default
The Indenture includes certain events of default, including payment defaults, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy with respect to us, the Issuers and the restricted subsidiaries that are defined in the Indenture as significant subsidiaries, failure to pay certain judgments, and invalidation or unenforceability of the guarantees of the senior notes.
 
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock, and a significant public market for our common stock may not develop or be sustained after this offering. Future sales of significant amounts of our common stock, including shares of our outstanding common stock and shares of our common stock issued upon exercise of outstanding options and warrants, in the public market after this offering could adversely affect the prevailing market price of our common stock and could impair our future ability to raise capital through the sale of securities.
Sale of Restricted Shares and Lock-Up Agreements
Upon the closing of this offering, we will have outstanding 39,351,985 shares of common stock, based upon the common units of MagnaChip Semiconductor LLC outstanding as of December 31, 2010 after giving effect to the corporate conversion pursuant to which each common unit will be automatically converted into shares of our common stock at a ratio of eight-for-one.
Of these shares, the 9,500,000 the shares of common stock sold in this offering, or 10,925,000 shares if the underwriters exercise their option to purchase additional shares in full, will be freely tradable without restriction under the Securities Act, unless purchased by affiliates of our company, as that term is defined in Rule 144 under the Securities Act.
The 29,851,985 remaining shares of common stock are subject to a registration rights agreement or restricted unit agreements that restricts their sale for 180 days after the date of this prospectus unless Barclays Capital Inc. and Deutsche Bank Securities Inc., the representatives of the underwriters, agree to a lesser period. These lock-up agreements do not restrict the ability of the stockholders party to the registration rights agreement to cause a resale registration statement to be filed in accordance with the demand registration rights described above under “Description of Capital Stock—Registration Rights.”
Barclays Capital Inc. and Deutsche Bank Securities Inc., as representatives of the underwriters, may, at any time without notice, release all or any portion of the securities subject to the lock-up agreements. We have been advised by the representatives of the underwriters that, when determining whether or not to release shares from the lock-up agreements, the representatives of the underwriters will consider, among other factors, the stockholder’s reasons for requesting the release, the number of shares for which the release is being requested and market conditions at the time. The representatives of the underwriters have advised us that they have no present intention to release any of the shares subject to the lock-up agreements prior to the expiration of the lock-up period.
Following expiration of the lock-up agreements or upon any earlier release of the shares, all of the shares subject to such agreements will be eligible for resale in compliance with Rule 144 or Rule 701 of the Securities Act.
Rule 144
In general, Rule 144 allows a stockholder (or stockholders where shares of common stock are aggregated) who has beneficially owned shares of our common stock for at least six months to sell an unlimited number of shares of our common stock provided current public information about us is available and, after one year, an unlimited number of shares of our common stock without restriction. Our affiliates who have beneficially owned shares of our common stock for at least six months are entitled to sell within any three-month period commencing 90 days after the date of this prospectus a number of those shares that does not exceed the greater of:
 
 	Ÿ	 	one percent of the number of shares of common stock then outstanding, which will equal approximately 393,520 shares immediately after this offering; or	
 
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 	Ÿ	 	the average weekly trading volume of the common stock on all national securities exchanges and/or reported through the automated quotation system of a registered securities association during the four calendar weeks preceding the sale.	
Sales under Rule 144 by our affiliates are subject to specific manner of sales provisions, notice requirements and the availability of current information about us. We cannot estimate the number of shares of common stock our existing stockholders will sell under Rule 144, as this will depend on the market price for our common stock, the personal circumstances of the stockholders and other factors.
Options
In addition to the 39,351,985 shares of common stock outstanding immediately after this offering, based upon the common units of MagnaChip Semiconductor LLC outstanding as of December 31, 2010 after giving effect to the corporate conversion pursuant to which each common unit will be automatically converted into shares of our common stock at a ratio of eight-for-one, there were outstanding options to purchase 1,957,760 shares of our common stock. As soon as practicable after the closing of this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering shares of our common stock reserved for issuance upon exercise of stock options outstanding as of December 31, 2010 at a weighted average exercise price of $6.33 per share and 1,680,190 shares of our common stock reserved for issuance pursuant to future grants under our 2011 Equity Incentive Plan and 2011 Employee Stock Purchase Plan, based in part on the number of shares of common stock reserved for issuance under our 2009 Plan as of December 31, 2010. See “Management—Grants of Plan-Based Awards—2011 Equity Incentive Plan.” Accordingly, shares of our common stock registered under such registration statement will be available for sale in the open market upon exercise by the holders, subject to vesting restrictions with us, contractual lock-up restrictions, our securities trading policy and/or market stand-off provisions applicable to each other agreement that prohibits the sale or other disposition of the shares of common stock underlying the options for a period of 180 days after the date of this prospectus without the prior written consent from us or Barclays Capital Inc. and Deutsche Bank Securities Inc.
Warrants
In addition to the 39,351,985 shares of common stock outstanding immediately after this offering after giving effect to the corporate conversion, as of December 31, 2010, there were outstanding warrants to purchase 1,875,017 shares of our common stock. The warrants were issued under Section 1145 of the U.S. Bankruptcy Code in connection with our reorganization proceedings and such warrants were deemed to have been issued, and shares of common stock issued upon exercise of such warrants will be deemed to be issued, in a public offering and may be resold as freely tradeable securities under Section 4(1) of the Securities Act, except for such warrants and shares of common stock issued upon exercise of such warrants held by our affiliates or holders deemed to be “underwriters,” as that term is defined in Section 1145(b) of the U.S. Bankruptcy Code, who may be subject to applicable resale limitations under Rule 144. The warrants and shares of common stock issued upon exercise of such warrants are subject to a warrant agreement that restricts their sale for 180 days after the date of this prospectus unless we and the managing underwriters, agree to a lesser period.
Registration Rights
Upon the closing of this offering, certain holders of our shares of common stock will have the right to register their remaining shares of common stock pursuant to a registration rights agreement. In addition, some holders will have certain “piggyback” registration rights, pursuant to that agreement. See “Description of Capital Stock.”
 
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax consequences of the ownership and disposition of shares of our common stock to a U.S. holder or non-U.S. holder (each, as defined below) who purchases our common stock in this offering. For purposes of this discussion, a U.S. holder is any beneficial owner (other than an entity treated as a partnership for U.S. federal income tax purposes) of our common stock that for U.S. federal income tax purposes is:
 
 	Ÿ	 	an individual citizen or resident of the United States;	
 
 	Ÿ	 	a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States or any state thereof or the District of Columbia;	
 
 	Ÿ	 	an estate whose income is subject to U.S. federal income tax regardless of its source; or	
 
 	Ÿ	 	a trust (x) whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (y) which has made a valid election to be treated as a U.S. person.	
A non-U.S. holder is any beneficial owner of our common stock that is not a U.S. holder and is not an entity treated as a partnership for U.S. federal income tax purposes.
If a partnership or other pass-through entity holds our common stock, the tax treatment of a partner or member in the partnership or other entity will generally depend on the status of the partner or member and upon the activities of the partnership or other entity. Accordingly, we urge partnerships or other pass-through entities which hold shares of our common stock and partners or members in these partnerships or other entities to consult their tax advisors.
This discussion assumes that shares of our common stock issued pursuant to the offering will be held as a capital asset (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant in light of a holder’s special tax status or special tax situations. U.S. expatriates, life insurance companies, tax-exempt organizations, dealers in securities or currency, banks or other financial institutions, pension funds and investors that hold our shares of common stock as part of a hedge, straddle or conversion transaction are among those categories of potential investors that are subject to special rules not covered in this discussion. This discussion does not address any non-income tax consequences or any income tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction. Furthermore, the following discussion is based on current provisions of the Internal Revenue Code, Treasury Regulations and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. Additionally, we have not sought any ruling from the Internal Revenue Service or IRS, with respect to statements made and conclusions reached in this discussion, and there can be no assurance that the IRS will agree with these statements and conclusions. We urge each prospective purchaser to consult a tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of acquiring, holding and disposing of shares of our common stock.
The U.S. federal income tax consequences of cancellation of the depositary shares, and issuance of a credit for the number of shares of common stock equal to the number of cancelled depositary shares, under circumstances comparable to ours are not specifically addressed in the Internal Revenue Code, Treasury Regulations or administrative or judicial interpretations thereof. The IRS, however, has ruled for various purposes of the Internal Revenue Code that a holder of an American Depositary Receipt representing shares of a foreign corporation is treated as if such holder held the underlying shares of stock directly, based in part on the fact that such holder had full voting rights with respect to the corporation stock represented by the receipts, was entitled to dividends paid, and was entitled to surrender the receipts and have the stock delivered to the holder. Based on this analogous authority, it is reasonable to conclude that depositary shares sold in this offering should represent
 
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beneficial ownership in the underlying shares of our common stock for U.S. federal income tax purposes because, among other things, the holders of the depositary shares will have the right to receive dividends, if declared and paid, with respect to the underlying shares, the right to vote with respect to the underlying shares, and the right to receive the underlying shares upon demand or upon cancellation of the depositary shares. On the date that the depositary shares are cancelled and each holder is credited with a number of shares of common stock equal to the number of depositary shares held by such holder, the holder should retain ownership in the shares of common stock for U.S. federal income tax purposes without recognition of gain or loss and with such holder’s holding period of the underlying common stock including the period during which the depositary shares are outstanding. Because the Company will not be obtaining a ruling from the IRS regarding the treatment of the depositary share cancellation, there can be no assurance that the IRS will not adopt a contrary position. Although unlikely, if the IRS were to conclude that a holder of our depositary shares did not own the underlying shares, the cancellation of the depositary shares might be a taxable transaction to the holder, causing the holder to recognize gain or loss in an amount equal to the difference between the fair market value of the underlying common stock at the time of cancellation of the depositary shares and the holder’s tax basis in the depositary shares.
All references in this discussion to “our common stock” include references to “the depositary shares representing ownership rights in the underlying common stock”.
U.S. Holders
Distributions
If we make distributions on our common stock, those payments will generally constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. With respect to certain non-corporate U.S. holders, including individual U.S. holders, for taxable years beginning before January 1, 2013, dividends will be taxed at the lower capital gains rate applicable to “qualified dividend income,” provided that certain holding period requirements are met. To the extent those distributions exceed our current and accumulated earnings and profits, the distributions will first constitute a return of capital and will reduce a U.S. holder’s tax basis in our common stock, but not below zero, and then will be treated as gain from the sale of our common stock and may be subject to U.S. federal income tax as described below. Dividends received by a corporation may be eligible for a dividends received deduction, subject to applicable limitations.
Disposition of Shares of Common Stock
A U.S. holder generally will recognize gain or loss upon the taxable sale or other disposition of shares of our common stock in an amount equal to the difference between the amount realized upon such sale or disposition and the U.S. holder’s tax basis in the shares of our common stock. Such gain or loss generally will be capital gain or loss. Capital gain will be long-term capital gain if the U.S. holder’s holding period for such shares is more than one year at the time of disposition. Long-term capital gains are generally subject to a reduced rate of taxation for non-corporate U.S. holders. A deduction with respect to a capital loss may be subject to limitation.
Non-U.S. Holders
Distributions
If we make distributions on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed our current and accumulated earnings and profits, the distributions will first constitute a return of capital and will reduce a holder’s tax basis in our common stock, but not below zero, and then will be treated as gain from the sale of shares and may be subject to U.S. federal income tax as described below.
 
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Any distribution that is a dividend, as defined above, paid to a non-U.S. holder generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable tax treaty. In order to receive a reduced treaty rate, a non-U.S. holder must timely provide us with an IRS Form W-8BEN or other appropriate version of IRS Form W-8 properly certifying qualification for the reduced rate.
Dividends received by a non-U.S. holder that are effectively connected with a U.S. trade or business conducted by the non-U.S. holder (and dividends attributable to a non-U.S. holder’s permanent establishment in the United States if a tax treaty applies) are exempt from this withholding tax. In order to obtain this exemption, a non-U.S. holder must timely provide us with an IRS Form W-8ECI properly certifying this exemption. Dividends that are so effectively connected (and, if required by an applicable tax treaty, attributable to a permanent establishment), although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of specified deductions and credits. In addition, such dividends received by a corporate non-U.S. holder may also be subject to a branch profits tax at a rate of 30% (or such lower rate as may be specified in a tax treaty).
A non-U.S. holder of common stock that is eligible for a reduced rate of withholding tax pursuant to a tax treaty may obtain a refund of any excess amounts withheld if an appropriate claim for refund is filed with the IRS.
Gain on Disposition of Shares of Common Stock
A non-U.S. holder generally will not be subject to United States federal income tax on gain realized upon the sale or other disposition of shares of our common stock unless:
 
 	Ÿ	 	the gain is effectively connected with a U.S. trade or business of the non-U.S. holder (and is attributable to a permanent establishment in the United States if a tax treaty applies);	
 
 	Ÿ	 	the non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the taxable year in which the sale or disposition occurs and certain other conditions are met; or	
 
 	Ÿ	 	our common stock constitutes a U.S. real property interest by reason of our status as a “United States real property holding corporation” for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the date of disposition or the holder’s holding period for shares of our common stock. We believe that we will not be, immediately after our conversion to a corporation, and we believe that we will not become, a “United States real property holding corporation” for U.S. federal income tax purposes. If we become a “United States real property holding corporation,” so long as our common stock is “regularly traded” on an established securities market, only a non-U.S. holder who, actually or constructively, holds or held (at any time during the shorter of the five year period preceding the date of disposition or the holder’s holding period) more than 5% of shares of our common stock will be subject to U.S. federal income tax on the disposition of shares of our common stock.	
If the recipient is a non-U.S. holder described in the first bullet above, the recipient will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and corporate non-U.S. holders described in the first bullet above may be subject to the branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Non-U.S. holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.
If the recipient is an individual non-U.S. holder described in the second bullet above, the recipient will be required to pay a flat 30% tax on the gain derived from the sale, which gain may be offset by U.S. source capital losses provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.
 
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Backup Withholding and Information Reporting
Payments of dividends or of proceeds on the disposition of shares made to a U.S. holder may be subject to information reporting and backup withholding at the then effective rate unless the U.S. holder provides a correct taxpayer identification number (which, in the case of an individual, is his or her social security number) and certifies that such U.S. holder is not subject to backup withholding of U.S. federal income tax by completing Form W-9 or otherwise establishing a basis for exemption from backup withholding. U.S. holders who fail to provide their correct taxpayer identification numbers and the appropriate certifications or fail to establish an exemption as described above will be subject to backup withholding and may be subject to a penalty imposed by the IRS.
Payments of dividends or of proceeds on the disposition of shares made to a non-U.S. holder may be subject to information reporting and backup withholding at the then effective rate unless the non-U.S. holder establishes an exemption, for example, by properly certifying its non-U.S. status on a Form W-8BEN or another appropriate version of Form W-8. Notwithstanding the foregoing, information reporting and backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person.
Even if a non-U.S. holder establishes an exemption from information reporting, we may still be required to report annually to the IRS the amount of dividends paid, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder. Pursuant to tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient’s country of residence.
Backup withholding is not an additional tax. Rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may be obtained, so long as the required information is furnished to the IRS in a timely manner.
New Legislation Relating to Foreign Accounts
Newly enacted legislation may impose withholding taxes on certain types of payments made to “foreign financial institutions” and certain other non-U.S. entities. Under this legislation, the failure to comply with additional certification, information reporting and other specified requirements could result in withholding tax being imposed on payments of dividends and sales proceeds to U.S. holders who own the shares through foreign accounts or foreign intermediaries and certain non-U.S. holders. The legislation imposes a 30% withholding tax on dividends on, or gross proceeds from the sale or other disposition of, our common stock paid to a foreign financial institution or to a foreign non-financial entity, unless (i) the foreign financial institution undertakes certain diligence and reporting obligations or (ii) the foreign non-financial entity either certifies it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner. In addition, if the payee is a foreign financial institution, it must enter into an agreement with the U.S. Treasury requiring, among other things, that it undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report certain information about such accounts and withhold 30% on payments to account holders whose actions prevent it from complying with these reporting and other requirements. The legislation applies to payments made after December 31, 2012. Prospective investors should consult their tax advisors regarding this legislation.
 
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UNDERWRITING
We, the selling stockholders and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Barclays Capital Inc. and Deutsche Bank Securities Inc. are the representatives of the underwriters.

Underwriters	  	Number of
Shares	 	
Barclays Capital Inc.	  	 	 	 	
Deutsche Bank Securities Inc.	  	 	 	 	
Goldman, Sachs & Co.	  	 	 	 	
Citigroup Global Markets Inc.	  	 	 	 	
UBS Securities LLC	  	 	 	 	
Total	  	 	9,500,000	  	
 	  	 	 	 	
The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised. If the underwriters sell more shares than the total number set forth in the table above, the underwriters have an option to buy up to an additional 142,500 shares from us and 1,282,500 shares from the selling stockholders. They may exercise that option in whole or in part and from time to time for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discount to be paid to the underwriters by us and the selling stockholders. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase 1,425,000 additional shares.

Paid by Us	  	No
Exercise	  	Full
Exercise	
Per share	  	$            	  	$            	
Total	  	$	  	$	

Paid by the Selling Stockholders	  	No
Exercise	  	Full
Exercise	
Per share	  	$            	  	$            	
Total	  	$	  	$	
Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $             per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.
We and our executive officers, directors, selling stockholders and certain other stockholders have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of the representatives; provided, that this agreement does not restrict the ability of the stockholders party to the registration rights agreement to cause a resale registration statement to be filed in accordance with the demand registration rights described above under “Description of Capital Stock—Registration Rights.” See “Shares Eligible for Future Sale” for a discussion of certain transfer restrictions.
 
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The 180-day restricted period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the 180-day restricted period we issue an earnings release or announce material news or a material event; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 15-day period following the last day of the 180-day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.
Prior to the offering, there has been no public market for the shares. The initial public offering price has been negotiated among us and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be our historical performance, estimates of our business potential and earnings prospects, an assessment of our management and the consideration of the above factors in relation to market valuation of companies in related businesses.
Our depositary shares and common stock have been approved for listing on the NYSE under the symbol “MX” with the listing being only for the depositary shares upon the completion of this offering and only for the common stock following cancellation of the depositary shares.
In connection with the offering, the underwriters may purchase and sell shares of our common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares from us and the selling stockholders in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the closing of the offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of our stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the NYSE, in the over-the-counter market or otherwise.
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, or a Relevant Member State, each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, or the Relevant Implementation Date, it has not made and will not make an
 
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offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:
(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43  million and (3) an annual net turnover of more than €50 million, as shown in its last annual or consolidated accounts;
(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer; or
(d) in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an “offer of shares to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
Each underwriter has represented and agreed that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, or the FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to the issuer; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.
The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or
 
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distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.
The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan, or the Financial Instruments and Exchange Law, and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.
A prospectus in electronic format will be available on the websites maintained by one or more of the underwriters participating in this offering. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters that make internet distributions on the same basis as other allocations.
The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered.
We estimate that our share of the total expenses of the offering, excluding underwriting discount but including the expenses of the selling stockholders, will be approximately $10.8 million.
We and the selling stockholders have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments that the underwriters may be required to make for any such liabilities.
If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.
Certain of the underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and
 
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expenses. Barclays Capital Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co., Citigroup Global Markets Inc. and UBS Securities LLC are managing underwriters in this offering. An affiliate of Goldman, Sachs & Co. is the counterparty to our currency hedging transactions. An affiliate of UBS Securities LLC holds 4.1% and Deutsche Bank Securities Inc. holds 1.7% of our outstanding common stock as of December 31, 2010 and are participating as selling stockholders in the offering as described under “Principal and Selling Stockholders.” Neither UBS Securities LLC, together with its affiliates and associated persons, or Deutsche Bank Securities Inc., together with its affiliates and associated persons, will receive 5% or more of the net proceeds from this offering, not including underwriting compensation. Goldman, Sachs & Co., Barclays Capital Inc., Deutsche Bank Securities, Inc., Citigroup Global Markets Inc. and UBS Securities LLC acted as initial purchasers in our private placement of $250 million in aggregate principal amount of senior notes, which closed on April 9, 2010 and for which they received discounts and commissions. The principal amount of senior notes purchased by each of the managing underwriters in this offering were as follows: (i) Goldman, Sachs & Co., $125 million; (ii) Barclays Capital Inc., $45.0 million; (iii) Deutsche Bank Securities Inc., $16.0 million; (iv) Citigroup Global Markets Inc., $11.5 million and (v) UBS Securities LLC, $11.5 million. In connection with the sale of the senior notes, we entered into an exchange and registration rights agreement with the managing underwriters and the other initial purchasers thereto pursuant to which we filed a registration statement with the SEC in August 2010 to register notes for which the senior notes sold in the offering were exchanged. As a portion of the proceeds from the sale of the senior notes were used to repay all outstanding borrowings under our new term loan, Goldman Sachs Lending Partners LLC, an affiliate of Goldman, Sachs & Co., and Citicorp North America, Inc., an affiliate of Citigroup Global Markets Inc., as lenders under the new term loan, were repaid $12.5 million and $7.5 million, respectively, with proceeds from the sale of the senior notes.
Prior to the reorganization proceedings, affiliates of Citigroup Global Markets Inc. directly or indirectly held in excess of 10% of our outstanding common units and preferred units, and were considered our affiliates. In the reorganization proceedings, all equity interests in our company, including interests in common units and preferred units, were assigned to Class 8 of our plan of reorganization. Members of Class 8, including the affiliates of Citigroup Global Markets Inc. that directly or indirectly held common or preferred units in our company, received no distributions or recoveries on account of their equity interests and these equity interests were cancelled and extinguished as of the effective date of our plan of reorganization.
In the ordinary course of their various business activities, certain of the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and such investment and securities activities may involve securities and/or instruments of the issuer. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
 
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LEGAL MATTERS
The validity of our depositary shares and the common stock represented by the depositary shares offered hereby will be passed upon for us by Jones Day, Palo Alto, California. Certain matters will be passed upon for the underwriters by Latham & Watkins LLP, New York, New York.
EXPERTS
The financial statements as of December 31, 2010 and 2009 and for the year ended December 31, 2010, the two-month period ended December 31, 2009 (Successor Company), and the ten-month period ended October 25, 2009 and the year ended December 31, 2008 (Predecessor Company) included in this Prospectus have been so included in reliance on the reports of Samil PricewaterhouseCoopers, an independent registered public accounting firm, given on the authority of said firm as experts in accounting and auditing. The address of Samil PricewaterhouseCoopers is LS Yongsan Tower, 191 Hangangro 2ga, Yongsan-gu, Seoul 140-702, Korea. Samil PricewaterhouseCoopers is a member of the Korean Institute of Certified Public Accountants.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act of 1933, covering our depositary shares and our common stock to be issued pursuant to this offering (Registration No. 333-165467). This prospectus, which is a part of the registration statement, does not contain all of the information included in the registration statement. Any statement made in this prospectus concerning the contents of any contract, agreement or other document is not necessarily complete. For further information regarding MagnaChip and the depositary shares to be issued in the offering, please refer to the registration statement, including its exhibits. If we have filed any contract, agreement or other document as an exhibit to the registration statement, you should read the exhibit for a more complete understanding of the documents or matters involved.
You may read and copy any reports or other information filed by us at the SEC’s public reference room at 100 F Street N.E., Washington, DC 20549. Copies of this material can be obtained from the Public Reference Section of the SEC upon payment of fees prescribed by the SEC. You may call the SEC at 800-SEC-0330 for further information on the operation of the public reference room. Our filings will also be available to the public from commercial document retrieval services and at the SEC website at “www.sec.gov.” In addition, you may request a copy of any of these filings, at no cost, by writing or telephoning us at the following address or phone number: c/o MagnaChip Semiconductor, Inc., 20400 Stevens Creek Boulevard, Suite 370, Cupertino, CA 95014, Attention: Senior Vice President, General Counsel and Secretary; the telephone number at that address is 408-625-5999.
 
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm	  	 	F-2	  	
MagnaChip Semiconductor Corporation Consolidated Balance Sheets as of December  31, 2010 and 2009 (Successor Company)	  	 	F-4	  	
MagnaChip Semiconductor Corporation Consolidated Statements of Operations for the Year Ended December 31, 2010 and the Two-Month Period Ended December 31, 2009 (Successor Company), and the Ten-Month Period Ended October 25, 2009 and the Year Ended December 31, 2008 (Predecessor Company)	  	 	F-5	  	
MagnaChip Semiconductor Corporation Consolidated Statements of Changes in Stockholders’/Unitholders’ Equity for the Year Ended December 31, 2010 and the Two-Month Period Ended December 31, 2009 (Successor Company), and the Ten-Month Period Ended October 25, 2009 and the Year Ended December 31, 2008 (Predecessor Company)	  	 	F-6	  	
MagnaChip Semiconductor Corporation Consolidated Statements of Cash Flows for the Year Ended December 31, 2010 and the Two-Month Period Ended December 31, 2009 (Successor Company), and the Ten-Month Period Ended October 25, 2009 and the Year Ended December 31, 2008 (Predecessor Company)	  	 	F-7	  	
MagnaChip Semiconductor Corporation Notes to Consolidated Financial Statements	  	 	F-8	  	
 
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
MagnaChip Semiconductor Corporation
The corporate conversion as described in Note 27(B) has not been consummated at February 18, 2011. When it has been consummated, we will be in a position to furnish the following report:
“In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in stockholders’ equity and of cash flows present fairly, in all material respects, the financial position of MagnaChip Semiconductor Corporation and its subsidiaries (the “Company”) at December 31, 2010 and 2009 (Successor Company), and the results of their operations and their cash flows for the year ended December 31, 2010 and the two-month period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 2 to the consolidated financial statements, the United States Bankruptcy Court for the District of Delaware confirmed the Creditors’ Committee’s reorganization plan (the “Plan”) on September 25, 2009. Confirmation of the Plan resulted in the discharge of all claims against the Company that arose before June 12, 2009 and substantially terminated all rights and interests of equity security holders as provided for in the Plan. The Plan was substantially consummated on November 9, 2009 and the Company emerged from bankruptcy. In connection with its emergence from bankruptcy, the Company adopted fresh-start accounting as of October 25, 2009.”
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
February 1, 2011 (except for the effects of the conversion to a corporation as described in Note 27(B), as to which the date is February 18, 2011)
 
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Unitholders of MagnaChip Semiconductor LLC
In our opinion, the accompanying consolidated statements of operations, of changes in unitholders’ equity and of cash flows present fairly, in all material respects, the results of operations and cash flows of MagnaChip Semiconductor LLC and its subsidiaries (the “Company”) for the ten-month period ended October 25, 2009 and the year ended December 31, 2008 (Predecessor Company), in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 2 to the consolidated financial statements, the Company filed a petition on June 12, 2009 with the United States Bankruptcy Court for the District of Delaware for reorganization under the provisions of Chapter 11 of the Bankruptcy Code. The Company’s Creditors’ Committee’s reorganization plan was substantially consummated on November 9, 2009 and the Company emerged from bankruptcy. In connection with its emergence from bankruptcy, the Company adopted fresh-start accounting.
As discussed in Note 4 to the consolidated financial statements, the Company changed the manner in which it accounts for business combinations in 2009.
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
March 13, 2010 (except for Note 28, as to which the date is August 4, 2010)
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 	  	Successor	 	
 	  	December 31,
2010	 	 	December 31,
2009	 	
 	  	(In thousands of US dollars,
except share/unit data)	 	
Assets	  	 	 	 	 	 	 	 	
Current assets	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	172,172	  	 	$	64,925	  	
Accounts receivable, net	  	 	119,054	  	 	 	74,233	  	
Inventories, net	  	 	68,435	  	 	 	63,407	  	
Other receivables	  	 	2,919	  	 	 	3,433	  	
Prepaid expenses	  	 	8,207	  	 	 	12,625	  	
Other current assets	  	 	18,920	  	 	 	3,433	  	
 	  	 	 	 	 	 	 	 	
Total current assets	  	 	389,707	  	 	 	222,056	  	
 	  	 	 	 	 	 	 	 	
Property, plant and equipment, net	  	 	179,012	  	 	 	156,337	  	
Intangible assets, net	  	 	27,538	  	 	 	50,158	  	
Long-term prepaid expenses	  	 	8,235	  	 	 	10,542	  	
Other non-current assets	  	 	21,252	  	 	 	14,238	  	
 	  	 	 	 	 	 	 	 	
Total assets	  	$	625,744	  	 	$	453,331	  	
 	  	 	 	 	 	 	 	 	
Liabilities and Stockholders’ Equity	  	 	 	 	 	 	 	 	
Current liabilities	  	 	 	 	 	 	 	 	
Accounts payable	  	$	58,264	  	 	$	59,705	  	
Other accounts payable	  	 	14,645	  	 	 	7,190	  	
Accrued expenses	  	 	32,635	  	 	 	22,114	  	
Current portion of long-term debt	  	 	—	  	 	 	618	  	
Current portion of capital lease obligation	  	 	5,557	  	 	 	—	  	
Other current liabilities	  	 	5,048	  	 	 	3,937	  	
 	  	 	 	 	 	 	 	 	
Total current liabilities	  	 	116,149	  	 	 	93,564	  	
 	  	 	 	 	 	 	 	 	
Long-term borrowings	  	 	246,882	  	 	 	61,132	  	
Long-term obligation under capital lease	  	 	3,105	  	 	 	—	  	
Accrued severance benefits, net	  	 	87,778	  	 	 	72,409	  	
Other non-current liabilities	  	 	8,979	  	 	 	10,536	  	
 	  	 	 	 	 	 	 	 	
Total liabilities	  	 	462,893	  	 	 	237,641	  	
 	  	 	 	 	 	 	 	 	
Commitments and contingencies (Note 24)	  	 	 	 	 	 	 	 	
Stockholders’ equity	  	 	 	 	 	 	 	 	
Common stock, $0.01 par value, 150,000,000 shares authorized, 38,401,985 and 38,385,544 shares issued and outstanding at December 31, 2010 and 2009, respectively	  	 	384	  	 	 	384	  	
Additional paid-in capital	  	 	95,585	  	 	 	223,451	  	
Retained earnings (accumulated deficit)	  	 	72,157	  	 	 	(1,963	) 	
Accumulated other comprehensive loss	  	 	(5,275	) 	 	 	(6,182	) 	
 	  	 	 	 	 	 	 	 	
Total stockholders’ equity	  	 	162,851	  	 	 	215,690	  	
 	  	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	  	$	625,744	  	 	$	453,331	  	
 	  	 	 	 	 	 	 	 	
The accompanying notes are an integral part of these consolidated financial statements
 
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Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

 	 	Successor	 	 	 	 	 	Predecessor	 	 	
 	 	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	 	Ten-Month
Period
Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	 	 	 	
 	 	(In thousands of US dollars, except share/unit data)	 	 	 	 	
Net sales	 	$	770,405	  	 	$	111,082	  	 	 	 	 	 	$	448,984	  	 	$	601,664	  	 	 	 	
Cost of sales	 	 	526,847	  	 	 	90,408	  	 	 	 	 	 	 	311,139	  	 	 	445,254	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	243,558	  	 	 	20,674	  	 	 	 	 	 	 	137,845	  	 	 	156,410	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	66,640	  	 	 	14,540	  	 	 	 	 	 	 	56,288	  	 	 	81,314	  	 	 	 	
Research and development expenses	 	 	83,524	  	 	 	14,741	  	 	 	 	 	 	 	56,148	  	 	 	89,455	  	 	 	 	
Restructuring and impairment charges	 	 	2,003	  	 	 	—	  	 	 	 	 	 	 	439	  	 	 	13,370	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss) from continuing operations	 	 	91,391	  	 	 	(8,607	) 	 	 	 	 	 	 	24,970	  	 	 	(27,729	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expenses)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense, net (contractual interest expense of $47,828 for the ten-month period ended October 25, 2009)	 	 	(22,899	) 	 	 	(1,258	) 	 	 	 	 	 	 	(31,165	) 	 	 	(76,119	) 	 	 	 	
Foreign currency gain (loss), net	 	 	14,724	  	 	 	9,338	  	 	 	 	 	 	 	43,437	  	 	 	(210,406	) 	 	 	 	
Reorganization items, net	 	 	—	  	 	 	—	  	 	 	 	 	 	 	804,573	  	 	 	—	  	 	 	 	
Others	 	 	(706	) 	 	 	—	  	 	 	 	 	 	 	—	  	 	 	—	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	(8,881	) 	 	 	8,080	  	 	 	 	 	 	 	816,845	  	 	 	(286,525	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations before income taxes	 	 	82,510	  	 	 	(527	) 	 	 	 	 	 	 	841,815	  	 	 	(314,254	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expenses	 	 	8,390	  	 	 	1,946	  	 	 	 	 	 	 	7,295	  	 	 	11,585	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	 	 	74,120	  	 	 	(2,473	) 	 	 	 	 	 	 	834,520	  	 	 	(325,839	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from discontinued operations, net of taxes	 	 	—	  	 	 	510	  	 	 	 	 	 	 	6,586	  	 	 	(91,455	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	74,120	  	 	$	(1,963	) 	 	 	 	 	 	$	841,106	  	 	$	(417,294	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends accrued on preferred units (contractual dividends of $11,819 for the ten-month period ended October 25, 2009)	 	 	—	  	 	 	—	  	 	 	 	 	 	 	6,317	  	 	 	13,264	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations attributable to common shares/units	 	$	74,120	  	 	$	(2,473	) 	 	 	 	 	 	$	828,203	  	 	$	(339,103	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) attributable to common shares/units	 	$	74,120	  	 	$	(1,963	) 	 	 	 	 	 	$	834,789	  	 	$	(430,558	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) per common share/unit from continuing operations—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	1.96	  	 	$	(0.07	) 	 	 	 	 	 	$	15.65	  	 	$	(6.43	) 	 	 	 	
Diluted	 	$	1.89	  	 	$	(0.07	) 	 	 	 	 	 	$	15.65	  	 	$	(6.43	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) per common share/unit from discontinued operations—Basic and diluted	 	$	—	  	 	$	0.02	  	 	 	 	 	 	$	0.12	  	 	$	(1.73	) 	 	 	 	

Earnings (loss) per common share/unit—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	1.96	  	 	$	(0.05	) 	 	 	 	 	 	$	15.77	  	 	$	(8.16	) 	 	 	 	
Diluted	 	$	1.89	  	 	$	(0.05	) 	 	 	 	 	 	$	15.77	  	 	$	(8.16	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of shares/units—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	37,836,256	  	 	 	37,607,846	  	 	 	 	 	 	 	52,923,483	  	 	 	52,768,614	  	 	 	 	
Diluted	 	 	39,144,287	  	 	 	37,607,846	  	 	 	 	 	 	 	52,923,483	  	 	 	52,768,614	  	 	 	 	
The accompanying notes are an integral part of these consolidated financial statements
 
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Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’/UNITHOLDERS’ EQUITY

 	 	Common Stock/Units	 	 	Additional
Paid-In
Capital	 	 	Retained  earnings
(accumulated
deficit)	 	 	Accumulated
Other
Comprehensive
Income (loss)	 	 	Total	 	 	
 	 	Shares/Units	 	 	Amount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	(In thousands of US dollars, except share/unit data)	 	 	 	 	
Balance at January 1, 2008	 	 	52,844,222	  	 	$	52,844	  	 	$	3,077	  	 	$	(564,449	) 	 	$	31,049	  	 	$	(477,479	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Predecessor Company)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Exercise of unit options	 	 	161,460	  	 	 	161	  	 	 	22	  	 	 	—	  	 	 	—	  	 	 	183	  	 	 	 	
Repurchase of common units	 	 	(82,199	) 	 	 	(82	) 	 	 	(414	) 	 	 	—	  	 	 	—	  	 	 	(496	) 	 	 	 	
Unit-based compensation	 	 	—	  	 	 	—	  	 	 	465	  	 	 	—	  	 	 	—	  	 	 	465	  	 	 	 	
Dividends accrued on preferred units	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(13,264	) 	 	 	—	  	 	 	(13,264	) 	 	 	 	
Comprehensive loss:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(417,294	) 	 	 	—	  	 	 	(417,294	) 	 	 	 	
Fair valuation of derivatives	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(864	) 	 	 	(864	) 	 	 	 	
Foreign currency translation adjustments	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	120,950	  	 	 	120,950	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive loss	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(297,208	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2008	 	 	52,923,483	  	 	$	52,923	  	 	$	3,150	  	 	$	(995,007	) 	 	$	151,135	  	 	$	(787,799	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Predecessor Company)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unit-based compensation	 	 	—	  	 	 	—	  	 	 	233	  	 	 	—	  	 	 	—	  	 	 	233	  	 	 	 	
Cancellation of the Predecessor Company’s unit options	 	 	—	  	 	 	—	  	 	 	166	  	 	 	—	  	 	 	—	  	 	 	166	  	 	 	 	
Dividends accrued on preferred units	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(6,317	) 	 	 	—	  	 	 	(6,317	) 	 	 	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	—	  	 	 	—	  	 	 	—	  	 	 	841,106	  	 	 	—	  	 	 	841,106	  	 	 	 	
Foreign currency translation adjustments	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(30,395	) 	 	 	(30,395	) 	 	 	 	
Unrealized gains on investments	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	340	  	 	 	340	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	811,051	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at October 25, 2009	 	 	52,923,483	  	 	$	52,923	  	 	$	3,549	  	 	$	(160,218	) 	 	$	121,080	  	 	$	17,334	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Predecessor Company)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fresh-start adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cancellation of the Predecessor Company’s common units	 	 	(52,923,483	) 	 	 	(52,923	) 	 	 	(3,549	) 	 	 	—	  	 	 	—	  	 	 	(56,472	) 	 	 	 	
Elimination of the Predecessor Company’s accumulated deficit and accumulated other comprehensive income	 	 	—	  	 	 	—	  	 	 	—	  	 	 	160,218	  	 	 	(121,080	) 	 	 	39,138	  	 	 	 	
Issuance of new equity interests in connection with emergence from Chapter 11	 	 	37,500,044	  	 	 	375	  	 	 	215,486	  	 	 	—	  	 	 	—	  	 	 	215,861	  	 	 	 	
Issuance of new warrants in connection with emergence from Chapter 11	 	 	—	  	 	 	—	  	 	 	2,533	  	 	 	—	  	 	 	—	  	 	 	2,533	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at October 25, 2009	 	 	37,500,044	  	 	$	375	  	 	$	218,019	  	 	$	—	  	 	$	—	  	 	$	218,394	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Successor Company)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	885,500	  	 	 	9	  	 	 	5,432	  	 	 	—	  	 	 	—	  	 	 	5,441	  	 	 	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(1,963	) 	 	 	—	  	 	 	(1,963	) 	 	 	 	
Foreign currency translation adjustments	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(6,298	) 	 	 	(6,298	) 	 	 	 	
Unrealized gains on investments	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	116	  	 	 	116	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive loss	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(8,145	) 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2009	 	 	38,385,544	  	 	$	384	  	 	$	223,451	  	 	$	(1,963	) 	 	$	(6,182	) 	 	$	215,690	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Successor Company)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Forfeiture of restricted units	 	 	(2,309	) 	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	
Stock-based compensation	 	 	18,750	  	 	 	—	  	 	 	2,823	  	 	 	—	  	 	 	—	  	 	 	2,823	  	 	 	 	
Distribution to stockholders	 	 	—	  	 	 	—	  	 	 	(130,689	) 	 	 	—	  	 	 	—	  	 	 	(130,689	) 	 	 	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	—	  	 	 	—	  	 	 	—	  	 	 	74,120	  	 	 	—	  	 	 	74,120	  	 	 	 	
Fair valuation of derivatives	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	3,982	  	 	 	3,982	  	 	 	 	
Reclassification to net income from accumulated other comprehensive loss related to hedge derivatives	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	4,785	  	 	 	4,785	  	 	 	 	
Foreign currency translation adjustments.	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(7,938	) 	 	 	(7,938	) 	 	 	 	
Unrealized gains on investments	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	78	  	 	 	78	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	75,027	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2010	 	 	38,401,985	  	 	$	384	  	 	$	95,585	  	 	$	72,157	  	 	$	(5,275	) 	 	$	162,851	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The accompanying notes are an integral part of these consolidated financial statements
 
F-6

Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

 	  	Successor	 	 	 	 	  	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	  	Ten-Month
Period Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
 	  	(In thousands of US dollars)	 	
Cash flows from operating activities	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Net income (loss)	  	$	74,120	  	 	$	(1,963	) 	 	 	 	 	  	$	841,106	  	 	$	(417,294	) 	
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Depreciation and amortization	  	 	58,395	  	 	 	11,218	  	 	 	 	 	  	 	38,255	  	 	 	71,960	  	
Provision for severance benefits	  	 	19,684	  	 	 	1,851	  	 	 	 	 	  	 	8,835	  	 	 	14,026	  	
Amortization of debt issuance costs and original issue discount	  	 	925	  	 	 	—	  	 	 	 	 	  	 	836	  	 	 	16,290	  	
Loss (gain) on foreign currency translation, net	  	 	(17,084	) 	 	 	(10,077	) 	 	 	 	 	  	 	(44,224	) 	 	 	215,571	  	
Loss (gain) on disposal of property, plant and equipment, net	  	 	39	  	 	 	17	  	 	 	 	 	  	 	95	  	 	 	(3,094	) 	
Loss (gain) on disposal of intangible assets, net	  	 	13	  	 	 	5	  	 	 	 	 	  	 	(9,230	) 	 	 	—	  	
Restructuring and impairment charges	  	 	2,003	  	 	 	—	  	 	 	 	 	  	 	(1,120	) 	 	 	42,539	  	
Stock/Unit-based compensation	  	 	5,239	  	 	 	2,199	  	 	 	 	 	  	 	233	  	 	 	465	  	
Cash used for reorganization items	  	 	1,573	  	 	 	4,263	  	 	 	 	 	  	 	1,076	  	 	 	—	  	
Noncash reorganization items	  	 	—	  	 	 	—	  	 	 	 	 	  	 	(805,649	) 	 	 	—	  	
Other	  	 	4,177	  	 	 	(667	) 	 	 	 	 	  	 	2,722	  	 	 	(400	) 	
Changes in operating assets and liabilities	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Accounts receivable	  	 	(41,370	) 	 	 	16,443	  	 	 	 	 	  	 	(12,930	) 	 	 	31,025	  	
Inventories	  	 	(3,172	) 	 	 	6,739	  	 	 	 	 	  	 	(1,163	) 	 	 	11,174	  	
Other receivables	  	 	297	  	 	 	1,755	  	 	 	 	 	  	 	31	  	 	 	1,016	  	
Deferred tax assets	  	 	1,543	  	 	 	678	  	 	 	 	 	  	 	1,054	  	 	 	1,490	  	
Accounts payable	  	 	(5,049	) 	 	 	(14,144	) 	 	 	 	 	  	 	6,316	  	 	 	(5,063	) 	
Other accounts payable	  	 	8,483	  	 	 	(12,511	) 	 	 	 	 	  	 	(11,452	) 	 	 	(19,887	) 	
Accrued expenses	  	 	3,992	  	 	 	(5,687	) 	 	 	 	 	  	 	28,295	  	 	 	23,953	  	
Long term other payable	  	 	(2,419	) 	 	 	(877	) 	 	 	 	 	  	 	507	  	 	 	121	  	
Other current assets	  	 	2,997	  	 	 	3,192	  	 	 	 	 	  	 	5,896	  	 	 	7,401	  	
Other current liabilities	  	 	962	  	 	 	1,188	  	 	 	 	 	  	 	39	  	 	 	1,295	  	
Payment of severance benefits	  	 	(6,673	) 	 	 	(1,389	) 	 	 	 	 	  	 	(4,320	) 	 	 	(6,505	) 	
Other	  	 	(710	) 	 	 	(125	) 	 	 	 	 	  	 	(516	) 	 	 	(4,471	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities before reorganization items	  	 	107,965	  	 	 	2,108	  	 	 	 	 	  	 	44,692	  	 	 	(18,388	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Cash used for reorganization items	  	 	(1,573	) 	 	 	(4,263	) 	 	 	 	 	  	 	(1,076	) 	 	 	—	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	  	 	106,392	  	 	 	(2,155	) 	 	 	 	 	  	 	43,616	  	 	 	(18,388	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Cash flows from investing activities	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Proceeds from disposal of plant, property and equipment	  	 	10	  	 	 	37	  	 	 	 	 	  	 	329	  	 	 	3,122	  	
Proceeds from disposal of intangible assets	  	 	—	  	 	 	—	  	 	 	 	 	  	 	9,375	  	 	 	—	  	
Purchase of plant, property and equipment	  	 	(43,616	) 	 	 	(1,258	) 	 	 	 	 	  	 	(7,513	) 	 	 	(28,608	) 	
Payment for intellectual property registration	  	 	(553	) 	 	 	(70	) 	 	 	 	 	  	 	(366	) 	 	 	(1,052	) 	
Decrease (increase) in restricted cash	  	 	—	  	 	 	—	  	 	 	 	 	  	 	11,409	  	 	 	(13,517	) 	
Decrease (increase) in short-term financial instruments	  	 	329	  	 	 	(329	) 	 	 	 	 	  	 	—	  	 	 	—	  	
Decrease in guarantee deposit	  	 	1,198	  	 	 	—	  	 	 	 	 	  	 	—	  	 	 	—	  	
Other	  	 	(1,096	) 	 	 	23	  	 	 	 	 	  	 	(96	) 	 	 	484	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Net cash provided by (used in) investing activities	  	 	(43,728	) 	 	 	(1,597	) 	 	 	 	 	  	 	13,138	  	 	 	(39,571	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Cash flows from financing activities	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Proceeds from issuance of senior notes	  	 	246,685	  	 	 	—	  	 	 	 	 	  	 	—	  	 	 	—	  	
Debt issuance costs paid	  	 	(8,313	) 	 	 	—	  	 	 	 	 	  	 	—	  	 	 	—	  	
Proceeds from short-term borrowings	  	 	—	  	 	 	—	  	 	 	 	 	  	 	—	  	 	 	180,000	  	
Issuance of new common units pursuant to the reorganization plan	  	 	—	  	 	 	—	  	 	 	 	 	  	 	35,280	  	 	 	—	  	
Issuance of old common units	  	 	—	  	 	 	—	  	 	 	 	 	  	 	—	  	 	 	183	  	
Repayment of long-term borrowings	  	 	(61,750	) 	 	 	—	  	 	 	 	 	  	 	—	  	 	 	—	  	
Repayment of obligations under capital lease	  	 	(3,476	) 	 	 	—	  	 	 	 	 	  	 	—	  	 	 	—	  	
Repayment of short-term borrowings	  	 	—	  	 	 	—	  	 	 	 	 	  	 	(33,250	) 	 	 	(165,000	) 	
Repurchase of old common units	  	 	—	  	 	 	—	  	 	 	 	 	  	 	—	  	 	 	(496	) 	
Distribution to stockholders	  	 	(130,689	) 	 	 	—	  	 	 	 	 	  	 	—	  	 	 	—	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Net cash provided by financing activities	  	 	42,457	  	 	 	—	  	 	 	 	 	  	 	2,030	  	 	 	14,687	  	
Effect of exchange rates on cash and cash equivalents	  	 	2,126	  	 	 	1,098	  	 	 	 	 	  	 	4,758	  	 	 	(17,036	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	  	 	107,247	  	 	 	(2,654	) 	 	 	 	 	  	 	63,542	  	 	 	(60,308	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Beginning of the period	  	 	64,925	  	 	 	67,579	  	 	 	 	 	  	 	4,037	  	 	 	64,345	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
End of the period	  	$	172,172	  	 	$	64,925	  	 	 	 	 	  	$	67,579	  	 	$	4,037	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Supplemental cash flow information	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Cash paid for interest	  	$	17,070	  	 	$	955	  	 	 	 	 	  	$	7,962	  	 	$	39,276	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Cash paid for income taxes	  	$	773	  	 	$	669	  	 	 	 	 	  	$	8,074	  	 	$	13,207	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Noncash investing and financing activities	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Assets acquired under capital lease obligations	  	$	10,673	  	 	$	—	  	 	 	 	 	  	$	—	  	 	$	—	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
The accompanying notes are an integral part of these consolidated financial statements
 
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Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
1. General
The Company
MagnaChip Semiconductor Corporation, successor to MagnaChip Semiconductor LLC (together with its subsidiaries, the “Company”) is a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. The Company’s business is comprised of three key segments: Display Solutions, Power Solutions and Semiconductor Manufacturing Services. The Company’s Display Solutions products include display drivers for use in a wide range of flat panel displays and mobile multimedia devices. The Company’s Power Solutions products include discrete and integrated circuit solutions for power management in high-volume consumer applications. The Company’s Semiconductor Manufacturing Services segment provides specialty analog and mixed-signal foundry services for fabless semiconductor companies that serve the consumer, computing and wireless end markets.
2. Voluntary Reorganization under Chapter 11
On June 12, 2009, MagnaChip Semiconductor LLC (the “Parent”), MagnaChip Semiconductor B.V., MagnaChip Semiconductor S.A. and certain other subsidiaries of the Parent in the U.S. (the “Debtors”), filed a voluntary petition for relief in the U.S. Bankruptcy Court for the District of Delaware under Chapter 11 of the U.S. Bankruptcy Code. The court approved a plan of reorganization proposed by the Creditors’ Committee on September 25, 2009 (the “Plan of Reorganization”), and the Plan of Reorganization became effective and the Debtors emerged from Chapter 11 reorganization proceedings (the “Reorganization Proceedings”) on November 9, 2009 (the “Reorganization Effective Date”). On the Reorganization Effective Date, the Company implemented fresh-start reporting in accordance with Accounting Standards Codification (“ASC”) 852, “ Reorganizations ” (“ASC 852”).
All conditions required for the adoption of fresh-start reporting were met upon emergence from the Reorganization Proceedings on the Reorganization Effective Date. The Company is permitted to select an accounting convenience date (“the Fresh-Start Adoption Date”) proximate to the emergence date for purposes of fresh-start reporting, provided that an analysis of the activity between the date of emergence and an accounting convenience date does not result in a material difference in the fresh-start reporting results. The Company evaluated transaction activity between October 25, 2009 and the Reorganization Effective Date and concluded that an accounting convenience date of October 25, 2009 which was the Company’s October accounting period end was appropriate. As a result, the fair value of the Predecessor Company’s assets became the new basis for the Successor Company’s consolidated statement of financial position as of the Fresh-Start Adoption Date, and all operations beginning on or after October 26, 2009 are related to the Successor Company.
As a result of the application of fresh-start reporting in accordance with ASC 852, the financial statements prior to and including October 25, 2009 represent the operations of the Predecessor Company and are not comparable with the financial statements for periods on or after October 25, 2009. References to the “Successor Company” refer to the Company on or after October 25, 2009, after giving effect to the application of fresh-start reporting. References to the “Predecessor Company” refer to the Company prior to and including October 25, 2009. See “Note 3 Fresh-Start Reporting” for further details.
 
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Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The Plan of Reorganization provided for the satisfaction of claims against the Debtors through (i) the issuance of a new term loan in the amount of approximately $61.8 million in complete satisfaction of the first lien lender claims arising from the senior secured credit facility, (ii) the conversion to Parent equity of all claims arising from the Second Priority Senior Secured Notes and Senior Subordinated Notes, (iii) an offering of equity to the holders of the Second Priority Senior Secured Notes and (iv) a cash payment to holders of unsecured claims. On the Reorganization Effective Date, among other events, (i) the liens and guarantees securing the Second Priority Senior Secured Notes and Senior Subordinated Notes were released and extinguished, (ii) funds affiliated with Avenue Capital Management II, L.P. became the majority unitholder of Parent and (iii) the new term loan was evidenced by the Amended and Restated Credit Agreement dated as of November 6, 2009, by and among MagnaChip Semiconductor S.A., MagnaChip Semiconductor Finance Company, Parent, the Subsidiary Guarantors, the Lenders party thereto, and Wilmington Trust FSB, as administrative agent for the Lenders and collateral agent for the secured parties.
During the period from the date of its Chapter 11 filing to the Fresh-Start Adoption Date (the “Pre-Emergence Period”), the Company recorded interest expense on pre-petition obligations only to the extent it believed the interest would be paid during the Reorganization Proceedings. Had the Company recorded interest expense based on its pre-petition contractual obligations pursuant to its Second Priority Senior Notes and Senior Subordinated Notes, interest expense would have been $47,828 thousand, a $16,663 thousand increase for the ten-month period ended October 25, 2009.
In addition, the Company’s Series B redeemable convertible preferred units were also subject to compromise and no dividends were accrued during the Pre-Emergence Period. Had the Company recorded dividends based on pre-petition contractual obligations, dividends accrued on preferred units would have been $11,819 thousand, a $5,502 thousand increase for the ten-month period ended October 25, 2009.
3. Fresh-Start Reporting
Upon emergence from the Reorganization Proceedings, the Company adopted fresh-start reporting in accordance with ASC 852. The Company’s emergence from the Reorganization Proceedings resulted in a new reporting entity with no retained earnings or accumulated deficit. Accordingly, the Company’s consolidated financial statements for periods prior to and including October 25, 2009 are not comparable to consolidated financial statements presented on or after October 25, 2009.
Fresh-start reporting reflects the value of the Company as determined in the confirmed Plan of Reorganization. Under fresh-start reporting, the Company’s asset values were remeasured and allocated in conformity with ASC 805, “Business Combinations” (“ASC 805”). Fresh-start reporting required that all liabilities, other than deferred taxes and severance benefits, be stated at fair value. Deferred taxes are determined in conformity with ASC 740, “Income Taxes” (“ASC 740”).
Estimates of fair value represent the Company’s best estimates based on its valuation models, which incorporated industry data and trends and relevant market rates and transactions. The estimates and assumptions are inherently subject to significant uncertainties and contingencies beyond the control of the Company. Accordingly, the Company cannot provide assurance that the estimates, assumptions and values reflected in the valuations will be realized, and actual results could vary materially.
 
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Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
To facilitate the calculation of the enterprise value of the Successor Company, the Company prepared a valuation analysis for the Successor Company’s common units as of the Reorganization Effective Date. The enterprise valuation used a discounted cash flow analysis which measures the projected multi-year free cash flows of the Company to arrive at an enterprise value.
In the course of valuation analysis, financial and other information, including prospective financial information obtained from management and from various public, financial and industry sources was relied upon. The basis of the discounted cash flow analysis used in developing the total enterprise value was based on the Company’s prepared projections, which included a variety of estimates and assumptions. While the Company considers such estimates and assumptions reasonable, they are inherently subject to significant business, economic and competitive uncertainties, many of which are beyond the Company’s control and, therefore, may not be realized. Changes in these estimates and assumptions may have had a significant effect on the determination of the Company’s fair value. Assumptions used in our valuation models that have the most significant effect on our estimated fair value include discount rates and future cash flow projections.
Discount rate—The discount rate is an overall rate based upon the individual rates of return for invested capital components of the Company (such as rate of return on debt capital and rate of return on common equity capital). As the Company is emerging from bankruptcy and, therefore, has some of the characteristics of a distressed company, in determining a discount rate the Company incorporated a risk premium derived from higher risk due to its emergence from bankruptcy which bears uncertainty surrounding its future performance, continued economic viability, and maintenance of its customer relationships, to better reflect the return of an investment with those specific risk characteristics from a market participant’s perspective. The resulting discount rate of 46.7% approximates the venture capital rate of return required by investors in companies with similar risk profiles as the Company.
Cash flow projections—The Company projected its future cash flow based on various assumptions depending on the nature of cash flow components. Some of the major accounts projected were based on the following assumptions.
 
 	Ÿ	 	Revenue—The Company based 2009 and 2010 revenue on the historical ten-month period ended October 25, 2009 and the Company’s business plan. For the subsequent four years, revenue projections were based on market growth trends and plans for market share growth. Overall, the Company projected a compound revenue growth for this purpose of 12% for the period between 2009 and 2014.	
 
 	Ÿ	 	Cost of Sales—The Company estimated three sub-components—variable cost, depreciation and other fixed costs. Variable cost was defined as those cost elements directly in proportion to sales and estimated as a certain percentage of projected sales. Depreciation is estimated considering expected depreciation of existing assets and depreciation of assets from the Company’s capital expenditure forecast. Other fixed costs are assumed to be increased by a fixed percentage which was implied by the CPI (Consumer Price Index) rate increases during the projection period. The Company projected cost of sales for the periods between 2009 and 2014 to vary between 70.1% and 62.6%.	
 
 	Ÿ	 	Working capital changes—Working capital levels were estimated based on the Company’s historical levels and benchmarking.	
 
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Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
 	Ÿ	 	Capital expenditures—Capital expenditures for 2009 and 2010 were determined based on the Company’s capital expenditure forecast. The Company assumed that the capital expenditure level for the subsequent years would be determined at 5% of its future projected revenue.	
The following fresh-start condensed consolidated balance sheet illustrates the financial effects on the Company resulting from the implementation of the Plan of Reorganization and the adoption of fresh-start reporting. This fresh-start condensed consolidated balance sheet reflects the effect of consummating the transactions contemplated in the Plan of Reorganization, including issuance of certain securities, incurrence of new indebtedness, discharge and repayment of old indebtedness and other cash payments.
 
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Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The effects of the Plan of Reorganization and fresh-start reporting on the Company’s condensed consolidated balance sheet are as follows:

 	  	Predecessor	 	 	Effects of
Plan	 	 	Fresh-Start
Valuation	 	 	Successor (*)	 	 	
 	  	October 25,
2009	 	 	 	 	 	 	 	 	October 25,
2009	 	 	 	 	 	
Assets	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current assets	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	14,610	  	 	$	52,969	(a,b,f,j) 	 	$	—	  	 	$	67,579	  	 	 	 	 	
Restricted cash	  	 	52,015	  	 	 	(52,015	)(b) 	 	 	—	  	 	 	—	  	 	 	 	 	
Accounts receivable, net	  	 	89,314	  	 	 	—	  	 	 	—	  	 	 	89,314	  	 	 	 	 	
Inventories, net	  	 	51,389	  	 	 	—	  	 	 	17,903	(n) 	 	 	69,292	  	 	 	 	 	
Other receivables	  	 	5,189	  	 	 	—	  	 	 	—	  	 	 	5,189	  	 	 	 	 	
Other current assets	  	 	17,477	  	 	 	(179	)(c) 	 	 	(1,233	)(o) 	 	 	16,065	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current assets	  	 	229,994	  	 	 	775	  	 	 	16,670	  	 	 	247,439	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Property, plant and equipment, net	  	 	172,358	  	 	 	—	  	 	 	(13,940	)(p) 	 	 	158,418	  	 	 	 	 	
Intangible assets, net	  	 	26,886	  	 	 	—	  	 	 	28,314	(q) 	 	 	55,200	  	 	 	 	 	
Other non-current assets	  	 	23,947	  	 	 	235	(d) 	 	 	355	(r) 	 	 	24,537	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	  	$	453,185	  	 	$	1,010	  	 	$	31,399	  	 	$	485,594	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities and Stockholders’/Unitholders’ Equity	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	  	$	77,395	  	 	$	—	  	 	$	—	  	 	$	77,395	  	 	 	 	 	
Other accounts payable	  	 	13,515	  	 	 	506	(e) 	 	 	—	  	 	 	14,021	  	 	 	 	 	
Accrued expenses	  	 	22,621	  	 	 	6,383	(f) 	 	 	—	  	 	 	29,004	  	 	 	 	 	
Short-term borrowings	  	 	95,000	  	 	 	(95,000	)(a) 	 	 	—	  	 	 	—	  	 	 	 	 	
Current portion of long-term debt-new	  	 	—	  	 	 	463	(a) 	 	 	—	  	 	 	463	  	 	 	 	 	
Other current liabilities	  	 	3,533	  	 	 	—	  	 	 	—	  	 	 	3,533	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current liabilities	  	 	212,064	  	 	 	(87,648	) 	 	 	—	  	 	 	124,416	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt-new	  	 	—	  	 	 	61,287	(a) 	 	 	—	  	 	 	61,287	  	 	 	 	 	
Accrued severance benefits, net	  	 	71,029	  	 	 	—	  	 	 	—	  	 	 	71,029	  	 	 	 	 	
Liabilities subject to compromise	  	 	798,043	  	 	 	(798,043	)(g) 	 	 	—	  	 	 	—	  	 	 	 	 	
Other non-current liabilities	  	 	10,468	  	 	 	—	  	 	 	—	  	 	 	10,468	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities	  	 	1,091,604	  	 	 	(824,404	) 	 	 	—	  	 	 	267,200	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Commitments and contingencies	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Series A redeemable convertible preferred units	  	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	 	 	
Series B redeemable convertible preferred units subject to compromise	  	 	148,986	  	 	 	(148,986	)(h) 	 	 	—	  	 	 	—	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total redeemable convertible preferred units	  	 	148,986	  	 	 	(148,986	) 	 	 	—	  	 	 	—	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stockholders’/Unitholders’ equity	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common units-old	  	 	52,923	  	 	 	(52,923	)(i) 	 	 	—	  	 	 	—	  	 	 	 	 	
Common stock-new	  	 	—	  	 	 	375	(g,j) 	 	 	—	  	 	 	375	  	 	 	 	 	
Additional paid-in capital	  	 	3,383	  	 	 	166	(s) 	 	 	—	  	 	 	—	  	 	 	 	 	
 	  	 	—	  	 	 	(3,549	)(i) 	 	 	—	  	 	 	—	  	 	 	 	 	
 	  	 	—	  	 	 	16,769	(g) 	 	 	—	  	 	 	—	  	 	 	 	 	
 	  	 	—	  	 	 	34,928	(j) 	 	 	—	  	 	 	—	  	 	 	 	 	
 	  	 	—	  	 	 	166,322	(m) 	 	 	—	  	 	 	218,019	  	 	 	 	 	
Retained earnings (accumulated deficit)	  	 	(964,791	) 	 	 	160,218	(k) 	 	 	—	  	 	 	—	  	 	 	 	 	
 	  	 	—	  	 	 	773,174	(l) 	 	 	31,399	(l) 	 	 	—	  	 	 	 	 	
Accumulated other comprehensive income	  	 	121,080	  	 	 	(121,080	)(k) 	 	 	—	  	 	 	—	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders’/unitholders’ equity	  	 	(787,405	) 	 	 	974,400	  	 	 	31,399	  	 	 	218,394	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities, redeemable convertible preferred units and stockholders’/unitholders’ equity	  	$	453,185	  	 	$	1,010	  	 	$	31,399	  	 	$	485,594	  	 	 	 	 	

(a)	To record the issuance of a new term loan in the amount of $61,750 thousand and 35% cash payment of $33,250 thousand in complete satisfaction of the first lien lender claims arising from the senior secured credit facility (short-term borrowings) of $95 million. The new term loan was accounted for as current portion of long-term debt of $463 thousand and long-term debt of $61,287 thousand.	
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
(b)	Cash in Korea Exchange Bank account of $52,015 thousand, restricted under forbearance agreement, was released from restriction according to the debt restructuring by the Plan of Reorganization.	
(c)	To record impairment of remaining capitalized costs of $166 thousand in connection with entering into the senior secured credit facility, impairment of prepaid agency fee of $14 thousand of the senior secured credit facility and capitalization of costs of $1 thousand in connection with the issuance of the new term loan.	
(d)	To record capitalization of costs of $235 thousand in connection with the issuance of the new term loan.	
(e)	To record capitalization of costs incurred in connection with the issuance of the new term loan of $236 thousand and 10% of the general unsecured claims of $270 thousand to be settled in cash.	
(f)	To record professional fees of $7,459 thousand incurred in relation to the Reorganization Proceeding of which $1,076 thousand was paid in cash with the remainder of $6,383 thousand recorded as accrued expenses.	
(g)	To record the discharge of liabilities subject to compromise of $798,043 thousand and the issuance of 2,250 thousand shares of new common stock and new warrants to purchase 1,875 thousand shares of new common stock. The issuances of new common stock and new warrants were recorded as increase in common stock and additional paid-in capital by $23 thousand and $16,769 thousand, respectively. Current portion of long-term debt of $750 million and its accrued interest of $45,341 thousand as of October 25, 2009 were discharged in exchange for new common stock representing 6% of the Successor Company’s outstanding common stock to two classes of creditors of the Company and new warrants representing 5% of the Successor Company’s outstanding common stock to two classes of creditors of the Company. General unsecured claims of $2,702 thousand were also discharged in exchange for a cash payment equal to 10% of the allowed claims of $270 thousand.	
(h)	To record the retirement of Series B redeemable convertible preferred units of $148,986 thousand without consideration in accordance with the Plan of Reorganization.	
(i)	To record the retirement of old equity interests without consideration in accordance with the Plan of Reorganization.	
(j)	To record the issuance of 35,250 thousand shares of new common stock which was recorded as an increase in common stock and additional paid-in capital by $352 thousand and $34,928 thousand, respectively.	
(k)	To record the elimination of the Predecessor Company’s accumulated deficit of $160,218 thousand and accumulated other comprehensive income of $121,080 thousand.	
(l)	To record reorganization items, net of $804,573 thousand.	
(m)	To record $166,322 thousand of additional paid-in capital. Reconciliation of total enterprise value to the reorganization value of the Company, determination of goodwill and additional paid-in capital and allocation of the total enterprise value to common stockholders are as below:	

Total value attributable to debt and equity(1)	  	$	212,564	  	
Plus: cash and cash equivalents	  	 	67,579	  	
Plus: liabilities	  	 	205,451	  	
 	  	 	 	 	
Reorganization value of the Company’s total assets	  	 	485,594	  	
Fair value of the Company’s total assets	  	 	485,594	  	
 	  	 	 	 	
Goodwill	  	$	—	  	
 	  	 	 	 	
Reorganization value of the Company’s total assets	  	$	485,594	  	
Less: liabilities	  	 	(205,450	) 	
Less: new term loan	  	 	(61,750	) 	
Fair value of new warrants issued	  	 	(2,533	) 	
Fair value of new common stock issued	  	 	(49,539	) 	
 	  	 	 	 	
Additional paid-in capital	  	$	166,322	  	
 	  	 	 	 	
Enterprise value allocated to common stockholders	  	$	215,861	  	

 	(1)	The Plan of Reorganization, which was confirmed by the bankruptcy court, includes an estimated total value attributable to debt and equity of $225.0 million. This amount does not include cash balances and non-financial liabilities as of the Reorganization Effective Date.	
(n)	To record the fair value of inventories, net, as estimated by the Predecessor Company, fair value of finished goods was estimated by subtracting from average selling prices the sum of costs of disposal and a reasonable profit allowance for the selling effort. Fair value of work-in-process was estimated by subtracting from average selling prices the sum of costs to complete, costs of disposal and a reasonable profit allowance for the completing and selling effort based on profit for similar finished goods. Fair value of raw materials was estimated by current replacement costs.	
(o)	To record the fair value of advance payments as estimated by the Predecessor Company. For the value of advance payments, the Orderly Liquidation Value (“OLV”) was estimated using the cost and market approaches.	
(p)	To record the fair value of property, plant and equipment, net as estimated by the Predecessor Company. For the value of certain fixed assets, the OLV was estimated using the cost and market approaches. This premise of value was chosen given the fact that the Company was just emerging from bankruptcy proceedings.	
(q)	To record the fair value of intangible assets, net as estimated by the Predecessor Company. Discrete valuations of each of the reporting units’ identified intangible assets related to technology, contracts, trade names, customer-based intangible assets and acquired in-process research and development (“IPR&D”) were performed using the excess earnings method or the royalty savings method.	
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
(r)	To record the Predecessor Company’s other non-current assets at their estimated fair value using observable market data.	
(s)	To record the immediately recognized unit-based compensation of $166 thousand, which is attributable to old unit options which were cancelled without consideration in accordance with the Plan of Reorganization.	
(*)	The following table summarizes the allocation of fair value of the assets and liabilities at emergence as shown in the reorganized consolidated balance sheet as of October 25, 2009:	

Cash and cash equivalents	  	$	67,579	  	
Accounts receivable, net	  	 	89,314	  	
Inventories, net	  	 	69,292	  	
Other receivables	  	 	5,189	  	
Other current assets	  	 	16,065	  	
Property, plant and equipment, net	  	 	158,418	  	
Intangible assets, net	  	 	55,200	  	
Other non-current assets	  	 	24,537	  	
 	  	 	 	 	
Total assets	  	 	485,594	  	
Less: current liabilities (including current portion of long-term debt)	  	 	(124,416	) 	
Less: long-term debt	  	 	(61,287	) 	
Less: non-current liabilities (excluding long-term debt)	  	 	(81,497	) 	
 	  	 	 	 	
Total liabilities assumed	  	 	(267,200	) 	
 	  	 	 	 	
Net assets acquired	  	$	218,394	  	
 	  	 	 	 	
4. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
In preparing the consolidated financial statements for the Predecessor Company and Successor Company, the Company applied ASC 852, which requires that the financial statements for periods subsequent to the Chapter 11 filing distinguish transactions and events that were directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expenses, realized gains and losses and provisions for losses that were realized or incurred in the Reorganization Proceedings were recorded in reorganization items, net on the consolidated statements of operations.
Significant accounting policies followed by the Company in the preparation of the accompanying consolidated financial statements are summarized below.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company including its wholly-owned subsidiaries. All intercompany transactions and balances are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and disclosures. The most significant estimates and assumptions relate to the fair valuation of acquired assets and assumed liabilities, fair valuation of common shares/units, the useful life of property, plant and equipment, allowance for doubtful accounts receivable, contingent
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
liabilities, inventory valuation, fair valuation of derivative financial instruments, restructuring accrual and impairment of long-lived assets. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from the estimates.
Foreign Currency Translation
The Company has assessed in accordance with ASC 830, “Foreign Currency Matters” (“ASC 830”), the functional currency of each of its subsidiaries in Luxembourg, the Netherlands and the United Kingdom and has designated the U.S. dollar to be their respective functional currencies. The Company and its other subsidiaries are utilizing their local currencies as their functional currencies. The financial statements of the subsidiaries in functional currencies other than the U.S. dollar are translated into the U.S. dollar in accordance with ASC 830. All the assets and liabilities are translated to the U.S. dollar at the end-of-period exchange rates. Capital accounts are determined to be of a permanent nature and are therefore translated using historical exchange rates. Revenues and expenses are translated using average exchange rates for the respective periods. Foreign currency translation adjustments arising from differences in exchange rates from period to period are included in the foreign currency translation adjustment account in accumulated comprehensive income (loss) of stockholders’/unitholders’ equity. Gains and losses due to transactions in currencies other than the functional currency are included as a component of other income (expense) in the statement of operations.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with an original maturity date of three months or less.
Accounts Receivable Reserves
An allowance for doubtful accounts is provided based on the aggregate estimated uncollectability of the Company’s accounts receivable. The Company also records an allowance for cash returns, included within accounts receivable, net, based on the historical experience of the amount of goods that will be returned and refunded. In addition, the Company also includes in accounts receivable, an allowance for additional products that may have to be provided, free of charge, to compensate customers for products that do not meet previously agreed yield criteria, the low yield compensation reserve.
Inventories
Inventories are stated at the lower of cost or market, using the average cost method, which approximates the first in, first out method (“FIFO”). If net realizable value is less than cost at the balance sheet date, the carrying amount is reduced to the realizable value, and the difference is recognized as a loss on valuation of inventories within cost of sales. Inventory reserves are established when conditions indicate that the net realizable value is less than costs due to physical deterioration, obsolescence, changes in price levels, or other causes based on individual facts and circumstances. Reserves are also established for excess inventory based on inventory levels in excess of six months of projected demand, as judged by management, for each specific product.
In addition, as prescribed in ASC 330, “Inventory,” the cost of inventories is determined based on the normal capacity of each fabrication facility. In case the capacity utilization is lower than a certain
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
level that management believes to be normal, the fixed overhead costs per production unit which exceeds those under normal capacity are charged to cost of sales rather than capitalized as inventories.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as set forth below.

Buildings	  	30 - 40 years	
Building related structures	  	10 - 20 years	
Machinery and equipment	  	5 - 10 years	
Vehicles and others	  	5 years	
Routine maintenance and repairs are charged to expense as incurred. Expenditures that enhance the value or significantly extend the useful lives of the related assets are capitalized.
Borrowing costs incurred during the construction period of assets are capitalized as part of the related assets.
Impairment of Long-Lived Assets
The Company reviews property, plant and equipment and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with ASC 360, “ Property, Plant and Equipment ” (“ASC 360”). Recoverability is measured by comparing its carrying amount with the future net undiscounted cash flows the assets are expected to generate. If such assets are considered to be impaired, the impairment is measured as the difference between the carrying amount of the assets and the fair value of assets using the present value of the future net cash flows generated by the respective long-lived assets.
Restructuring Charges
The Company recognizes restructuring charges in accordance with ASC 420, “Exit or Disposal Cost Obligations” (“ASC 420”). Certain costs and expenses related to exit or disposal activities are recorded as restructuring charges when liabilities for those costs and expenses are incurred.
Lease Transactions
The Company accounts for lease transactions as either operating leases or capital leases, depending on the terms of the underlying lease agreements. Machinery and equipment acquired under capital lease agreements are recorded at the lower of the present value of future minimum lease payments and estimated fair value of leased property and depreciated using the straight-line method over their estimated useful lives. In addition, the aggregate lease payments are recorded as capital lease obligations, net of unaccrued interest. Interest is amortized over the lease period using the effective interest rate method. Leases that do not qualify as capital leases are classified as operating leases, and the related rental payments are expensed on a straight-line basis over the shorter of the estimated useful lives of the leased property and the lease term.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Software
The Company capitalizes certain external costs that are incurred to purchase and implement internal-use computer software. Direct costs relating to the development of software for internal use are capitalized after technological feasibility has been established, in accordance with ASC 350, “ Intangibles-Goodwill and Other ” (“ASC 350”). Depreciation is recorded on a straight-line basis over the software’s estimated useful life, which is usually five years.
Intangible Assets
Intangible assets other than intellectual property include technology and customer relationships which are amortized on a straight-line basis over periods ranging from one to five years. Intellectual property assets acquired represent rights under patents, trademarks and property use rights and are amortized over their respective periods of benefit, ranging up to ten years, on a straight-line basis.
Goodwill
Goodwill is evaluated for impairment by comparing the fair value and carrying amount of the reporting unit to which the goodwill relates. Specifically, the Company uses the two-step method for evaluating goodwill for impairment as prescribed in ASC 350, “ Intangibles-Goodwill and Other ” (“ASC 350”). In the first step, the fair value of a reporting unit is compared to the carrying amount of such reporting unit. If the carrying amount exceeds the fair value, a potential impairment condition exists. In the second step, impairment is measured as the excess of the carrying amount of reporting unit goodwill over the implied fair value of reporting unit goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and thus the second step of the impairment test is unnecessary.
Fair Value Disclosures of Financial Instruments
The Company has adopted and follows ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”) for measurement and disclosures about fair value of its financial instruments. ASC 820 establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by ASC 820 are:
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2—Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Valuation of instruments includes unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
As defined by ASC 820, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale, which was further clarified as the price that would be received to sell an asset or paid to transfer a liability (“an exit price”) in an orderly transaction between market participants at the measurement date. The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, other receivables, accounts payable and other accounts payable approximate their fair values because of the short maturity of these instruments.
Accrued Severance Benefits
The majority of accrued severance benefits is for employees in the Company’s Korean subsidiary. Pursuant to the Employee Retirement Benefit Security Act of Korea, most employees and executive officers with one or more years of service are entitled to severance benefits upon the termination of their employment based on their length of service and rate of pay. As of December 31, 2010, 98% of all employees of the Company were eligible for severance benefits.
Accrued severance benefits are funded through a group severance insurance plan. The amounts funded under this insurance plan are classified as a reduction of the accrued severance benefits. Subsequent accruals are to be funded at the discretion of the Company.
In accordance with the National Pension Act of the Republic of Korea, a certain portion of accrued severance benefits is deposited with the National Pension Fund and deducted from the accrued severance benefits. The contributed amount is paid to employees from the National Pension Fund upon their retirement.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, the product has been delivered and title and risk of loss have transferred, the price is fixed and determinable, and collection of the resulting receivable is reasonably assured. Utilizing these criteria, product revenue is recognized either upon shipment, upon delivery of the product at the customer’s location or upon customer acceptance, depending on the terms of the arrangements. Certain sale arrangements include customer acceptance provisions that require written notification of acceptance within the pre-determined period from the date of delivery of the product. If the pre-determined period has ended without written notification, customer acceptance is deemed to have occurred pursuant to the underlying sales arrangements. In such cases, the Company recognizes revenue on the earlier of the written notification or the pre-determined period from date of delivery. The Company’s revenue recognition policy is consistent across its product lines, marketing venues, and geographic areas.
In accordance with revenue recognition guidance, any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer is presented in the statements of operations on a net basis (excluded from revenues).
The Company’s customers can return defective products, including products that do not meet the yield criteria. The Company accrues for the estimated costs that may be incurred for the defective products. In addition, the Company offers discounts to customers who make early payments. The Company estimates the amount to be paid to customers based on historical experience and expected rate of discount. The estimated discount amount is recorded as a deduction from net sales.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Other than product warranty obligations, yield provisions and customer acceptance provisions, sales contracts do not include any other post-shipment obligations that could have an impact on revenue recognition. In addition, the Company does not currently provide any credits, rebates or price protection or similar privileges that could have an impact on revenue recognition.
All amounts billed to a customer related to shipping and handling are classified as sales while all costs incurred by the Company for shipping and handling are classified as selling, general and administrative expenses. The amounts charged to selling, general and administrative expenses were $1,594 thousand, $207 thousand, $752 thousand and $1,295 thousand for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008, respectively.
Derivative Financial instruments
The Company applies the provisions of ASC 815, “Derivatives and Hedging” (“ASC 815”). This Statement requires the recognition of all derivative instruments as either assets or liabilities measured at fair value.
Under the provisions of ASC 815, the Company may designate a derivative instrument as hedging the exposure to variability in expected future cash flows that are attributable to a particular risk (a “cash flow hedge”) or hedging the exposure to changes in the fair value of an asset or a liability (a “fair value hedge”). Special accounting for qualifying hedges allows the effective portion of a derivative instrument’s gains and losses to offset related results on the hedged item in the consolidated statements of operations and requires that a company formally document, designate and assess the effectiveness of the transactions that receive hedge accounting treatment. Both at the inception of a hedge and on an ongoing basis, a hedge must be expected to be highly effective in achieving offsetting changes in cash flows or fair value attributable to the underlying risk being hedged. If the Company determines that a derivative instrument is no longer highly effective as a hedge, it discontinues hedge accounting prospectively and future changes in the fair value of the derivative are recognized in current earnings. The Company assesses hedge effectiveness at the end of each quarter.
In accordance with ASC 815, changes in the fair value of derivative instruments that are cash flow hedges are recognized in accumulated other comprehensive income (loss) and reclassified into earnings in the period in which the hedged item affects earnings. Ineffective portions of a derivative instrument’s change in fair value are immediately recognized in earnings. Derivative instruments that do not qualify, or cease to qualify, as hedges must be adjusted to fair value and the adjustments are recorded through net income (loss).
The cash flows from derivative instruments receiving hedge accounting treatment are classified in the same categories as the hedged items in the consolidated statements of cash flows.
Advertising
The Company expenses advertising costs as incurred. Advertising expense was approximately $106 thousand, $25 thousand, $70 thousand and $165 thousand for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008, respectively.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Product Warranties
The Company records, in other current liabilities, warranty liabilities for the estimated costs that may be incurred under its basic limited warranty. This warranty covers defective products, and related liabilities are accrued when product revenues are recognized. Factors that affect the Company’s warranty liability include historical and anticipated rates of warranty claims and repair costs per claim to satisfy the Company’s warranty obligation. As these factors are impacted by actual experience and future expectations, the Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts when necessary.
Research and Development
Research and development costs are expensed as incurred and include wafers, masks, employee expenses, contractor fees, building costs, utilities and administrative expenses. Acquired IPR&D assets are considered indefinite-lived intangible assets and are not subject to amortization. An IPR&D asset must be tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the IPR&D asset with its carrying amount. If the carrying amount of the IPR&D asset exceeds its fair value, an impairment loss must be recognized in an amount equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the IPR&D asset will be its new accounting basis. Subsequent reversal of a previously recognized impairment loss is prohibited. The initial determination and subsequent evaluation for impairment of the IPR&D asset requires management to make significant judgments and estimates. Once the IPR&D projects have been completed or abandoned, the useful life of the IPR&D asset is determined and amortized accordingly.
Licensed Patents and Technologies
The Company has entered into a number of royalty agreements to license patents and technology used in the design of its products. The Company carries two types of royalties: lump-sum and running basis. Lump-sum royalties which require initial payments, usually paid in installments, represent a non-refundable commitment, such that the total present value of these payments is recorded as a liability upon execution of the agreements and the costs are amortized over the contract period using the straight-line method and charged to research and development expenses in the statements of operations.
Running royalty is paid based on the revenue of related products sold by the Company. For example, the Company entered into an agreement with a semiconductor design company, who comprised 77.5%, 88.4%, 94.4% and 92.4% of total running royalty expenses in the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008, respectively. Pursuant to the agreement with the semiconductor design company, royalty rates range from 1.75% to 6.5% of the related product revenue and payment is made monthly, and is charged to selling, general and administrative expenses in the statements of operations as incurred.
Stock/Unit-Based Compensation
The Company follows the provisions of ASC 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock/unit-based compensation cost is measured at the grant date, based on
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
the fair value of the award, and is recognized as expense over the requisite service period. As permitted under ASC 718, the Company elected to recognize compensation expense for all options with graded vesting based on the graded attribution method.
The Company uses the Black-Scholes option-pricing model to measure the grant-date-fair-value of options. The Black-Scholes model requires certain assumptions to determine an option’s fair value, including expected term, risk free interest, expected volatility and fair value of underlying common share/unit. The expected term of each option grant was based on employees’ expected exercises and post-vesting employment termination behavior and the risk free interest rate was based on the U.S. Treasury yield curve for the period corresponding with the expected term at the time of grant. The expected volatility was estimated using historical volatility of share prices of similar public entities. No dividends were assumed for this calculation of option value. The Company estimates the fair value of the underlying common stock/unit because there is no public trading market for its common stock/units.
Earnings per Share/Unit
In accordance with ASC 260, “Earnings Per Share” (“ASC 260”), the Company computes basic earnings from continuing operations per share/unit and basic earnings per share/unit by dividing income from continuing operations available to common stockholders/unitholders and net income available to common stockholders/unitholders, respectively, by the weighted average number of common shares/units outstanding during the period which would include, to the extent their effect is dilutive, redeemable convertible preferred units, options to purchase common stock/units and restricted stock/units. Diluted earnings per share/unit reflect the dilution of potential common stock/units outstanding during the period. In determining the hypothetical shares/units repurchased, the Company uses the average share/unit price for the period.
Income Taxes
Prior to its conversion to a corporation, MagnaChip Semiconductor Corporation elected to be treated as a partnership for U.S. federal income tax purposes and therefore was not subject to income taxes on its income. Taxes on its income were the responsibility of the individual equity owners of MagnaChip Semiconductor Corporation. The Company operates a number of subsidiaries that are subject to local income taxes in those markets.
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in a company’s financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based upon the difference between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities.
The Company follows Financial Accounting Standards Board (“FASB”) interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, ” codified as ASC 740, which prescribes a recognition threshold and measurement attribute for tax positions
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
taken or expected to be taken in a tax return. This interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The evaluation of a tax position in accordance with this interpretation is a two-step process. In the first step, recognition, the Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step addresses measurement of a tax position that meets the more-likely-than-not criteria. The tax position is measured at the largest amount of benefit that has a likelihood of greater than 50 percent of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in (a) an increase in a liability for income taxes payable or a reduction of an income tax refund receivable, (b) a reduction in a deferred tax asset or an increase in a deferred tax liability or (c) both (a) and (b). Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be de-recognized in the first subsequent financial reporting period in which that threshold is no longer met. Use of a valuation allowance as described in ASC 740 is not an appropriate substitute for the de-recognition of a tax position. The requirement to assess the need for a valuation allowance for deferred tax assets based on sufficiency of future taxable income is unchanged by this interpretation.
Segment Information
The Company has determined, based on the nature of its operations and products offered to customers, that its reportable segments are Display Solutions, Semiconductor Manufacturing Services and Power Solutions. The Display Solutions segment’s primary products are flat panel display drivers and the Semiconductor Manufacturing Services segment provides wafer foundry services to clients. The Power Solutions segment’s products are designed for applications such as mobile phones, LCD televisions and desktop computers, and allow electronics manufacturers to achieve specific design goals of high efficiency and low standby power consumption. Net sales and gross profit for the “All other” category primarily relate to certain business activities that do not constitute operating or reportable segments.
The Company’s chief operating decision maker (“CODM”) as defined by ASC 280, “Segment Reporting ” (“ASC 280”), allocates resources to and assesses the performance of each segment using information about its revenue and gross profit. The Company does not identify or allocate assets by segments, nor does the CODM evaluate operating segments using discrete asset information. In addition, the Company does not allocate operating expenses, interest income or expense, other income or expense, or income tax expenses to the segments. Management does not evaluate segments based on these criteria.
On October 6, 2008, the Company announced the closure of its Imaging Solutions reporting unit. As of December 31, 2008, the Imaging Solutions business segment qualified as a discontinued operation component of the Company under ASC 360, “ Property, Plant and Equipment ” (“ASC 360”). Accordingly, the results of operations of the Imaging Solutions business and reportable segment have been classified as discontinued operations. All prior period information has been reclassified to reflect this presentation on the statements of operations. Unless noted otherwise, discussions in these notes pertain to the Company’s continuing operations.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Concentration of Credit Risk
The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral for customers on accounts receivable. The Company maintains reserves for potential credit losses, but historically has not experienced significant losses related to individual customers or groups of customers in any particular industry or geographic area. The Company derives a substantial portion of its revenues from export sales through its overseas subsidiaries in Asia, North America and Europe.
Recent Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2010-06 (ASU 2010-06), which amends the disclosure requirements of ASC 820,  “Fair Value Measurements and Disclosures,” (“ASC 820”) as of January 1, 2010. ASU 2010-06 requires new disclosures for any transfers of fair value into and out of Level 1 and 2 fair value measurements and separate presentation of purchases, sales, issuances and settlements within the reconciliation of Level 3 unobservable inputs. The Company previously adopted ASC 820 on January 1, 2008 and January 1, 2009 for financial assets and liabilities and for nonfinancial assets and liabilities, respectively. ASU 2010-06 is effective for annual and interim periods beginning after December 15, 2009, except for the Level 3 reconciliation which is effective for annual and interim periods beginning after December 15, 2010. The adoption of ASU 2010-06 as of January 1, 2010 did not have a material effect on the Company’s financial condition or results of operations. The Company does not expect the adoption of ASU 2010-06 in relation to the Level 3 reconciliation to have a material impact on the Company’s financial condition or results of operations.
In June 2009, the FASB issued ASC 810, “Consolidation,” (“ASC 810”), which (1) replaces the quantitative-based risks and rewards calculation for determining whether an enterprise is the primary beneficiary in a variable interest entity with an approach that is primarily qualitative, (2) requires ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity and (3) requires additional disclosures about an enterprise’s involvement in variable interest entities. The Company was required to adopt ASC 810 as of the beginning of 2010. The adoption of ASC 810 did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
5. Reorganization Related Items
In accordance with ASC 852, the financial statements for the Predecessor Company periods distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the Company. In connection with the bankruptcy proceedings, implementation of the Plan of Reorganization and adoption of fresh-start reporting, the Company recorded the following reorganization income (expense) items:

 	  	Predecessor	 	
 	  	Ten-Month Period
Ended October  25,
2009	 	
Professional fees	  	$	(7,459	) 	
Revaluation of assets	  	 	31,399	  	
Effects of the plan of reorganization	  	 	780,981	  	
Write-off of debt issuance costs	  	 	(166	) 	
Others	  	 	(182	) 	
 	  	 	 	 	
Total	  	$	804,573	  	
 	  	 	 	 	
Included in reorganization items, net for the ten-month period ended October 25, 2009 was the Predecessor Company’s gain recognized from the effects of the Plan of Reorganization. The gain results from the difference between the Predecessor Company’s carrying amount of remaining pre-petition liabilities subject to compromise and the amounts to be distributed pursuant to the Plan of Reorganization. The gain from the effects of the Plan of Reorganization is comprised of the following:

 	  	Predecessor	 	
 	  	Ten-Month Period
Ended October  25,
2009	 	
Discharge of liabilities subject to compromise	  	$	798,043	  	
Issuance of new common stock	  	 	(14,259	) 	
Issuance of new warrants	  	 	(2,533	) 	
Accrual of amounts to be settled in cash	  	 	(270	) 	
 	  	 	 	 	
Gain from the effects of the Plan of Reorganization	  	$	780,981	  	
 	  	 	 	 	
Liabilities subject to compromise represent the liabilities of the Company incurred prior to the petition date, except those that will not be impaired under the Plan of Reorganization. Liabilities subject to compromise consisted of the following at October 25, 2009.

 	  	Predecessor	 	
 	  	October 25,
2009	 	
General unsecured claims	  	$	2,702	  	
Current portion of long-term debt-old	  	 	750,000	  	
Accrued interest on current portion of long-term debt	  	 	45,341	  	
 	  	 	 	 	
Total	  	$	798,043	  	

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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
6. Fair Value Measurements
ASC 820 defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value measurements. The Company adopted ASC 820 on January 1, 2008 for financial assets and liabilities and non-financial assets and liabilities. ASC 820 requires, among other things, the Company’s valuation techniques used to measure fair value to maximize the use of observable inputs and minimize the use of unobservable inputs. This guidance was applied prospectively to the valuation of assets and liabilities on and after the effective dates of this guidance.
Successor Company
The following table represents the Company’s assets measured at fair value on a recurring basis as of December 31, 2010 and the basis for that measurement:

 	  	Carrying Value
December 31, 2010	 	  	Fair Value
Measurement
December 31, 2010	 	  	Quoted Prices in
Active Markets
for Identical
Asset (Level 1)	 	  	Significant
Other
Observable
Inputs
(Level 2)	 	  	Significant
Unobservable
Inputs
(Level 3)	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Current derivative assets (other current assets)	  	$	8,322	  	  	$	8,322	  	  	$	—	  	  	$	8,322	  	  	$	—	  	
Available-for-sale securities (other non-current assets)	  	 	673	  	  	 	673	  	  	 	673	  	  	 	—	  	  	 	—	  	

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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The following table represents the Company’s assets measured at fair value on a recurring basis as of December 31, 2009 and the basis for that measurement:

 	  	Carrying Value
December 31,  2009	 	  	Fair Value
Measurement
December 31, 2009	 	  	Quoted Prices in
Active Markets
for Identical
Asset (Level 1)	 	  	Significant
Other
Observable
Inputs
(Level 2)	 	  	Significant
Unobservable
Inputs
(Level 3)	 	
Assets:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Available-for-sale securities (other non-current assets)	  	$	739	  	  	$	739	  	  	$	739	  	  	$	—	  	  	$	—	  	
At December 31, 2010, there were $250 million senior notes outstanding. The carrying amount of the $250 million senior notes was $242,882 thousand at December 31, 2010. The fair value of the $250 million senior notes at December 31, 2010 was estimated to be $267,813 thousand, based on quoted market rates.
Predecessor Company
There are three general valuation techniques that may be used to measure fair value, as described below:
(A) Market approach—Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;
(B) Cost approach—Based on the amount that currently would be required to reproduce or replace the service capacity of an asset (reproduction cost or replacement cost); and
(C) Income approach—Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about the future amounts (includes present value techniques, option-pricing models, the excess earnings method, and the royalty savings method).
I. Net present value method is an income approach where a stream of expected cash flows is discounted at an appropriate discount rate.
II. The excess earnings method is a variation of the income approach where the value of a specific asset is isolated from its contributory assets.
III. The royalty savings method is a variation of the income approach where the underlying premise is that an intangible asset’s fair value is equal to the present value of the cost savings (royalties) achieved by owning the asset.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Fair value information for each major category of assets and liabilities measured on a nonrecurring basis as part of fresh-start reporting during the period is listed in the following table. The Company remeasured its assets and liabilities at fair value on the Reorganization Effective Date as required by ASC 852 using the guidance for measurement found in ASC 805. The gains and losses related to these fair value adjustments were recorded by the Predecessor Company. Assets and liabilities measured at fair value on a nonrecurring basis during the period included:

 	 	Successor	 	
 	 	As of
October 25,
2009	 	 	Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)	 	 	Significant
Other
Observable
Inputs
(Level 2)	 	 	Significant
Unobservable
Inputs
(Level 3)	 	 	Total
Gains
(Losses)	 	 	Valuation
Technique	 	
ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other current assets	 	$	439	  	 	 	 	 	 	 	 	 	 	$	439	  	 	$	(1,233	) 	 	 	(B), (C)-I	  	
Inventories	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Finished goods	 	 	10,078	  	 	 	 	 	 	$	10,078	  	 	 	 	 	 	 	2,557	  	 	 	(A), (C)-I	  	
Semi-finished goods and work-in-process	 	 	52,309	  	 	 	 	 	 	 	52,309	  	 	 	 	 	 	 	15,346	  	 	 	(A), (B), (C)-I	  	
Property, plant and equipment	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Land	 	 	14,902	  	 	 	 	 	 	 	 	 	 	 	14,902	  	 	 	5,091	  	 	 	(A), (C)-I	  	
Building	 	 	71,007	  	 	 	 	 	 	 	 	 	 	 	71,007	  	 	 	(25,113	) 	 	 	(A), (C)-I	  	
Furniture and fixture	 	 	1,435	  	 	 	 	 	 	 	 	 	 	 	1,435	  	 	 	(4,771	) 	 	 	(B), (C)-I	  	
Machinery and equipment	 	 	69,664	  	 	 	 	 	 	 	 	 	 	 	69,664	  	 	 	14,867	  	 	 	(B), (C)-I	  	
Structure	 	 	119	  	 	 	 	 	 	 	 	 	 	 	119	  	 	 	(1,814	) 	 	 	(B), (C)-I	  	
Other tangible assets	 	 	1,291	  	 	 	 	 	 	 	 	 	 	 	1,291	  	 	 	(2,200	) 	 	 	(B), (C)-I	  	
Intangible assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Technology	 	 	14,745	  	 	 	 	 	 	 	 	 	 	 	14,745	  	 	 	13,095	  	 	 	(C)-I, II, III	  	
Customer relationships	 	 	26,100	  	 	 	 	 	 	 	 	 	 	 	26,100	  	 	 	3,132	  	 	 	(C)-I, II	  	
Intellectual property assets	 	 	4,655	  	 	 	 	 	 	 	 	 	 	 	4,655	  	 	 	2,387	  	 	 	(C)-I, III	  	
In-process research and development	 	 	9,700	  	 	 	 	 	 	 	 	 	 	 	9,700	  	 	 	9,700	  	 	 	(C)-I, II	  	
Other non-current assets	 	 	2,270	  	 	 	 	 	 	 	2,270	  	 	 	 	 	 	 	355	  	 	 	(A)	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	31,399	  	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
$31,399 thousand of valuation gain was recorded as reorganization items, net in the statement of operations.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Carrying amounts of the other assets and liabilities except those in the above table equal their fair value.
For details of key assumptions and inputs applied by the Company for above fair valuation, see “Note 3 Fresh-Start Reporting.”
7. Accounts Receivable
Accounts receivable as of December 31, 2010 and 2009 consisted of the following:

 	  	Successor	 	
 	  	December 31,
2010	 	 	December 31,
2009	 	
Accounts receivable	  	$	111,420	  	 	$	74,516	  	
Notes receivable	  	 	10,699	  	 	 	3,260	  	
Less:	  	 	 	 	 	 	 	 	
Allowances for doubtful accounts	  	 	(609	) 	 	 	(377	) 	
Cash return reserve	  	 	(322	) 	 	 	(1,729	) 	
Low yield compensation reserve	  	 	(2,134	) 	 	 	(1,437	) 	
 	  	 	 	 	 	 	 	 	
Accounts receivable, net	  	$	119,054	  	 	$	74,233	  	
 	  	 	 	 	 	 	 	 	
Changes in allowance for doubtful accounts for each period are as follows:

 	  	Successor	 	 	 	 	  	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	  	Ten-Month
Period Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
Beginning balance	  	$	(377	) 	 	$	—	  	 	 	 	 	  	$	(1,569	) 	 	$	(1,367	) 	
Bad debt expense	  	 	(217	) 	 	 	(379	) 	 	 	 	 	  	 	(723	) 	 	 	(503	) 	
Write off	  	 	—	  	 	 	—	  	 	 	 	 	  	 	—	  	 	 	104	  	
Translation adjustments	  	 	(15	) 	 	 	2	  	 	 	 	 	  	 	(40	) 	 	 	197	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Ending balance	  	$	(609	) 	 	$	(377	) 	 	 	 	 	  	$	(2,332	) 	 	$	(1,569	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Changes in cash return reserve for each period are as follows:

 	  	Successor	 	 	 	 	  	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	  	Ten-Month
Period Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
Beginning balance	  	$	(1,729	) 	 	$	(1,545	) 	 	 	 	 	  	$	(671	) 	 	$	(914	) 	
Addition to reserve	  	 	(776	) 	 	 	(648	) 	 	 	 	 	  	 	(4,476	) 	 	 	(3,385	) 	
Payment made	  	 	2,172	  	 	 	484	  	 	 	 	 	  	 	3,722	  	 	 	3,393	  	
Translation adjustments	  	 	11	  	 	 	(20	) 	 	 	 	 	  	 	(120	) 	 	 	235	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Ending balance	  	$	(322	) 	 	$	(1,729	) 	 	 	 	 	  	$	(1,545	) 	 	$	(671	) 	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Changes in low yield compensation reserve for each period are as follows:

 	  	Successor	 	 	 	 	  	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	  	Ten-Month
Period Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
Beginning balance	  	$	(1,437	) 	 	$	(1,213	) 	 	 	 	 	  	$	(1,101	) 	 	$	(1,260	) 	
Addition to reserve	  	 	(2,168	) 	 	 	(715	) 	 	 	 	 	  	 	(1,759	) 	 	 	(1,854	) 	
Payment made	  	 	1,508	  	 	 	507	  	 	 	 	 	  	 	1,724	  	 	 	1,663	  	
Translation adjustments	  	 	(37	) 	 	 	(16	) 	 	 	 	 	  	 	(77	) 	 	 	350	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Ending balance	  	$	(2,134	) 	 	$	(1,437	) 	 	 	 	 	  	$	(1,213	) 	 	$	(1,101	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
8. Inventories
Inventories as of December 31, 2010 and 2009 consist of the following:

 	  	Successor	 	
 	  	December 31,
2010	 	 	December 31,
2009	 	
Finished goods	  	$	13,529	  	 	$	19,474	  	
Semi-finished goods and work-in-process	  	 	50,542	  	 	 	42,604	  	
Raw materials	  	 	9,762	  	 	 	5,844	  	
Materials in-transit	  	 	1,643	  	 	 	64	  	
Less: inventory reserve	  	 	(7,041	) 	 	 	(4,579	) 	
 	  	 	 	 	 	 	 	 	
Inventories, net	  	$	 68,435	  	 	$	63,407	  	
 	  	 	 	 	 	 	 	 	
Changes in inventory reserve for each period are as follows:

 	  	Successor	 	 	 	 	  	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	  	Ten-Month
Period Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
Beginning balance	  	$	(4,579	) 	 	$	—	  	 	 	 	 	  	$	(33,075	) 	 	$	(8,620	) 	
Change in reserve	  	 	(5,936	) 	 	 	(4,952	) 	 	 	 	 	  	 	8,081	  	 	 	(34,869	) 	
Write off	  	 	3,606	  	 	 	391	  	 	 	 	 	  	 	11,297	  	 	 	4,992	  	
Translation adjustments	  	 	(132	) 	 	 	(18	) 	 	 	 	 	  	 	17	  	 	 	5,422	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Ending balance	  	$	(7,041	) 	 	$	(4,579	) 	 	 	 	 	  	$	(13,680	) 	 	$	(33,075	) 	

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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
9. Property, Plant and Equipment
Property, plant and equipment as of December 31, 2010 and 2009 are comprised of the following:

 	  	Successor	 	
 	  	December 31,
2010	 	 	December 31,
2009	 	
Buildings and related structures	  	$	73,945	  	 	$	72,076	  	
Machinery and equipment	  	 	112,398	  	 	 	71,505	  	
Vehicles and others	  	 	8,007	  	 	 	3,043	  	
Equipment under capital lease	  	 	11,457	  	 	 	—	  	
 	  	 	 	 	 	 	 	 	
 	  	 	205,807	  	 	 	146,624	  	
Less: accumulated depreciation	  	 	(41,440	) 	 	 	(5,388	) 	
accumulated depreciation on equipment under capital lease	  	 	(836	) 	 	 	—	  	
Land	  	 	15,481	  	 	 	15,101	  	
 	  	 	 	 	 	 	 	 	
Property, plant and equipment, net	  	$	179,012	  	 	$	156,337	  	
 	  	 	 	 	 	 	 	 	
Aggregate depreciation expenses totaled $36,261 thousand, $5,389 thousand, $28,649 thousand and $47,707 thousand for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008, respectively.
10. Intangible assets
Intangible assets at December 31, 2010 and 2009 are as follows:

 	  	Successor	 	
 	  	December 31,
2010	 	 	December 31,
2009	 	
Technology	  	$	19,969	  	 	$	14,942	  	
Customer relationships	  	 	27,115	  	 	 	26,448	  	
Intellectual property assets	  	 	5,444	  	 	 	4,779	  	
In-process research and development	  	 	3,418	  	 	 	9,829	  	
Less: accumulated amortization	  	 	(28,408	) 	 	 	(5,840	) 	
 	  	 	 	 	 	 	 	 	
Intangible assets, net	  	$	27,538	  	 	$	50,158	  	
 	  	 	 	 	 	 	 	 	
Aggregate amortization expenses for intangible assets totaled $22,134 thousand, $5,829 thousand, $9,606 thousand and $24,254 thousand for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008, respectively. The estimated aggregate amortization expense of intangible assets for the next five years is $8,481 thousand in 2011, $7,601 thousand in 2012, $6,011 thousand in 2013, $1,145 thousand in 2014 and $33 thousand in 2015.
As part of its application of fresh-start reporting, the Company recognized fair value associated with IPR&D of $9,700 thousand. The Company accounted for IPR&D as an indefinite-lived intangible asset until completion or abandonment of the associated research and development (“R&D”) projects. The IPR&D charges incurred by the Company’s Semiconductor Manufacturing Services (“SMS”)
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
segment related to design of a product to the point that it met specific technical requirements, directly targeted at customers. The Display Solutions segment incurs IPR&D charges related to the design of possible products. These R&D efforts are intended to incur incremental sales with the Company’s existing and new customers.
When a project is completed, the carrying amount of the related IPR&D is reclassified into technology and amortized over the remaining estimated life of the asset beginning in the period in which the project is completed and sales of related product is recognized. Accordingly, IPR&D of $1,700 thousand in the Display Solutions segment and $2,950 thousand in the SMS segment have been reclassified into technology and amortized beginning in 2010.
IPR&D assets are reviewed at least annually for impairment or more frequently if changes in circumstances indicate the asset may be impaired. If a project becomes impaired or abandoned, the carrying amount of the related intangible asset would be written down to its fair value and an impairment charge would be taken in the period in which the impairment occurs. The Company performed its annual impairment test as of September 30, 2010. The impairment test consists of a comparison of the fair value of the IPR&D with its carrying amount. The excess earnings method was applied as a valuation method that establishes the business value based on a stream of future economic benefits, such as net cash flows, discounted to their present value. This calculation is highly sensitive to both the estimated future cash flows from each R&D project and the discount rate assumed in these calculations. These components are discussed below:
 
 	•	 	Estimated future cash flows	
The key variables that the Company must estimate to determine future cash flows include assumptions for sales volume, selling prices, raw material costs, labor and other employee benefit costs, capital additions and other economic or market-related factors. Significant management judgment is involved in estimating these variables, and they include inherent uncertainties since they are forecasting future events. For example, unanticipated changes in competition, customer sourcing requirements and product maturity would all have a significant impact on these estimates.
 
 	•	 	Discount rate	
The Company employs a Weighted Average Cost of Capital (“WACC”) approach to determine the Company’s discount rate for IPR&D impairment testing. The Company’s WACC calculation includes factors such as the risk free rate of return, cost of debt and expected equity premiums. The factors in this calculation are largely external to the Company, and therefore are beyond the Company’s control.
When the carrying amount of any IPR&D project exceeds its estimated fair value on a project by project basis, an impairment charge must be recognized in an amount equal to that excess. Accordingly, the Company recognized $2,003 thousand of impairment charges for the year ended December 31, 2010, which consisted of $391 thousand from IPR&D annual impairment test and $1,612 thousand from twelve abandoned IPR&D projects.
The primary risks associated with the above projects include uncertainties in completing development projects on schedule due to technological feasibility and resource capacity, which could
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
lead to lower demand at a lower selling point given the market trends. Such delay in development and production could adversely affect the related customer relationship. Additionally, there can be no assurance that meaningful sales will occur on a continuing basis considering market changes.
The Company recorded goodwill as a result from the acquisition of ISRON Corporation on March 6, 2005. On an ongoing basis, the Company evaluates goodwill at the reporting unit level for indications of potential impairment. Goodwill is tested for impairment based on the present value of discounted cash flows, and, if impaired, goodwill is written down to fair value. The Company performs its annual goodwill impairment test during the first quarter of each fiscal year, as well as additional impairment tests, if any, required on an event-driven basis. In the first quarter of 2008, the Company performed its annual goodwill impairment test and determined that goodwill was not impaired. As of December 31, 2008, the Company performed an additional goodwill impairment test triggered by the significant adverse change in the revenue of the mobile display solutions, or MDS, reporting unit, and determined that goodwill was impaired. At the time of impairment, revenue of the MDS reporting unit was expected to decrease due to the deterioration of the Company’s financial credit status and the decline of the semiconductor sector resulting from the world-wide economic slowdown. Accordingly, an impairment charge of $14,245 thousand, which represented the entire balance of goodwill, was recorded for the year ended December 31, 2008.
11. Derivative Financial Instruments
Effective January 11, 2010, the Company’s Korean subsidiary entered into option and forward contracts to hedge the risk of changes in the functional-currency-equivalent cash flows attributable to currency rate changes on U.S. dollar denominated revenues. Total notional amounts for the options and forward contracts were $50 million and $135 million, respectively, and monthly settlements for the contracts were made from February to December 2010.
Effective May 25, 2010, the Company’s Korean subsidiary entered into additional option and forward contracts to hedge the risk of changes in the functional-currency-equivalent cash flows attributable to currency rate changes on U.S. dollar denominated revenues. Total notional amounts for the options and forward contracts were $30 million and $78 million, respectively, and monthly settlements for the contracts will be made from January to June 2011.
Effective August 12, 2010, the Company’s Korean subsidiary entered into zero cost collar contracts to hedge the risk of changes in the functional-currency-equivalent cash flows attributable to currency rate changes on U.S. dollar denominated revenues. Total notional amounts for the zero cost collar contracts were $108 million and monthly settlements for the contracts will be made from July to December 2011.
The option, forward and zero cost collar contracts qualify as cash flow hedges under ASC 815, “Derivatives and Hedging ,” (“ASC 815”), since at both the inception of the contracts and on an ongoing basis, the hedging relationship was and is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the contracts. The Company utilizes the “hypothetical derivative” method to measure the effectiveness by comparing the changes in value of the actual derivative versus the change in fair value of the “hypothetical derivative.”
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The fair values of the Company’s outstanding option, forward and zero cost collar contracts recorded as assets as of December 31, 2010 are as follows:

Derivatives designated as hedging instruments under ASC 815:	  	 	  	December 31,
2010	 	
Asset Derivatives:	  	 	  	 	 	 	
Options	  	Other current assets	  	$	104	  	
Forwards	  	Other current assets	  	$	 6,674	  	
Zero cost collars	  	Other current assets	  	$	1,544	  	
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (“AOCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative, representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness, are recognized in current earnings.
The following table summarizes the impact of derivative instruments on the consolidated statement of operations for the year ended December 31, 2010:

Derivatives in
ASC 815
Cash Flow
Hedging
Relationships	  	Amount of Gain
(Loss)
Recognized in
AOCI on
Derivatives
(Effective Portion)	 	 	Location of Loss
Reclassified from
AOCI into
Statement of
Operations
(Effective Portion)	 	  	Amount of Loss
Reclassified from
AOCI into
Statement of
Operations
(Effective Portion)	 	 	Location of
Gain (Loss)
Recognized in
Statement of
Operations on
Derivative
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)	 	 	Amount of Gain
(Loss)
Recognized in
Statement of
Operations on
Derivatives
(Ineffective Portion
and Amount
Excluded from
Effectiveness
Testing)	 	
Options	  	$	(1,416	) 	 	 	Net sales	  	  	$	(751	) 	 	 
 
 	Other income
(expenses)—
Others	  
  
  	 	$	(72	) 	
Forwards	  	 	3,856	  	 	 	Net sales	  	  	 	(4,034	) 	 	 
 
 	Other income
(expenses)—
Others	  
  
  	 	 	(720	) 	
Zero cost collars	  	 
	1,542
	  
	 	 	Net sales	  	  	 	—	  	 	 
 
 	Other income
(expenses)—
Others	  
  
  	 	 	81	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Total	  	$	3,982	  	 	 	 	 	  	$	(4,785	) 	 	 	 	 	 	$	(711	) 	
 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
The Company’s option, forward and zero cost collar contracts are subject to termination upon the occurrence of the following events:
(i) On the last day of a fiscal quarter, the sum of qualified and unrestricted cash and cash equivalents held by the Company is less than $30 million.
(ii) The rating of the Company’s debt is B- or lower by Standard & Poor’s Ratings Group or any successor rating agency thereof (“S&P”) or B3 or lower by Moody’s Investor Services, Inc. or any successor rating agency thereof (“Moody’s”) or the Company’s debt ceases to be assigned a rating by either S&P or Moody’s.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
In addition, the Company is required to deposit cash collateral with Goldman Sachs International Bank, the counterparty to the option, forward and zero cost collar contracts, for any exposure in excess of $5 million.
12. Product Warranties
Changes in accrued warranty liabilities for each period are as follows:

 	 	Successor	 	 	Predecessor	 	
 	 	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	Ten-Month
Period Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
Beginning balance	 	 	$ 921	  	 	$	929	  	 	 	 	$	474	  	 	$	211	  	
Addition (decrease) to warranty reserve	 	 	(247	) 	 	 	(16	) 	 	 	 	 	1,928	  	 	 	2,608	  	
Payments made	 	 	(432	) 	 	 	(4	) 	 	 	 	 	(1,544	) 	 	 	(2,243	) 	
Translation adjustments	 	 	24	  	 	 	12	  	 	 	 	 	71	  	 	 	(102	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending balance	 	$	 266	  	 	$	921	  	 	 	 	$	929	  	 	$	474	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
13. Long-term Borrowings
Long-term borrowings as of December 31, 2010 and December 31, 2009 are as follows:
 	 	 	 	 	 	 	 	 	
 	  	Successor	 	
 	  	December 31,
2010	 	 	December 31,
2009	 	
New term loan	  	$	—	  	 	$	61,750	  	
10.5% senior notes due April 2018	  	 	250,000	  	 	 	—	  	
Current portion of long-term borrowings	  	 	—	  	 	 	(618	) 	
 	  	 	 	 	 	 	 	 	
 	  	 	250,000	  	 	 	61,132	  	
Discount on 10.5% senior notes due April 2018	  	 	(3,118	) 	 	 	—	  	
 	  	 	 	 	 	 	 	 	
Long-term borrowings, net of unamortized discount	  	$	246,882	  	 	$	61,132	  	
 	  	 	 	 	 	 	 	 	
New Term Loan
In connection with the Predecessor Company’s reorganization in 2009, in complete satisfaction of the first lien lender claims arising from the senior secured credit facility (included in short-term borrowings) of $95 million, the Company made a cash payment of $33,250 thousand to the senior secured credit facility lenders and, together with its subsidiaries, including MagnaChip Semiconductor S.A. and MagnaChip Semiconductor Finance Company, as borrowers, entered into a $61,750 thousand Amended and Restated Credit Agreement (the “Credit Agreement” or the “new term loan”) with Avenue Investments, LP, Goldman Sachs Lending Partners LLC and Citicorp North America, Inc.
Long-term borrowings as of December 31, 2009 consisted of Eurodollar loans at an annual interest rate of 6 month LIBOR plus 12% to Avenue Investments, LP, Goldman Sachs Lending Partners LLC and Citicorp North America, Inc. in the principal amount of $42,055 thousand, $12,285 thousand and $7,410 thousand, respectively.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The principal balance of the new term loan was to be paid in quarterly installments of approximately $154 thousand with the first installment due on March 31, 2010, and ending with the last installment due on September 30, 2013. In addition, the Company had an optional prepayment right at any time and from time to time to prepay the new term loan, in whole or in part.
On April 9, 2010, the new term loan of $61,596 thousand was fully repaid by the Company with the proceeds from issuance of new 10.5% senior notes. In connection with the repayment of the new term loan, $210 thousand of relevant debt issuance costs were written off.
As of December 31, 2009, the Company and all of its subsidiaries except for MagnaChip Semiconductor (Shanghai) Company Limited jointly and severally guaranteed, as a primary obligor, the payment and performance of the borrower’s obligations under the Credit Agreement.
10.5% Senior Notes
On April 9, 2010, two of the Company’s wholly-owned subsidiaries, MagnaChip Semiconductor S.A. and MagnaChip Semiconductor Finance Company, issued $250 million aggregate principal amount of 10.5% senior notes due April 15, 2018 at a price of 98.674%. Interest on the notes accrues at a rate of 10.5% per annum, payable semi-annually on April 15 and October 15 of each year, beginning on October 15, 2010. $250 million of principal amount will be due in full at April 15, 2018. The obligations under the senior notes are fully and unconditionally guaranteed on an unsecured senior basis by the Company and all of its subsidiaries except for MagnaChip Semiconductor, Ltd. (Korea) and MagnaChip Semiconductor (Shanghai) Company Limited. For the accrual of interest expense, the Company uses the effective interest method and accrues interest at an effective rate of 11.04% per annum.
Of the $238,372 thousand of net proceeds, which represents $250 million of principal amount net of $3,315 thousand of original issue discount and $8,313 thousand of debt issuance costs, $130,689 thousand was used to make a distribution to the Company’s stockholders and $61,596 thousand was used to repay all outstanding borrowings under the new term loan. The remaining proceeds of $46,087 thousand were retained to fund working capital and for general corporate purposes.
The Company can optionally redeem all or a part of the notes according to the following schedule: (i) at any time prior to April 15, 2013, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of notes issued under the indenture at a redemption price equal to 110.5% of the principal amount of the notes redeemed, plus accrued and unpaid interest and special interest, if any, to the date of redemption; (ii) at any time prior to April 15, 2014, the Company may on any one or more occasions redeem all or a part of the notes at a redemption price equal to 100% of the principal amount of the notes redeemed, plus the applicable premium as of, and accrued and unpaid interest and special interest, if any, to the date of redemption; and (iii) on or after April 15, 2014, the Company may on any one or more occasions redeem all or a part of the notes, at a redemption price equal to 105.25%, 102.625% and 100% of the principal amount of the notes redeemed in 2014, 2015 and 2016 and thereafter, respectively, plus accrued and unpaid interest and special interest, if any, on the notes redeemed, to the applicable date of redemption.
The indenture relating to the Company’s $250 million senior notes contains covenants that limit ability of the Parent, co-issuers and the restricted subsidiaries to: (i) declare or pay any dividend or
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
make any payment or distribution on account of or purchase or redeem the Company’s capital stock or equity interests of the restricted subsidiaries; (ii) make any principal payment on, or redeem or repurchase, prior to any scheduled repayment, sinking fund payment or maturity, any subordinated indebtedness; (iii) make certain investments; (iv) incur additional indebtedness and issue certain types of capital stock; (v) create or incur any lien (except for permitted liens) that secures obligations under any indebtedness or related guarantee; (vi) merge with or into or sell all or substantially all of the Company’s assets to other companies; (vii) enter into certain types of transactions with affiliates; (viii) guarantee the payment of any indebtedness; (ix) enter into sale-leaseback transactions; (x) enter into agreements that would restrict the ability of the restricted subsidiaries to make distributions with respect to their equity, to make loans to the Parent, co-issuers or other restricted subsidiaries or to transfer assets to the Parent, co-issuers or other restricted subsidiaries; and (xi) designate unrestricted subsidiaries.
These covenants are subject to a number of exceptions and qualifications. Certain of these restrictive covenants will terminate if the notes are rated investment grade at any time.
As of December 31, 2010, the Company is compliant with all of its covenant requirements in the indenture governing the senior notes.
Of the $250 million aggregate principal amount, funds affiliated with Avenue Capital Management II, L.P. purchased $35 million principal amount.
In connection with the issuance of the senior notes, the Company capitalized certain costs and fees, which are being amortized using the effective interest method over its respective term, 2010 to 2018. Amortization costs, which were included in interest expense in the accompanying statements of operations, amounted to $493 thousand for the year ended December 31, 2010. The remaining capitalized costs as of December 31, 2010 were $7,819 thousand.
14. Capital Leases
The Company entered into several lease agreements for the use of equipment for manufacturing and research and development. These leases are accounted for as capital leases as the ownership of the equipment will be transferred to the Company upon expiration of the lease terms or the Company has bargain purchase options at the end of the lease terms.
Future minimum payments under the capital lease as of December 31, 2010 were as follows:

Payable during	  	Capital
Lease	 	
2011	  	$	6,170	  	
2012	  	 	3,184	  	
2013	  	 	24	  	
 	  	 	 	 	
Total future minimum lease payments	  	 	9,378	  	
Less: Amount representing interest (a)	  	 	(716	) 	
 	  	 	 	 	
Present value of net minimum lease payments	  	 	8,662	  	
Less: current portion of capital lease obligations	  	 	(5,557	) 	
 	  	 	 	 	
Long-term obligations under capital lease	  	$	3,105	  	

(a)	The lessor’s implicit rate at lease inception was applied.	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
15. Accrued Severance Benefits
The majority of accrued severance benefits is for employees in the Company’s Korean subsidiary, MagnaChip Semiconductor Ltd. (Korea). Pursuant to the Employee Retirement Benefit Security Act of Korea, most employees and executive officers with one or more years of service are entitled to severance benefits upon the termination of their employment based on their length of service and rate of pay. As of December 31, 2010, 98% of all employees of the Company were eligible for severance benefits.
Changes in accrued severance benefits for each period are as follows:

 	  	Successor	 	 	 	 	 	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	 	Ten-Month
Period Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
Beginning balance	  	$	73,646	  	 	$	72,243	  	 	 	 	 	 	$	63,147	  	 	$	75,869	  	
Provisions	  	 	19,684	  	 	 	1,851	  	 	 	 	 	 	 	8,835	  	 	 	14,026	  	
Severance payments	  	 	(6,673	) 	 	 	(1,389	) 	 	 	 	 	 	 	(4,320	) 	 	 	(6,505	) 	
Translation adjustments	  	 	2,316	  	 	 	941	  	 	 	 	 	 	 	4,581	  	 	 	(20,243	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	 	88,973	  	 	 	73,646	  	 	 	 	 	 	 	72,243	  	 	 	63,147	  	
Less: cumulative contributions to the National Pension Fund	  	 	(463	) 	 	 	(530	) 	 	 	 	 	 	 	(533	) 	 	 	(539	) 	
Group severance insurance plan	  	 	(732	) 	 	 	(707	) 	 	 	 	 	 	 	(681	) 	 	 	(669	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	$	87,778	  	 	$	72,409	  	 	 	 	 	 	$	71,029	  	 	$	61,939	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The severance benefits are funded approximately 1.34%, 1.68% and 1.91% as of December 31, 2010, 2009 and 2008, respectively, through the Company’s National Pension Fund and group severance insurance plan which will be used exclusively for payment of severance benefits to eligible employees. These amounts have been deducted from the accrued severance benefit balance.
The Company is liable to pay the following future benefits to its employees upon their normal retirement age:

 	  	Severance
Benefit	 	
2011	  	$	—	  	
2012	  	 	151	  	
2013	  	 	—	  	
2014	  	 	305	  	
2015	  	 	344	  	
2016 – 2020	  	 
	11,104

The above amounts were determined based on the employees’ current salary rates and the number of service years that will be accumulated upon their retirement dates. These amounts do not include amounts that might be paid to employees that will cease working with the Company before their normal retirement ages.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
16. Redeemable Convertible Preferred Units
Predecessor Company
The Company issued 49,727 units as Series A redeemable convertible preferred units (the “Series A units”) and 447,420 units as Series B redeemable convertible preferred units (the “Series B units”) on September 23, 2004 and an additional 364 units of Series A units and 3,272 units of Series B units on November 30, 2004, respectively. Each Series A and Series B unit had a stated value of $1,000 per unit. As the Series A and B units were redeemable at the option of the holders, the Company classified the Series A units and B units outside of permanent equity. All Series A units were redeemed by cash on December 27, 2004 and a portion of the Series B units were redeemed by cash on December 15, 2004 and December 27, 2004.
Changes in Series B units for each period are as follows:

 	  	Predecessor	 	
 	  	Ten-Month
Period Ended
October 25, 2009	 	  	Year Ended
December 31,
2008	 	
 	  	Units	 	  	Amount	 	  	Units	 	  	Amount	 	
Series B Units	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Beginning of the period	  	 	93,997	  	  	$	142,669	  	  	 	93,997	  	  	$	129,405	  	
Accrual of preferred dividends	  	 	—	  	  	 	6,317	  	  	 	—	  	  	 	13,264	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
End of the period	  	 	93,997	  	  	$	148,986	  	  	 	93,997	  	  	$	142,669	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The Series B units were issued to the original purchasers of the Company in 2004. Holders of Series B units were entitled to receive cumulative dividends, whether or not earned or declared by the board of directors. The cumulative cash dividends accrued at the rate of 10% per unit per annum on the Series B units’ original issue price, compounded semi-annually.
The Series B units, which had a carrying amount of $148,986 thousand, were retired without consideration as part of the Company’s reorganization as described in Note 3.
17. Warrants
In connection with the Company’s reorganization, the Company issued warrants to purchase 1,875 thousand of the Company’s new common stock. The warrants were issued in partial satisfaction of the claims of the holders of the Company’s Senior Subordinated Notes and are exercisable at a price of $15.76 per share at any time following the issue date of the warrants, so long as the exercise of the warrants is exempt from the registration requirements of the Securities Act of 1933, as amended. The value of each warrant to purchase one common share is $1.35, which was estimated using the Black-Scholes option pricing model using the following assumptions: fair value of $6.32 per common share, exercise price of $15.76 per share, risk free rate of interest of 2.3%, volatility of 50%, dividend rate of 0% and term of 5 years.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
18. Common Stock
Common stock par value $0.01 per share, was authorized in the amount of 150,000 thousand shares, of which 38,402 thousand shares were issued and outstanding as of December 31, 2010.
Changes in common stock for each period are as follows:

 	  	Successor	 	
 	  	Year ended December 31,
2010	 	  	Year ended December 31,
2009	 	
 	  	Shares	 	 	Amount	 	  	Shares	 	  	Amount	 	
Common stock at the beginning of the period	  	 	38,385,544	  	 	$	384	  	  	 	37,500,044	  	  	$	375	  	
Restricted stock bonuses issued	  	 	18,750	  	 	 	—	  	  	 	885,500	  	  	 	9	  	
Forfeiture of restricted stock bonuses	  	 	(2,309	) 	 	 	—	  	  	 	—	  	  	 	—	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Total common stock issued and outstanding at the end of the period	  	 	38,401,985	  	 	$	384	  	  	 	38,385,544	  	  	$	384	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
On April 19, 2010, the Company made distributions to its stockholders at a rate per share of $3.40 and the aggregate amount distributed was $130,689 thousand.
19. Equity Incentive Plans
Successor Company
The Successor Company adopted its 2009 Common Unit Plan effective December 8, 2009, which is administered by the board of directors. Under the plan, employees, consultants and non-employee directors are eligible for equity incentives, including grants of options to purchase the Company’s common stock or restricted stock bonuses or restricted stock purchase rights and deferred stock awards, subject to terms and conditions determined by the board of directors. The term of options shall not exceed ten years from the date of grant. Restricted stock purchase rights shall be exercisable within a period established by the board of directors, which shall in no event exceed thirty days from the effective date of the grant. As of December 31, 2010, on an as converted basis pursuant to the corporate conversion described in Note 27(B), an aggregate maximum of 3,750 thousand shares were authorized and 890 thousand shares were reserved for all future grants.
Stock options are generally granted with exercise prices of no less than the fair market value of the Company’s common stock on the grant date. The requisite service period, or the period during which a grantee is required to provide service in exchange for option grants, coincides with the vesting period.
The purchase price for shares issuable under each restricted stock purchase right shall be established by the board of directors in its discretion. No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving shares pursuant to a restricted stock bonus, the consideration for which shall be services actually rendered to a participating company or for its benefit. Stock issued pursuant to any restricted stock award may (but need not) be made subject to vesting conditions based upon the satisfaction of such service requirements, conditions, restrictions or performance criteria as shall be established by the board of directors and set forth in the award agreement evidencing such award. During any period in which stock acquired pursuant to a restricted stock award remain subject to vesting conditions, such stock may not be sold, exchanged, transferred,
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
pledged, assigned or otherwise disposed of other than pursuant to an ownership change event or transfer by will or the laws of descent and distribution. The grantee shall have all of the rights of a stockholder of the Company holding stock, including the right to vote such stock and to receive all dividends and other distributions paid with respect to such stock; provided, however, that if so determined by the board of directors and provided by the award agreement, such dividends and distributions shall be subject to the same vesting conditions as the stock subject to the restricted stock award with respect to which such dividends or distributions were paid. If a grantee’s service terminates for any reason, whether voluntary or involuntary (including the grantee’s death or disability), then (a) the Company (or its assignee) has the option to repurchase for the purchase price paid by the grantee any stock acquired by the grantee pursuant to a restricted stock purchase right which remain subject to vesting conditions as of the date of the grantee’s termination of service and (b) the grantee shall forfeit to the Company any stock acquired by the grantee pursuant to a restricted stock bonus which remain subject to vesting conditions as of the date of the grantee’s termination of service. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.
No monetary payment (other than applicable tax withholding, if any) is required as a condition of receiving a deferred stock award, the consideration for which shall be services actually rendered to a participating company or for its benefit. Deferred stock awards may (but need not) be made subject to vesting conditions based upon the satisfaction of such service requirements, conditions, restrictions or performance criteria as shall be established by the Committee and set forth in the award agreement evidencing such award. Grantees have no voting rights with respect to stock represented by deferred stock awards until the date of the issuance of such stock (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). If a grantee’s service terminates for any reason, whether voluntary or involuntary (including the grantee’s death or disability), then the grantee shall forfeit to the Company any deferred stock pursuant to the award which remain subject to vesting conditions as of the date of the grantee’s termination of service, and, in the event of the grantee’s termination for cause, such deferred stock award to the extent not yet settled. The Company shall issue to a grantee on the date on which deferred stock subject to the grantee’s deferred stock award vest or on such other date determined by the board of directors, in its discretion, and set forth in the award agreement one share (and/or any other new, substituted or additional securities or other property) for each deferred stock then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes, if any.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The following summarizes stock option and restricted stock bonus activities for the year ended December 31, 2010 and the two-month period ended December 31, 2009 after giving effect to the corporate conversion described in Note 27(B). At the date of grant, all options had an exercise price above the fair value of common stock:

 	  	Successor Company	 	
 	  	Number of
Restricted Stock
Bonuses	 	 	Number of
Options	 	 	Weighted
Average
Exercise
Price of
Stock
Options	 	  	Aggregate
Intrinsic
Value of
Stock
Options	 	  	Weighted
Average
Remaining
Contractual
Life of
Stock
Options	 	
Outstanding at October 25, 2009	  	 	—	  	 	 	—	  	 	 	—	  	  	 	 	 	  	 	 	 	
Granted	  	 	885,500	  	 	 	1,920,625	  	 	$	9.28	  	  	 	 	 	  	 	 	 	
Released from restriction	  	 	(301,070	) 	 	 	—	  	 	 	 	 	  	 	 	 	  	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Outstanding at December 31, 2009	  	 	584,430	  	 	 	1,920,625	  	 	 	9.28	  	  	 	—	  	  	 	9.9 years	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Vested and expected to vest at December 31, 2009	  	 	 	 	 	 	1,694,163	  	 	 	9.28	  	  	 	—	  	  	 	9.9 years	  	
Exercisable at December 31, 2009	  	 	 	 	 	 	—	  	 	 	 	 	  	 	—	  	  	 	—	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Outstanding at January 1, 2010	  	 	584,430	  	 	 	1,920,625	  	 	$	9.28	  	  	 	 	 	  	 	9.9 years	  	
Granted	  	 	18,750	  	 	 	114,250	  	 	 	15.60	  	  	 	 	 	  	 	 	 	
Released from restriction	  	 	(309,810	) 	 	 	—	  	 	 	 	 	  	 	 	 	  	 	 	 	
Forfeited	  	 	(2,309	) 	 	 	(77,115	) 	 	 	5.88	  	  	 	 	 	  	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Outstanding at December 31, 2010	  	 	291,061	  	 	 	1,957,760	  	 	 	6.32	  	  	 	14,158	  	  	 	9.0 years	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Vested and expected to vest at December 31, 2010	  	 	 	 	 	 	1,868,665	  	 	 	6.32	  	  	 	13,528	  	  	 	9.0 years	  	
Exercisable at December 31, 2010	  	 	 	 	 	 	629,935	  	 	 	5.88	  	  	 	4,838	  	  	 	8.9 years	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
On April 19, 2010, the Company made a distribution to its stockholders of $3.40 per share, which resulted in the option exercise price of all outstanding options being reduced by $3.40 pursuant to the anti-dilution provision in the award agreement.
Total compensation expenses recorded for the restricted stock bonuses and stock options pursuant to ASC 718 were $2,923 thousand and $2,316 thousand for the year ended December 31, 2010 and $2,073 thousand and $126 thousand for the two-month period ended December 31, 2009, respectively. As of December 31, 2010, there were $823 thousand and $1,314 thousand of total unrecognized compensation cost related to unvested restricted stock bonuses and stock options, which are expected to be recognized over a weighted average future periods of 0.9 years and 1.0 years, respectively. As of December 31, 2009, there were $3,243 thousand and $2,811 thousand of total unrecognized compensation cost related to unvested restricted stock bonuses and stock options, which are expected to be recognized over a weighted average future periods of 1.4 years and 1.7 years, respectively. Total fair values of restricted stock bonuses released from restriction were $2,157 thousand and $1,903 thousand for the year ended December 31, 2010 and two-month period ended December 31, 2009, respectively. Total fair value of options vested for the year ended December 31, 2010 is $811 thousand.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The Company utilizes the Black-Scholes option-pricing model to measure the fair value of each option grant. The following summarizes the grant-date fair value of options granted for the year ended December 31, 2010 and two-month period ended December 31, 2009 and assumptions used in the Black-Scholes option-pricing model on a weighted average basis:

 	  	Year Ended
December 31, 2010	 	 	Two-Month Period Ended
December 31, 2009	 	
Grant-date fair value of option (in US dollars)	  	$	6.65	  	 	$	1.76	  	
Expected term	  	 	2.9 Years	  	 	 	2.9 Years	  	
Risk-free interest rate	  	 	0.8	% 	 	 	0.6	% 	
Expected volatility	  	 	54.4	% 	 	 	59.1	% 	
Expected dividends	  	 	—	  	 	 	—	  	
The number and weighted average grant-date fair value of the unvested stock options are as follows:

 	  	Year Ended
December 31, 2010	 	  	Two-Month Period
Ended December 31,  2009	 	
 	  	Number	 	 	Weighted Average
Grant-Date Fair Value	 	  	Number	 	  	Weighted Average
Grant-Date Fair  Value	 	
Unvested options at the beginning of the period	  	 	1,920,625	  	 	$	1.76	  	  	 	—	  	  	$	—	  	
Granted options during the period	  	 	114,250	  	 	 	6.65	  	  	 	1,920,625	  	  	 	1.76	  	
Vested options during the period	  	 	(629,935	) 	 	 	1.30	  	  	 	—	  	  	 	—	  	
Forfeited options during the period	  	 	(77,115	) 	 	 	1.76	  	  	 	—	  	  	 	—	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Unvested options at the end of the period	  	 	1,327,825	  	 	 	2.37	  	  	 	1,920,625	  	  	 	1.76	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Predecessor Company
The Predecessor Company adopted two equity incentive plans effective October 6, 2004 and March 21, 2005, respectively, which were administered by the compensation committee designated by the board of directors. Employees, consultants and non-employee directors were eligible for the grant of options to purchase the Company’s common units or restricted common units subject to terms and conditions determined by the compensation committee. The term of options could in no event exceed ten years from the date of grant. As of December 31, 2008, an aggregate maximum of 7,890,864 common units were authorized and reserved for all future and outstanding grants of options.
Unit options were generally granted with exercise prices of no less than the fair market value of the Company’s common units on the grant date. Generally, options vested and became exercisable in periodic installments, with 25% of the options vesting on the first anniversary of the grant date and 6.25% of options vesting on the last day of each calendar quarter thereafter. In most cases, the requisite service period, or the period during which a grantee was required to provide service in exchange for option grants, coincided with the vesting period.
Upon the termination of a unit option grantee’s employment prior to a public offering, the Company had the right to repurchase all or any of the common units acquired by the grantee upon exercise of any of his or her options for a cash payment equal to the fair market value of such common units on the date of repurchase. The Company’s repurchase right would terminate ninety days after the termination date.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
During the three months ended December 31, 2004, restricted units were issued upon the exercise of certain options to purchase restricted common units at the exercise price of $1 per unit. Restricted units issued were subject to restrictions which generally lapsed in installments over a four-year period. Under the terms and conditions of these restricted units, the restricted units were subject to forfeiture upon the termination of the restricted unitholder’s employment with the Company. Upon termination, the Company could repurchase all, or any portion of the restricted common units for either $1 per unit (the exercise price) or the fair market value of the restricted common units at the time of repurchase. If the termination was for cause, as defined in the service agreements entered into with each restricted unitholder, the repurchase price per unit would be $1. However, if the termination was for any other reason, then the Company could repurchase all or any portion of the restricted units for which the restricted period had not lapsed as of the date of termination for a repurchase price per unit of $1, and could repurchase all or any portion of the restricted common units for which the restricted period had lapsed as of the date of termination for a repurchase price per unit equal to fair market value. Termination for “cause” was defined in the service agreements to mean a termination of the restricted unitholder’s employment with the Company because of (a) a failure by the restricted unitholder to substantially perform the restricted unitholder’s customary duties with the Company in the ordinary course (other than in certain specified circumstances); (b) the restricted unitholder’s gross negligence, intentional misconduct or fraud in the performance of his or her employment; (c) the restricted unitholder’s indictment for a felony or to a crime involving fraud or dishonesty; (d) a judicial determination that the restricted unitholder committed fraud or dishonesty against any person or entity; or (e) the restricted unitholder’s material violation of one or more of the Company’s policies applicable to the restricted unitholder’s employment as may be in effect from time to time.
The Predecessor Company adopted fresh-start reporting (see Note 3) as of October 25, 2009, at which time it effectively cancelled all unit options under the Predecessor Company’s equity incentive plans.
 
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Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The following summarizes unit option and restricted unit activities for the ten-month period ended October 25, 2009 and for the year ended December 31, 2008. At the date of grant, all options had an exercise price at or above the fair value of common units:

 	  	Predecessor Company	 	
 	  	Number of
Restricted
Units	 	  	Number of
Options	 	 	Weighted
Average Exercise
Price of Unit
Options	 	  	Aggregate
Intrinsic
Value of
Unit
Options	 	  	Weighted
Average
Remaining
Contractual Life
of Unit Options	 	
Outstanding at January 1, 2008	  	 	268,343	  	  	 	4,916,840	  	 	$	1.9	  	  	 	 	 	  	 	 	 	
Granted	  	 	—	  	  	 	315,000	  	 	 	5.8	  	  	 	 	 	  	 	 	 	
Exercised	  	 	—	  	  	 	(161,460	) 	 	 	1.1	  	  	$	787	  	  	 	 	 	
Forfeited	  	 	—	  	  	 	(853,780	) 	 	 	3.1	  	  	 	 	 	  	 	 	 	
Released from restriction	  	 	268,343	  	  	 	—	  	 	 	 	 	  	 	 	 	  	 	 	 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Outstanding at December 31, 2008	  	 	—	  	  	 	4,216,600	  	 	 	1.9	  	  	 	15,118	  	  	 	6.9 years	  	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Vested and expected to vest at December 31, 2008	  	 	 	 	  	 	3,973,510	  	 	 	1.9	  	  	 	14,412	  	  	 	6.9 years	  	
Exercisable at December 31, 2008	  	 	 	 	  	 	3,085,038	  	 	 	1.7	  	  	 	11,827	  	  	 	6.6 years	  	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Outstanding at January 1, 2009	  	 	—	  	  	 	4,216,600	  	 	 	1.9	  	  	 	 	 	  	 	 	 	
Granted	  	 	—	  	  	 	—	  	 	 	—	  	  	 	 	 	  	 	 	 	
Exercised	  	 	—	  	  	 	—	  	 	 	—	  	  	 	—	  	  	 	 	 	
Forfeited	  	 	—	  	  	 	(391,500	) 	 	 	2.5	  	  	 	 	 	  	 	 	 	
Released from restriction	  	 	—	  	  	 	—	  	 	 	 	 	  	 	 	 	  	 	 	 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Outstanding at October 25, 2009 (Predecessor Company)	  	 	—	  	  	 	3,825,100	  	 	 	1.9	  	  	 	—	  	  	 	6.1 years	  	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Application of fresh-start reporting (Note 4)	  	 	—	  	  	 	(3,825,100	) 	 	 	 	 	  	 	 	 	  	 	 	 	
Outstanding at October 25, 2009 (Successor Company)	  	 	—	  	  	 	—	  	 	 	 	 	  	 	 	 	  	 	 	 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Total compensation expenses recorded for the restricted units and unit options pursuant to ASC 718 were $0 and $233 thousand for the ten-month period ended October 25, 2009, $16 thousand and $449 thousand for the year ended December 31, 2008, respectively. As of October 25, 2009, total unrecognized compensation cost related to unvested unit options of $166 thousand, which were expected to be recognized over a weighted average future period of 0.7 years, was recognized as reorganization items, net, according to the Company’s reorganization. As of December 31, 2008, there was $335 thousand of total unrecognized compensation cost related to unvested unit options, which were expected to be recognized over a weighted average future period of 1.0 years. Total fair value of restricted units released from restriction for the year ended December 31, 2008 was $152 thousand. Total fair value of options vested for the ten-month period ended October 25, 2009 and for the year ended December 31, 2008 was $266 thousand and $408 thousand, respectively.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The Company utilizes the Black-Scholes option-pricing model to measure the fair value of each option grant. The following summarizes the grant-date fair value of options granted during the specified periods and assumptions used in the Black-Scholes option-pricing model on a weighted average basis:

 	  	Predecessor	 	
 	  	Year Ended
December 31,
2008	 	
Grant-date fair value of option	  	$	0.87	  	
Expected term	  	 	2.2 Years	  	
Risk-free interest rate	  	 	2.5	% 	
Expected volatility	  	 	42.0	% 	
Expected dividends	  	 	—	  	
The total cash received from employees as a result of option exercises was $0, $183 thousand for the ten-month period ended October 25, 2009 and for the year ended December 31, 2008, respectively.
The number and weighted average grant-date fair value of the unvested unit options are as follows:

 	 	Ten-Month
Period Ended
October 25, 2009	 	 	Year Ended
December 31, 2008	 	
 	 	Number	 	 	Weighted
Average
Grant-Date
Fair Value	 	 	Number	 	 	Weighted
Average
Grant-Date
Fair Value	 	
Unvested options at the beginning of the period	 	 	1,131,563	  	 	$	0.65	  	 	 	2,374,896	  	 	$	0.43	  	
Granted options during the period	 	 	—	  	 	 	—	  	 	 	315,000	  	 	 	0.87	  	
Vested options during the period	 	 	(520,969	) 	 	 	0.51	  	 	 	(1,108,772	) 	 	 	0.31	  	
Forfeited options during the period	 	 	(63,156	) 	 	 	0.17	  	 	 	(449,561	) 	 	 	0.51	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unvested options at the end of the period	 	 	547,438	  	 	 	0.88	  	 	 	1,131,563	  	 	 	0.65	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
20. Discontinued Operations
On October 6, 2008, the Company announced the closure of its Imaging Solutions business segment. As of December 31, 2008, Imaging Solutions business segment qualified as a discontinued operation component of the Company under ASC 360,  “Property, Plant and Equipment,”  (“ASC 360”). As a result, the results of operations of the Imaging Solutions business segment were classified as discontinued operations. All prior period information has been reclassified to reflect this presentation on the statements of operations.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The results of operations of the Company’s discontinued Imaging Solutions business consist of the following:

 	  	Successor	 	 	 	 	 	Predecessor	 	
 	  	Two-Month
Period Ended
December 31,
2009	 	 	 	 	 	Ten-Month
Period Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
Net sales	  	$	947	  	 	 	 	 	 	$	2,728	  	 	$	65,862	  	
Cost of sales	  	 	369	  	 	 	 	 	 	 	3,617	  	 	 	81,789	  	
Selling, general and administrative expenses	  	 	68	  	 	 	 	 	 	 	(6,355	) 	 	 	3,491	  	
Research and development expenses	  	 	—	  	 	 	 	 	 	 	—	  	 	 	37,506	  	
Restructuring and impairment charges	  	 	—	  	 	 	 	 	 	 	(1,120	) 	 	 	34,158	  	
Income tax expenses	  	 	—	  	 	 	 	 	 	 	—	  	 	 	373	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from discontinued operations, net of taxes	  	$	510	  	 	 	 	 	 	$	6,586	  	 	$	(91,455	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
In prior years the Company had entered into an agreement with a software company to purchase licensed software products (the “Purchase Agreement”), including the licensed CAD software, for the three-year period from January 31, 2008 to January 30, 2011. The licensed CAD software has been used across all lines of the Company’s business for purposes of developing products by the Imaging Solutions business and the Display Solution business and verifying the origin of defects in the manufacturing process of the Semiconductor Manufacturing Services.
During the third quarter of 2009, due to the discontinuation of its Imaging Solutions business segment and the related declining usage of the licensed CAD software, the Company was able to renegotiate the Purchase Agreement with a software company. Such renegotiation resulted in a reduction of the total fee, which lowered the Company’s future scheduled payments. Therefore, the Company adjusted the previously recorded restructuring charges related to this agreement’s non-refundable future scheduled payments in the amount of $1,120 thousand. The Company had considered such payments as a contract termination cost. The adjustment of $1,120 thousand represents the amount by which the non-cancellable future payments that were to be incurred by the Imaging Solutions business segment were reduced as a result of the revised payment terms.
The Company renewed the Purchase Agreement exclusively for the use of other business segments and not for the use of the Imaging Solutions business segment and the Company has no continuing involvement in the Imaging Solutions business.
In connection with the closure of its Imaging Solutions business segment, the Company recorded impairment charges of $26,285 thousand during the third quarter ended September 28, 2008, in accordance with ASC 360. Also, the Company recorded restructuring charges of $7,873 thousand during the fourth quarter ended December 31, 2008, in accordance with ASC 420, “Exit or Disposal Cost Obligations” (“ASC 420”), related to one-time employee termination benefits, costs associated with the closing of the facilities and contract terminations. Actual payments of $4,989 thousand were charged against the restructuring accruals and the remaining accrual balance as of December 31, 2008 was $2,584 thousand.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
21. Restructuring and Impairment Charges
Successor Company
2010 Restructuring and Impairment Charges
The Company recognized $2,003 thousand of impairment charges for the year ended December 31, 2010, which consists of $391 thousand from IPR&D annual impairment test performed on September 30, 2010 and $1,612 thousand from twelve abandoned IPR&D projects.
Predecessor Company
2009 Restructuring and Impairment Charges
On March 31, 2009, the Company announced the closure of the Tokyo office of its subsidiary, MagnaChip Semiconductor Inc. (Japan). In connection with this closure, the Company recognized $439 thousand of restructuring charges, which consisted of one-time termination benefits and other related costs under ASC 420 for the ten-month period ended October 25, 2009. Actual payments of $439 thousand were charged against the restructuring accruals and there were no remaining restructuring accruals as of December 31, 2009.
2008 Restructuring and Impairment Charges
During the three months ended July 1, 2007, the Company recognized $1,978 thousand of restructuring accruals under ASC 420. The restructuring charges were related to the closure of the Company’s five-inch wafer fabrication facilities located in Gumi and those charges consisted of one-time termination benefits and other associated costs. Up to the first quarter of 2008, actual payments of $1,103 were charged against the restructuring accruals and the Company believes the restructuring activities were substantially completed as of March 30, 2008. Accordingly, the Company reversed $875 thousand of unused restructuring accruals.
As of December 31, 2008, the Company performed an additional goodwill impairment test triggered by the significant adverse change in the revenue of the MDS reporting unit, and determined that total amount of goodwill was impaired. Revenue of the MDS reporting unit was expected to decrease due to the deterioration of the Company’s financial credit status and the recession in the semiconductor industry resulting from the world-wide economic crisis beginning in the third quarter of 2008. Accordingly, an impairment charge of $14,245 thousand was recorded for the year ended December 31, 2008.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
22. Income Taxes
The Company’s income tax expenses are composed of domestic and foreign income taxes depending on the relevant tax jurisdiction. “Domestic” refers to the income before taxes, current income taxes and deferred income taxes generated or incurred in the United States, where the Parent resides.
The components of income tax expense are as follows:

 	  	Successor	 	 	 	 	 	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	 	Ten-Month
Period Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
Income (loss) from continuing operations before income taxes	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Domestic	  	$	(439	) 	 	$	(4	) 	 	 	 	 	 	$	774,188	  	 	$	18,442	  	
Foreign	  	 	82,949	  	 	 	(523	) 	 	 	 	 	 	 	67,627	  	 	 	(332,696	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	$	82,510	  	 	$	(527	) 	 	 	 	 	 	$	841,815	  	 	$	(314,254	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current income taxes expense (benefits)	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Domestic	  	$	92	  	 	$	16	  	 	 	 	 	 	$	(143	) 	 	$	1,335	  	
Foreign	  	 	6,555	  	 	 	1,244	  	 	 	 	 	 	 	6,033	  	 	 	8,530	  	
Uncertain tax position liability (domestic)	  	 	121	  	 	 	9	  	 	 	 	 	 	 	256	  	 	 	92	  	
Uncertain tax position liability (foreign)	  	 	251	  	 	 	23	  	 	 	 	 	 	 	95	  	 	 	138	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	 	7,019	  	 	 	1,292	  	 	 	 	 	 	 	6,241	  	 	 	10,095	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Deferred income taxes expense	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Domestic	  	 	—	  	 	 	—	  	 	 	 	 	 	 	—	  	 	 	—	  	
Foreign	  	 	1,371	  	 	 	654	  	 	 	 	 	 	 	1,054	  	 	 	1,490	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	 	1,371	  	 	 	654	  	 	 	 	 	 	 	1,054	  	 	 	1,490	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income tax expense	  	$	8,390	  	 	$	1,946	  	 	 	 	 	 	$	7,295	  	 	$	11,585	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Prior to its conversion to a corporation, the Parent was a limited liability company and a non-taxable entity for US tax purposes, and thus the applicable statutory income tax rate was zero. MagnaChip Semiconductor, Ltd. (Korea) is the principal operating entity within the consolidated Company. The statutory income tax rate of MagnaChip Semiconductor, Ltd. (Korea), including tax surcharges, applicable to the consolidated Company was approximately 24.2% in 2010 and 2009, and 27.5% in 2008. MagnaChip Semiconductor, Ltd. (Korea) was eligible for a tax exemption for companies qualified as direct foreign investments under the Korean tax code until 2008, and, accordingly, its corporate income tax was reduced by 30% in 2008.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The provision for domestic and foreign income taxes incurred is different from the amount calculated by applying the statutory tax rate to the net income before income taxes. The significant items causing this difference are as follows:

 	  	Successor	 	 	 	 	 	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	 	Ten-Month
Period
Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
Provision computed at statutory rate	  	$	—	  	 	$	—	  	 	 	 	 	 	$	—	  	 	$	—	  	
Permanent differences	  	 	9,129	  	 	 	(693	) 	 	 	 	 	 	 	(19,500	) 	 	 	(1,076	) 	
Change in statutory tax rate	  	 	(814	) 	 	 	(265	) 	 	 	 	 	 	 	118	  	 	 	8,173	  	
Adjustment for overseas tax rate	  	 	10,526	  	 	 	3,139	  	 	 	 	 	 	 	8,192	  	 	 	(52,569	) 	
Change in valuation allowance	  	 	(10,823	) 	 	 	(267	) 	 	 	 	 	 	 	18,134	  	 	 	56,827	  	
Uncertain tax positions liability	  	 	372	  	 	 	32	  	 	 	 	 	 	 	351	  	 	 	230	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expenses	  	$	8,390	  	 	$	1,946	  	 	 	 	 	 	$	7,295	  	 	$	11,585	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
A summary of the composition of net deferred income tax assets (liabilities) at December 31, 2010 and 2009 are as follows:

 	  	Successor	 	
 	  	December 31,
2010	 	 	December 31,
2009	 	
Deferred tax assets	  	 	 	 	 	 	 	 	
Inventories	  	$	2,056	  	 	$	—	  	
Accrued expenses	  	 	1,360	  	 	 	2,056	  	
Product warranties	  	 	72	  	 	 	322	  	
Other reserves	  	 	538	  	 	 	530	  	
Accumulated severance benefits	  	 	15,584	  	 	 	12,042	  	
Property, plant and equipments	  	 	11,907	  	 	 	15,503	  	
NOL carry-forwards	  	 	129,678	  	 	 	146,833	  	
Tax credit	  	 	39,298	  	 	 	31,558	  	
Royalty income	  	 	5,154	  	 	 	5,985	  	
Foreign currency translation loss	  	 	24,896	  	 	 	30,198	  	
Debt issuance costs	  	 	145	  	 	 	284	  	
Others	  	 	3,659	  	 	 	3,081	  	
 	  	 	 	 	 	 	 	 	
Total deferred tax assets	  	 	234,347	  	 	 	248,392	  	
Less: valuation allowance	  	 	(219,045	) 	 	 	(225,704	) 	
 	  	 	 	 	 	 	 	 	
 	  	 	15,302	  	 	 	22,688	  	
 	 	 	
Deferred tax liabilities	  	 	 	 	 	 	 	 	
Inventories	  	 	—	  	 	 	1,721	  	
Derivative assets	  	 	1,680	  	 	 	—	  	
Intangible assets	  	 	5,450	  	 	 	12,247	  	
Others	  	 	207	  	 	 	243	  	
 	  	 	 	 	 	 	 	 	
Total deferred tax liabilities	  	 	7,337	  	 	 	14,211	  	
 	  	 	 	 	 	 	 	 	
Net deferred tax assets	  	$	7,965	  	 	$	8,477	  	

Reported as	  	 	 	 	 	 	 	 	
Current deferred income tax assets (other current assets)	  	$	1,968	  	 	$	1,836	  	
Long-term deferred income tax assets (other non-current assets)	  	$	5,997	  	 	$	6,641	  	
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Changes in valuation allowance for deferred tax assets for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008 are as follows:

 	  	Successor	 	 	 	 	 	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	 	Two-Month
Period Ended
December 31,
2009	 	  	Year Ended
December 31,
2008	 	
Beginning balance	  	$	225,704	  	 	$	223,367	  	 	 	 	 	 	$	196,093	  	  	$	165,977	  	
Charge to expenses	  	 	(10,823	) 	 	 	(409	) 	 	 	 	 	 	 	17,090	  	  	 	79,438	  	
Translation adjustment	  	 	4,164	  	 	 	2,746	  	 	 	 	 	 	 	10,184	  	  	 	(49,322	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Ending balance	  	$	219,045	  	 	$	225,704	  	 	 	 	 	 	$	223,367	  	  	$	196,093	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Deferred income tax assets are recognized only to the extent that realization of the related tax benefit is more likely than not. Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company’s ability to generate taxable income within the period during which the temporary differences reverse, the outlook for the economic environment in which the Company operates and the overall future industry outlook. Based on the Company’s historical accounting and tax losses, management determined that it was more likely than not that the Company would realize benefits for a foreign subsidiary which has a history of earnings, related to its deferred tax assets in the amount of $7,965 thousand and $8,477 thousand as of December 31, 2010 and 2009, respectively. Accordingly, the Company recorded a valuation allowance of $219,045 thousand and $225,704 thousand on its net deferred tax assets as of December 31, 2010 and 2009, respectively.
At December 31, 2010, the Company had approximately $550,199 thousand of net operating loss carry-forwards available to offset future taxable income. The majority of net operating loss is related to the Company’s Korean subsidiary, which expires in varying amounts starting from 2011 to 2019. The Company also has Korean and Dutch tax credit carry-forwards of approximately $14,051 thousand and $25,238 thousand, respectively, as of December 31, 2010. The Korean tax credits expire at various dates starting from 2011 to 2014, and the Dutch tax credits are carried forward to be used for an indefinite period of time.
Uncertainty in Income Taxes
The Company’s subsidiaries file income tax returns in Korea, Japan, Taiwan, the U.S. and in various other jurisdictions. The Company is subject to income tax examinations by tax authorities of these jurisdictions for all years since the beginning of its operation as an independent company in October 2004.
As of December 31, 2010 and 2009, the Company recorded $2,905 thousand and $1,997 thousand of liabilities for unrecognized tax benefits, respectively. For the year ended December 31, 2010, the Company incurred $2,548 thousand of income tax expenses for uncertain tax positions mainly resulting from withholding taxes related to intercompany balances and recorded $1,640 thousand of income tax benefits by reversing liabilities due to the lapse of the applicable statute of limitations.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The Company recognizes interest and penalties accrued related to unrecognized tax benefits as income tax expenses. The Company recognized $179 thousand, $26 thousand, $206 thousand and $155 thousand of interest and penalties as income tax expense for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008, respectively. Total interest and penalties accrued as of December 31, 2010 and 2009 were $317 thousand and $946 thousand, respectively.
A tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of each period is as follows:

 	  	Successor	 	 	 	 	 	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	 	Two-Month
Period Ended
December 31,
2009	 	 	 	 	 	Ten-Month
Period Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
Unrecognized tax benefits, balance at the beginning	  	$	2,979	  	 	$	2,874	  	 	 	 	 	 	$	2,293	  	 	$	1,593	  	
Additions based on tax positions related to the current year	  	 	1,862	  	 	 	—	  	 	 	 	 	 	 	33	  	 	 	—	  	
Additions for tax positions of prior years	  	 	4,275	  	 	 	123	  	 	 	 	 	 	 	635	  	 	 	748	  	
Reductions for tax positions of prior years	  	 	—	  	 	 	(18	) 	 	 	 	 	 	 	(88	) 	 	 	(64	) 	
Lapse of statute of limitations	  	 	(592	) 	 	 	—	  	 	 	 	 	 	 	—	  	 	 	—	  	
Translation adjustment	  	 	65	  	 	 	—	  	 	 	 	 	 	 	1	  	 	 	16	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrecognized tax benefits, balance at the ending	  	$	8,589	  	 	$	2,979	  	 	 	 	 	 	$	2,874	  	 	$	2,293	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
23. Geographic and Segment Information
The following sets forth information relating to the reportable segments:

 	  	Successor	 	  	 	 	 	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	  	Two-Month
Period Ended
December 31,
2009	 	  	 	 	 	Ten-Month
Period Ended
October 25,
2009	 	  	Year Ended
December 31,
2008	 	
Net Sales	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Display Solutions	  	$	305,884	  	  	$	51,044	  	  	 	 	 	 	$	231,894	  	  	$	304,095	  	
Semiconductor Manufacturing Services	  	 	405,197	  	  	 	54,759	  	  	 	 	 	 	 	206,662	  	  	 	287,111	  	
Power Solutions	  	 	57,273	  	  	 	4,746	  	  	 	 	 	 	 	7,627	  	  	 	5,437	  	
All other	  	 	2,051	  	  	 	533	  	  	 	 	 	 	 	2,801	  	  	 	5,021	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Total segment net sales	  	$	770,405	  	  	$	111,082	  	  	 	 	 	 	$	448,984	  	  	$	601,664	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Gross Profit	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Display Solutions	  	$	78,175	  	  	$	8,747	  	  	 	 	 	 	$	61,788	  	  	$	57,386	  	
Semiconductor Manufacturing Services	  	 	155,476	  	  	 	10,657	  	  	 	 	 	 	 	71,825	  	  	 	98,411	  	
Power Solutions	  	 	7,856	  	  	 	737	  	  	 	 	 	 	 	1,431	  	  	 	(4,272	) 	
All other	  	 	2,051	  	  	 	533	  	  	 	 	 	 	 	2,801	  	  	 	4,885	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Total segment gross profit	  	$	243,558	  	  	$	20,674	  	  	 	 	 	 	$	137,845	  	  	$	156,410	  	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The following is a summary of net sales by region, based on the location of the customer:

 	  	Successor	 	  	 	 	 	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	  	Two-Month
Period Ended
December 31,
2009	 	  	 	 	 	Ten-Month
Period Ended
October 25,
2009	 	  	Year Ended
December 31,
2008	 	
Korea	  	$	379,057	  	  	$	62,241	  	  	 	 	 	 	$	244,309	  	  	$	301,006	  	
Asia Pacific	  	 	222,060	  	  	 	25,573	  	  	 	 	 	 	 	116,920	  	  	 	144,482	  	
Japan	  	 	57,431	  	  	 	6,477	  	  	 	 	 	 	 	31,641	  	  	 	79,892	  	
North America	  	 	95,166	  	  	 	14,910	  	  	 	 	 	 	 	48,458	  	  	 	61,346	  	
Europe	  	 	14,946	  	  	 	1,881	  	  	 	 	 	 	 	7,656	  	  	 	14,938	  	
Africa	  	 	1,745	  	  	 	—	  	  	 	 	 	 	 	—	  	  	 	—	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
 	  	$	770,405	  	  	$	111,082	  	  	 	 	 	 	$	448,984	  	  	$	601,664	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
Over 99% of the Company’s property, plant and equipment are located in Korea as of December 31, 2010.
Net sales from the Company’s top ten largest customers accounted for 63%, 66%, 69% and 63% for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and for the year ended December 31, 2008, respectively.
The Company recorded $126.7 million, $25.3 million, $121.5 million and $152.4 million of sales to one customer within its Display Solutions segment, which represents greater than 10% of net sales, for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and for the year ended December 31, 2008, respectively.
24. Commitments and Contingencies
Operating Agreements with Hynix
In connection with the acquisition of the non-memory semiconductor business from Hynix on October 4, 2004 (the “Original Acquisition”), the Company entered into several agreements with Hynix, including a non-exclusive cross license that provides the Company with access to certain of Hynix’s intellectual property for use in the manufacture and sale of non-memory semiconductor products. The Company also agreed to provide certain utilities and infrastructure support services to Hynix. The obligation to provide certain of these services lasts indefinitely.
Upon the closing of the Original Acquisition, the Company’s Korean subsidiary and Hynix also entered into lease agreements under which the Company’s Korean subsidiary leases space from Hynix in several buildings, primarily warehouses and utility facilities, in Cheongju, Korea. These leases are generally for an initial term of 20 years plus an indefinite number of renewal terms of 10 years each. Each of the leases is cancelable upon 90 days’ notice by the lessee. The Company also leases certain land from Hynix located in Cheongju, Korea. The term of this lease is indefinite unless otherwise agreed by the parties, and as long as the buildings remain on the lease site and are owned and used by the Company for permitted uses.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Operating Leases
The Company leases land, office space and equipment under various operating lease agreements that expire through 2034. Rental expenses were approximately $7,824 thousand, $2,472 thousand, $11,775 thousand and $13,380 thousand for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and the year ended December 31, 2008, respectively.
As of December 31, 2010, the minimum aggregate rental payments due under non-cancelable lease contracts are as follows:

2011	  	$	    5,322	  	
2012	  	 	3,979	  	
2013	  	 	1,960	  	
2014	  	 	1,928	  	
2015	  	 	1,928	  	
2016 and thereafter	  	 	36,196	  	
 	  	 	 	 	
 	  	$	51,313	  	
 	  	 	 	 	
Payments of Guarantee
As of December 31, 2010 and 2009, the Company has provided guarantees for bank loans that employees borrowed to participate in the issuance of new shares of Hynix in 1999. The outstanding balances of guarantees for payments provided by the Company amounted to approximately $164 thousand and $163 thousand as of December 31, 2010 and 2009, respectively.
Loss Contingency
Samsung Fiber Optics has made a claim against the Company for the infringement of certain patent rights of Caltech in relation to imaging sensor products provided by the Company to Samsung Fiber Optics. The Company believes it is probable that the pending claim will have an unfavorable outcome and further believes the associated loss can be reasonably estimated according to ASC 450, “Contingencies” (“ASC 450”). The Company accrued $718 thousand of estimated liabilities as of December 31, 2010 as the Company believes its accrual of $718 thousand is its best estimate if the final outcome is unfavorable. Estimation was based on the Company’s most recent communication with Samsung Fiber Optics. Accordingly, the Company cannot provide assurance that the estimated liabilities will be realized, and actual results could vary materially. Legal costs expected to be incurred in connection with the loss contingency are expensed when the relevant services are rendered to the Company.
25. Related Party Transactions
Stockholders
Funds affiliated with Avenue Capital Management II, L.P. are the majority stockholders of the Company, owning 69.8% of the common stock outstanding at December 31, 2010.
 
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Senior Notes
Funds affiliated with Avenue Capital Management II, L.P. held $35 million aggregate principal amount of the $250 million senior notes as of December 31, 2010. The Company recorded $786 thousand of interest payable and $2,712 thousand of interest expenses in relation with the notes held by the funds affiliated with Avenue Capital Management II, L.P. as of December 31, 2010 and for the year then ended.
Warrants
Funds affiliated with Avenue Capital Management II, L.P. own warrants for the purchase of 556 thousand common shares out of the total warrants for the purchase of 1,875 thousand shares outstanding as of December 31, 2010.
New Term Loan
A portion of the new term loan equal to $42,055 thousand was borrowed from Avenue Investments, LP, which is an affiliate of Avenue Capital Management II, L.P., and related interest expense of $822 thousand was recorded in relation to this new term loan and remains as accrued interest as of December 31, 2009. The first principal installment of $105 thousand was repaid in March 2010. This new term loan was fully repaid in April 2010 with a portion of the proceeds from the $250 million senior notes offering, $42,828 thousand of which was paid to Avenue Investments, LP, including $878 thousand of accrued interest.
Backstop Commitment Agreement
Funds affiliated with Avenue Capital Management II, L.P. were paid an amount in new common stock equal to 10% of the new common stock (the “standby commitment fee”), or 3,750 thousand shares. The standby commitment fee was deemed fully earned and payable upon the Reorganization Effective Date, regardless of whether the offering was fully subscribed by eligible holders of the second lien noteholder claims.
Loans to employees
Loans to employees as of December 31, 2010 and 2009 were as follows:

 	  	Successor	 	
 	  	December 31,
2010	 	  	 	 	  	December 31,
2009	 	
Short-term loans	  	$	33	  	  	 	 	 	  	$	40	  	
Long-term loans	  	 	36	  	  	 	 	 	  	 	45	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	69	  	  	 	 	 	  	$	85	  	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
26. Earnings (loss) per Share/Unit
The following table illustrates the computation of basic and diluted earnings (loss) per common share/unit:

 	  	Successor	 	 	 	 	  	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	  	Two-Month
Period Ended
December 31,
2009	 	 	 	 	  	Ten-Month
Period Ended
October 25,
2009	 	 	Year Ended
December 31,
2008	 	
Income (loss) from continuing operations	  	$	74,120	  	  	$	(2,473	) 	 	 	 	 	  	$	834,520	  	 	$	(325,839	) 	
Income (loss) from discontinued operations, net of taxes	  	 	—	  	  	 	510	  	 	 	 	 	  	 	6,586	  	 	 	(91,455	) 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Net income (loss)	  	$	74,120	  	  	$	(1,963	) 	 	 	 	 	  	$	841,106	  	 	$	(417,294	) 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Dividends accrued on preferred unitholders	  	 	—	  	  	 	—	  	 	 	 	 	  	 	(6,317	) 	 	 	(13,264	) 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Income (loss) from continuing operations attributable to common stock/units	  	$	74,120	  	  	$	(2,473	) 	 	 	 	 	  	$	828,203	  	 	$	(339,103	) 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Net income (loss) attributable to common stock/units	  	$	74,120	  	  	$	(1,963	) 	 	 	 	 	  	$	834,789	  	 	$	(430,558	) 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Weighted average common stock/units outstanding —	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Basic	  	 	37,836,256	  	  	 	37,607,846	  	 	 	 	 	  	 	52,923,483	  	 	 	52,768,614	  	
Diluted	  	 	39,144,287	  	  	 	37,607,846	  	 	 	 	 	  	 	52,923,483	  	 	 	52,768,614	  	
Earnings (loss) per share/unit from continuing operations —	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Basic	  	$	1.96	  	  	$	(0.07	) 	 	 	 	 	  	$	15.65	  	 	$	(6.43	) 	
Diluted	  	$	1.89	  	  	$	(0.07	) 	 	 	 	 	  	$	15.65	  	 	$	(6.43	) 	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Earnings (loss) per share/unit from discontinued operations —	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Basic and diluted	  	$	—	  	  	$	0.02	  	 	 	 	 	  	$	0.12	  	 	$	(1.73)	  	
 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Earnings (loss) per share/unit —	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Basic	  	$	1.96	  	  	$	(0.05	) 	 	 	 	 	  	$	15.77	  	 	$	(8.16	) 	
Diluted	  	$	1.89	  	  	$	(0.05	) 	 	 	 	 	  	$	15.77	  	 	$	(8.16	) 	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
The following outstanding redeemable convertible preferred units, stock/unit options, restricted stock/units and warrants were excluded from the computation of diluted earnings (loss) per share/unit, as they would have an anti-dilutive effect on the calculation:

 	  	Successor	 	  	 	 	 	Predecessor	 	
 	  	Year Ended
December 31,
2010	 	  	Two-Month
Period Ended
December 31,
2009	 	  	 	 	 	Ten-Month
Period Ended
October 25,
2009	 	  	Year Ended
December 31,
2008	 	
Redeemable convertible preferred units	  	 	NA	  	  	 	NA	  	  	 	 	 	 	 	93,997	  	  	 	93,997	  	
Options	  	 	114,250	  	  	 	1,920,625	  	  	 	 	 	 	 	3,825,100	  	  	 	4,216,600	  	
Restricted Stock/Units	  	 	—	  	  	 	584,430	  	  	 	 	 	 	 	—	  	  	 	—	  	
Warrants	  	 	1,875,017	  	  	 	1,875,017	  	  	 	 	 	 	 	—	  	  	 	—	  	
27. Subsequent Events
A. Hedge Transactions (unaudited)
Effective January 17, 2011, the Company’s Korean subsidiary entered into zero cost collar contracts to hedge the risk of changes in the functional-currency-equivalent cash flows attributable to currency rate changes on U.S. dollar denominated revenues. Total notional amounts for the zero cost collar contracts were $60 million and monthly settlements for the contracts will be made from January to June 2012.
B. Corporate Conversion
In connection with the Company’s initial public offering (“IPO”), prior to the effectiveness of its registration statement, the Company’s board of directors and the holders of a majority of its outstanding common units will elect to convert the Company from a Delaware limited liability company to a Delaware corporation (the “Corporation”). In connection with the corporate conversion, outstanding common units of the Company will be automatically converted into shares of common stock of the Corporation, outstanding options to purchase common units of the Company will be automatically converted into options to purchase shares of common stock of the Corporation and outstanding warrants to purchase common units of the Company will be automatically converted into warrants to purchase shares of common stock of the Corporation, all at a ratio of eight-for-one. The consolidated financial statements as of December 31, 2010 and 2009 and for the year ended December 31, 2010 and the two-month period ended December 31, 2009, give retroactive effect to the corporate conversion.
28. Condensed Consolidating Financial Information
The $250 million senior notes are fully and unconditionally, jointly and severally guaranteed by the Company and all of its subsidiaries, except for MagnaChip Semiconductor, Ltd. (Korea) and MagnaChip Semiconductor (Shanghai) Company Limited.
The senior notes are structurally subordinated to the creditors of our principal manufacturing and selling subsidiary, MagnaChip Semiconductor, Ltd. (Korea), which accounts for substantially all of our net sales and assets.
Below are condensed consolidating balance sheets as of December 31, 2010 and 2009, condensed consolidating statements of operations and of cash flows for the year ended December 31, 2010, the two-month period ended December 31, 2009, the ten-month period ended October 25, 2009 and for the year ended December 31, 2008 of those entities that guarantee the senior notes, those that do not, MagnaChip Semiconductor Corporation, and the co-issuers.
For the purpose of the guarantor financial information, the investments in subsidiaries are accounted for under the equity method.
 
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Condensed Consolidating Balance Sheet
December 31, 2010
(Successor Company)

 	 	MagnaChip
Semiconductor
Corporation
(Parent)	 	 	Co-Issuers	 	 	Non-
Guarantors	 	 	Guarantors	 	 	Eliminations	 	 	Consolidated	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	79	  	 	$	46,595	  	 	$	112,370	  	 	$	13,128	  	 	$	—	  	 	$	172,172	  	
Accounts receivable, net	 	 	—	  	 	 	—	  	 	 	160,317	  	 	 	60,533	  	 	 	(101,796	) 	 	 	119,054	  	
Inventories, net	 	 	—	  	 	 	—	  	 	 	68,435	  	 	 	158	  	 	 	(158	) 	 	 	68,435	  	
Other receivables	 	 	718	  	 	 	718	  	 	 	23,111	  	 	 	2,969	  	 	 	(24,597	) 	 	 	2,919	  	
Prepaid expenses	 	 	52	  	 	 	2	  	 	 	10,957	  	 	 	93	  	 	 	(2,897	) 	 	 	8,207	  	
Short-term intercompany loan	 	 	—	  	 	 	95,000	  	 	 	—	  	 	 	95,000	  	 	 	(190,000	) 	 	 	—	  	
Other current assets	 	 	41,363	  	 	 	124,376	  	 	 	9,606	  	 	 	111,628	  	 	 	(268,053	) 	 	 	18,920	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current assets	 	 	42,212	  	 	 	266,691	  	 	 	384,796	  	 	 	283,509	  	 	 	(587,501	) 	 	 	389,707	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Property, plant and equipment, net	 	 	—	  	 	 	—	  	 	 	178,623	  	 	 	389	  	 	 	—	  	 	 	179,012	  	
Intangible assets, net	 	 	—	  	 	 	—	  	 	 	27,009	  	 	 	529	  	 	 	—	  	 	 	27,538	  	
Long-term prepaid expenses	 	 	—	  	 	 	—	  	 	 	17,371	  	 	 	—	  	 	 	(9,136	) 	 	 	8,235	  	
Investment in subsidiaries	 	 	(567,941	) 	 	 	(641,799	) 	 	 	—	  	 	 	(475,696	) 	 	 	1,685,436	  	 	 	—	  	
Long-term intercompany loan	 	 	697,125	  	 	 	792,846	  	 	 	—	  	 	 	621,000	  	 	 	(2,110,971	) 	 	 	—	  	
Other non-current assets	 	 	—	  	 	 	7,819	  	 	 	6,611	  	 	 	6,821	  	 	 	1	  	 	 	21,252	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Assets	 	$	171,396	  	 	$	425,557	  	 	$	614,410	  	 	$	436,552	  	 	$	(1,022,171	) 	 	$	625,744	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities and Stockholders’ Equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	$	—	  	 	$	—	  	 	$	118,353	  	 	$	41,634	  	 	$	(101,723	) 	 	$	58,264	  	
Other accounts payable	 	 	8,334	  	 	 	8,987	  	 	 	15,994	  	 	 	5,927	  	 	 	(24,597	) 	 	 	14,645	  	
Accrued expenses	 	 	211	  	 	 	39,887	  	 	 	134,460	  	 	 	126,204	  	 	 	(268,127	) 	 	 	32,635	  	
Short-term intercompany borrowings	 	 	—	  	 	 	—	  	 	 	95,000	  	 	 	95,000	  	 	 	(190,000	) 	 	 	—	  	
Current portion of capital lease obligations	 	 	—	  	 	 	—	  	 	 	5,373	  	 	 	184	  	 	 	—	  	 	 	5,557	  	
Other current liabilities	 	 	—	  	 	 	—	  	 	 	3,815	  	 	 	4,130	  	 	 	(2,897	) 	 	 	5,048	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current liabilities	 	 	8,545	  	 	 	48,874	  	 	 	372,995	  	 	 	273,079	  	 	 	(587,344	) 	 	 	116,149	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term borrowings	 	 	—	  	 	 	944,007	  	 	 	621,000	  	 	 	792,846	  	 	 	(2,110,971	) 	 	 	246,882	  	
Long-term obligations under capital lease	 	 	—	  	 	 	—	  	 	 	2,888	  	 	 	217	  	 	 	—	  	 	 	3,105	  	
Accrued severance benefits, net	 	 	—	  	 	 	—	  	 	 	86,511	  	 	 	1,267	  	 	 	—	  	 	 	87,778	  	
Other non-current liabilities	 	 	—	  	 	 	—	  	 	 	6,653	  	 	 	11,462	  	 	 	(9,136	) 	 	 	8,979	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities	 	 	8,545	  	 	 	992,881	  	 	 	1,090,047	  	 	 	1,078,871	  	 	 	(2,707,451	) 	 	 	462,893	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stockholders’ equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock	 	 	384	  	 	 	136,229	  	 	 	39,005	  	 	 	51,976	  	 	 	(227,210	) 	 	 	384	  	
Additional paid-in capital	 	 	95,585	  	 	 	(734,101	) 	 	 	(537,608	) 	 	 	(732,266	) 	 	 	2,003,975	  	 	 	95,585	  	
Retained earnings	 	 	72,157	  	 	 	35,823	  	 	 	31,799	  	 	 	43,269	  	 	 	(110,891	) 	 	 	72,157	  	
Accumulated other comprehensive loss	 	 	(5,275	) 	 	 	(5,275	) 	 	 	(8,833	) 	 	 	(5,298	) 	 	 	19,406	  	 	 	(5,275	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	162,851	  	 	 	(567,324	) 	 	 	(475,637	) 	 	 	(642,319	) 	 	 	1,685,280	  	 	 	162,851	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	 	$	171,396	  	 	$	425,557	  	 	$	614,410	  	 	$	436,552	  	 	$	(1,022,171	) 	 	$	625,744	  	

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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Condensed Consolidating Balance Sheet
December 31, 2009
(Successor Company)

 	 	MagnaChip
Semiconductor
Corporation
(Parent)	 	 	Co-Issuers	 	 	Non-
Guarantors	 	 	Guarantors	 	 	Eliminations	 	 	Consolidated	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	136	  	 	$	24	  	 	$	45,443	  	 	$	19,322	  	 	$	—	  	 	$	64,925	  	
Accounts receivable, net	 	 	—	  	 	 	—	  	 	 	122,500	  	 	 	66,872	  	 	 	(115,139	) 	 	 	74,233	  	
Inventories, net	 	 	—	  	 	 	—	  	 	 	59,914	  	 	 	4,098	  	 	 	(605	) 	 	 	63,407	  	
Other receivables	 	 	710	  	 	 	718	  	 	 	7,061	  	 	 	3,617	  	 	 	(8,673	) 	 	 	3,433	  	
Prepaid expenses	 	 	165	  	 	 	85	  	 	 	14,122	  	 	 	1,150	  	 	 	(2,897	) 	 	 	12,625	  	
Short-term intercompany loan	 	 	—	  	 	 	95,000	  	 	 	—	  	 	 	95,000	  	 	 	(190,000	) 	 	 	—	  	
Other current assets	 	 	16	  	 	 	72,614	  	 	 	776	  	 	 	72,868	  	 	 	(142,841	) 	 	 	3,433	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current assets	 	 	1,027	  	 	 	168,441	  	 	 	249,816	  	 	 	262,927	  	 	 	(460,155	) 	 	 	222,056	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Property, plant and equipment, net	 	 	—	  	 	 	—	  	 	 	155,951	  	 	 	386	  	 	 	—	  	 	 	156,337	  	
Intangible assets, net	 	 	—	  	 	 	—	  	 	 	49,459	  	 	 	699	  	 	 	—	  	 	 	50,158	  	
Long-term prepaid expenses	 	 	—	  	 	 	—	  	 	 	22,576	  	 	 	—	  	 	 	(12,034	) 	 	 	10,542	  	
Investment in subsidiaries	 	 	(608,843	) 	 	 	(690,259	) 	 	 	—	  	 	 	(517,520	) 	 	 	1,816,622	  	 	 	—	  	
Long-term intercompany loan	 	 	824,091	  	 	 	806,355	  	 	 	—	  	 	 	621,000	  	 	 	(2,251,446	) 	 	 	—	  	
Other non-current assets	 	 	—	  	 	 	234	  	 	 	5,753	  	 	 	8,251	  	 	 	—	  	 	 	14,238	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Assets	 	$	216,275	  	 	$	284,771	  	 	$	483,555	  	 	$	375,743	  	 	$	(907,013	) 	 	$	453,331	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities and Stockholders’ Equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	$	—	  	 	$	—	  	 	$	106,792	  	 	$	67,975	  	 	$	(115,062	) 	 	$	59,705	  	
Other accounts payable	 	 	485	  	 	 	5,551	  	 	 	6,337	  	 	 	3,490	  	 	 	(8,673	) 	 	 	7,190	  	
Accrued expenses	 	 	100	  	 	 	1,134	  	 	 	89,045	  	 	 	74,753	  	 	 	(142,918	) 	 	 	22,114	  	
Short-term intercompany borrowings	 	 	—	  	 	 	—	  	 	 	95,000	  	 	 	95,000	  	 	 	(190,000	) 	 	 	—	  	
Current portion of long-term debt	 	 	—	  	 	 	618	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	618	  	
Other current liabilities	 	 	—	  	 	 	—	  	 	 	2,935	  	 	 	3,899	  	 	 	(2,897	) 	 	 	3,937	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current liabilities	 	 	585	  	 	 	7,303	  	 	 	300,109	  	 	 	245,117	  	 	 	(459,550	) 	 	 	93,564	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term borrowings	 	 	—	  	 	 	885,224	  	 	 	621,000	  	 	 	806,354	  	 	 	(2,251,446	) 	 	 	61,132	  	
Accrued severance benefits, net	 	 	—	  	 	 	—	  	 	 	71,362	  	 	 	1,047	  	 	 	—	  	 	 	72,409	  	
Other non-current liabilities	 	 	—	  	 	 	—	  	 	 	8,550	  	 	 	14,020	  	 	 	(12,034	) 	 	 	10,536	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities	 	 	585	  	 	 	892,527	  	 	 	1,001,021	  	 	 	1,066,538	  	 	 	(2,723,030	) 	 	 	237,641	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stockholders’ equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock	 	 	384	  	 	 	136,229	  	 	 	39,005	  	 	 	51,976	  	 	 	(227,210	) 	 	 	384	  	
Additional paid-in capital	 	 	223,451	  	 	 	(735,940	) 	 	 	(539,175	) 	 	 	(734,525	) 	 	 	2,009,640	  	 	 	223,451	  	
Accumulated deficit	 	 	(1,963	) 	 	 	(1,871	) 	 	 	(11,636	) 	 	 	(2,056	) 	 	 	15,563	  	 	 	(1,963	) 	
Accumulated other comprehensive loss	 	 	(6,182	) 	 	 	(6,174	) 	 	 	(5,660	) 	 	 	(6,190	) 	 	 	18,024	  	 	 	(6,182	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	215,690	  	 	 	(607,756	) 	 	 	(517,466	) 	 	 	(690,795	) 	 	 	1,816,017	  	 	 	215,690	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	 	$	216,275	  	 	$	284,771	  	 	$	483,555	  	 	$	375,743	  	 	$	(907,013	) 	 	$	453,331	  	

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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Condensed Consolidating Statement of Operations
For the year ended December 31, 2010
(Successor Company)

 	 	MagnaChip
Semiconductor
Corporation
(Parent)	 	 	Co-Issuers	 	 	Non-
Guarantors	 	 	Guarantors	 	 	Eliminations	 	 	Consolidated	 	
Net sales	 	$	—	  	 	$	—	  	 	$	765,157	  	 	$	31,957	  	 	$	(26,709	) 	 	$	770,405	  	
Cost of sales	 	 	—	  	 	 	—	  	 	 	523,214	  	 	 	7,816	  	 	 	(4,183	) 	 	 	526,847	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	—	  	 	 	—	  	 	 	241,943	  	 	 	24,141	  	 	 	(22,526	) 	 	 	243,558	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	1,661	  	 	 	1,862	  	 	 	63,795	  	 	 	10,619	  	 	 	(11,297	) 	 	 	66,640	  	
Research and development expenses	 	 	—	  	 	 	—	  	 	 	87,497	  	 	 	7,996	  	 	 	(11,969	) 	 	 	83,524	  	
Restructuring and impairment charges	 	 	—	  	 	 	—	  	 	 	2,003	  	 	 	—	  	 	 	—	  	 	 	2,003	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss) from continuing operations	 	 	(1,661	) 	 	 	(1,862	) 	 	 	88,648	  	 	 	5,526	  	 	 	740	  	 	 	91,391	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expenses)	 	 	38,039	  	 	 	(6,166	) 	 	 	(45,191	) 	 	 	4,437	  	 	 	—	  	 	 	(8,881	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations before income taxes, equity in earnings of related equity investment	 	 	36,378	  	 	 	(8,028	) 	 	 	43,457	  	 	 	9,963	  	 	 	740	  	 	 	82,510	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expenses	 	 	—	  	 	 	—	  	 	 	22	  	 	 	8,368	  	 	 	—	  	 	 	8,390	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before equity in earnings of related investment	 	 	36,378	  	 	 	(8,028	) 	 	 	43,435	  	 	 	1,595	  	 	 	740	  	 	 	74,120	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings of related investment	 	 	37,742	  	 	 	45,722	  	 	 	—	  	 	 	43,730	  	 	 	(127,194	) 	 	 	—	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	74,120	  	 	$	37,694	  	 	$	43,435	  	 	$	45,325	  	 	$	(126,454	) 	 	$	74,120	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to common shares	 	$	74,120	  	 	$	37,694	  	 	$	43,435	  	 	$	45,325	  	 	$	(126,454	) 	 	$	74,120	  	

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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Condensed Consolidating Statement of Operations
For the two-month period ended December 31, 2009
(Successor Company)

 	 	MagnaChip
Semiconductor
Corporation
(Parent)	 	 	Co-Issuers	 	 	Non-
Guarantors	 	 	Guarantors	 	 	Eliminations	 	 	Consolidated	 	
Net sales	 	$	—	  	 	$	—	  	 	$	112,693	  	 	$	32,955	  	 	$	(34,566	) 	 	$	111,082	  	
Cost of sales	 	 	—	  	 	 	—	  	 	 	93,020	  	 	 	27,429	  	 	 	(30,041	) 	 	 	90,408	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	—	  	 	 	—	  	 	 	19,673	  	 	 	5,526	  	 	 	(4,525	) 	 	 	20,674	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	(69	) 	 	 	23	  	 	 	13,659	  	 	 	1,969	  	 	 	(1,042	) 	 	 	14,540	  	
Research and development expenses	 	 	—	  	 	 	—	  	 	 	16,048	  	 	 	1,710	  	 	 	(3,017	) 	 	 	14,741	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss) from continuing operations	 	 	69	  	 	 	(23	) 	 	 	(10,034	) 	 	 	1,847	  	 	 	(466	) 	 	 	(8,607	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expenses)	 	 	—	  	 	 	377	  	 	 	(2,118	) 	 	 	9,821	  	 	 	—	  	 	 	8,080	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations before income taxes, equity in loss of related equity investment	 	 	69	  	 	 	354	  	 	 	(12,152	) 	 	 	11,668	  	 	 	(466	) 	 	 	(527	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expenses (benefits)	 	 	—	  	 	 	—	  	 	 	(6	) 	 	 	1,952	  	 	 	—	  	 	 	1,946	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before equity in loss of related investment	 	 	69	  	 	 	354	  	 	 	(12,146	) 	 	 	9,716	  	 	 	(466	) 	 	 	(2,473	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss of related investment	 	 	(2,032	) 	 	 	(2,225	) 	 	 	—	  	 	 	(11,772	) 	 	 	16,029	  	 	 	—	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss from continuing operations	 	 	(1,963	) 	 	 	(1,871	) 	 	 	(12,146	) 	 	 	(2,056	) 	 	 	15,563	  	 	 	(2,473	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from discontinued operation, net of taxes	 	 	—	  	 	 	—	  	 	 	510	  	 	 	—	  	 	 	—	  	 	 	510	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(1,963	) 	 	$	(1,871	) 	 	$	(11,636	) 	 	$	(2,056	) 	 	$	15,563	  	 	$	(1,963	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss from continuing operations attributable to common shares	 	 	(1,963	) 	 	 	(1,871	) 	 	 	(12,146	) 	 	 	(2,056	) 	 	 	15,563	  	 	 	(2,473	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss attributable to common shares	 	$	(1,963	) 	 	$	(1,871	) 	 	$	(11,636	) 	 	$	(2,056	) 	 	$	15,563	  	 	$	(1,963	) 	

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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Condensed Consolidating Statement of Operations
For the ten-month period ended October 25, 2009
(Predecessor Company)

 	 	MagnaChip
Semiconductor
LLC (Parent)	 	 	Co-Issuers	 	 	Non-
Guarantors	 	 	Guarantors	 	 	Eliminations	 	 	Consolidated	 	
Net sales	 	$	—	  	 	$	—	  	 	$	434,896	  	 	$	156,813	  	 	$	(142,725	) 	 	$	448,984	  	
Cost of sales	 	 	—	  	 	 	—	  	 	 	309,151	  	 	 	131,162	  	 	 	(129,174	) 	 	 	311,139	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	—	  	 	 	—	  	 	 	125,745	  	 	 	25,651	  	 	 	(13,551	) 	 	 	137,845	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	2,771	  	 	 	333	  	 	 	47,103	  	 	 	10,235	  	 	 	(4,154	) 	 	 	56,288	  	
Research and development expenses	 	 	—	  	 	 	—	  	 	 	56,597	  	 	 	9,596	  	 	 	(10,045	) 	 	 	56,148	  	
Restructuring and impairment charges	 	 	—	  	 	 	—	  	 	 	—	  	 	 	439	  	 	 	—	  	 	 	439	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss) from continuing operations	 	 	(2,771	) 	 	 	(333	) 	 	 	22,045	  	 	 	5,381	  	 	 	648	  	 	 	24,970	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expenses)	 	 	779,304	  	 	 	33,193	  	 	 	20,978	  	 	 	(16,630	) 	 	 	—	  	 	 	816,845	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations before income taxes, equity in earnings of related equity investment	 	 	776,533	  	 	 	32,860	  	 	 	43,023	  	 	 	(11,249	) 	 	 	648	  	 	 	841,815	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expenses (benefits)	 	 	—	  	 	 	—	  	 	 	(8	) 	 	 	7,303	  	 	 	—	  	 	 	7,295	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before equity in earnings of related investment	 	 	776,533	  	 	 	32,860	  	 	 	43,031	  	 	 	(18,552	) 	 	 	648	  	 	 	834,520	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings of related investment	 	 	64,573	  	 	 	35,283	  	 	 	—	  	 	 	51,604	  	 	 	(151,460	) 	 	 	—	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	 	841,106	  	 	 	68,143	  	 	 	43,031	  	 	 	33,052	  	 	 	(150,812	) 	 	 	834,520	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from discontinued operation, net of taxes	 	 	—	  	 	 	—	  	 	 	8,586	  	 	 	(1,557	) 	 	 	(443	) 	 	 	6,586	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	841,106	  	 	$	68,143	  	 	$	51,617	  	 	$	31,495	  	 	$	(151,255	) 	 	$	841,106	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends accrued on preferred units	 	 	6,317	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	6,317	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations attributable to common units	 	 	834,789	  	 	 	68,143	  	 	 	43,031	  	 	 	33,052	  	 	 	(150,812	) 	 	 	828,203	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to common units	 	$	834,789	  	 	$	68,143	  	 	$	51,617	  	 	$	31,495	  	 	$	(151,255	) 	 	$	834,789	  	

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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Condensed Consolidating Statement of Operations
For the year ended December 31, 2008
(Predecessor Company)

 	 	MagnaChip
Semiconductor
LLC (Parent)	 	 	Co-Issuers	 	 	Non-
Guarantors	 	 	Guarantors	 	 	Eliminations	 	 	Consolidated	 	
Net sales	 	$	—	  	 	$	—	  	 	$	570,957	  	 	$	331,057	  	 	$	(300,350	) 	 	$	601,664	  	
Cost of sales	 	 	—	  	 	 	—	  	 	 	442,582	  	 	 	270,578	  	 	 	(267,906	) 	 	 	445,254	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	—	  	 	 	—	  	 	 	128,375	  	 	 	60,479	  	 	 	(32,444	) 	 	 	156,410	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	4,111	  	 	 	1,031	  	 	 	64,968	  	 	 	12,222	  	 	 	(1,018	) 	 	 	81,314	  	
Research and development expenses	 	 	—	  	 	 	—	  	 	 	106,182	  	 	 	15,734	  	 	 	(32,461	) 	 	 	89,455	  	
Restructuring and impairment charges	 	 	—	  	 	 	—	  	 	 	(875	) 	 	 	14,245	  	 	 	—	  	 	 	13,370	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss) from continuing operations	 	 	(4,111	) 	 	 	(1,031	) 	 	 	(41,900	) 	 	 	18,278	  	 	 	1,035	  	 	 	(27,729	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expenses)	 	 	—	  	 	 	(29,399	) 	 	 	(269,246	) 	 	 	12,120	  	 	 	—	  	 	 	(286,525	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations before income taxes, equity in loss of related equity investment	 	 	(4,111	) 	 	 	(30,430	) 	 	 	(311,146	) 	 	 	30,398	  	 	 	1,035	  	 	 	(314,254	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expenses	 	 	—	  	 	 	175	  	 	 	142	  	 	 	11,268	  	 	 	—	  	 	 	11,585	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before equity in loss of related investment	 	 	(4,111	) 	 	 	(30,605	) 	 	 	(311,288	) 	 	 	19,130	  	 	 	1,035	  	 	 	(325,839	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss of related investment	 	 	(413,183	) 	 	 	(382,574	) 	 	 	—	  	 	 	(380,731	) 	 	 	1,176,488	  	 	 	—	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss from continuing operations	 	 	(417,294	) 	 	 	(413,179	) 	 	 	(311,288	) 	 	 	(361,601	) 	 	 	1,177,523	  	 	 	(325,839	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss from discontinued operation, net of taxes	 	 	—	  	 	 	—	  	 	 	(69,475	) 	 	 	(21,250	) 	 	 	(730	) 	 	 	(91,455	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(417,294	) 	 	$	(413,179	) 	 	$	(380,763	) 	 	$	(382,851	) 	 	$	1,176,793	  	 	$	(417,294	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends accrued on preferred units	 	 	13,264	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	13,264	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss from continuing operations attributable to common units	 	 	(430,558	) 	 	 	(413,179	) 	 	 	(311,288	) 	 	 	(361,601	) 	 	 	1,177,523	  	 	 	(339,103	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss attributable to common units	 	$	(430,558	) 	 	$	(413,179	) 	 	$	(380,763	) 	 	$	(382,851	) 	 	$	1,176,793	  	 	$	(430,558	) 	

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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2010
(Successor Company)

 	 	MagnaChip
Semiconductor
Corporation
(Parent)	 	 	Co-Issuers	 	 	Non-
Guarantors	 	 	Guarantors	 	 	Eliminations	 	 	Consolidated	 	
Cash flow from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	74,120	  	 	$	37,694	  	 	$	43,435	  	 	$	45,325	  	 	$	(126,454	) 	 	$	74,120	  	
Adjustments to reconcile net loss to net cash provided by (used in) operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	—	  	 	 	—	  	 	 	58,107	  	 	 	288	  	 	 	—	  	 	 	58,395	  	
Provision for severance benefits	 	 	—	  	 	 	—	  	 	 	19,375	  	 	 	309	  	 	 	—	  	 	 	19,684	  	
Amortization of debt issuance costs and original issue discount	 	 	—	  	 	 	925	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	925	  	
Loss (gain) on foreign currency translation, net	 	 	—	  	 	 	13,508	  	 	 	(18,656	) 	 	 	(11,936	) 	 	 	—	  	 	 	(17,084	) 	
Loss on disposal of property, plant and equipment, net	 	 	—	  	 	 	—	  	 	 	38	  	 	 	1	  	 	 	—	  	 	 	39	  	
Loss on disposal of intangible assets, net	 	 	—	  	 	 	—	  	 	 	13	  	 	 	—	  	 	 	—	  	 	 	13	  	
Restructuring and impairment charges…………	 	 	—	  	 	 	—	  	 	 	2,003	  	 	 	—	  	 	 	—	  	 	 	2,003	  	
Stock-based compensation	 	 	563	  	 	 	—	  	 	 	3,983	  	 	 	693	  	 	 	—	  	 	 	5,239	  	
Cash used for reorganization items	 	 	—	  	 	 	—	  	 	 	51	  	 	 	1,522	  	 	 	—	  	 	 	1,573	  	
Earnings of related investment	 	 	(37,742	) 	 	 	(45,722	) 	 	 	—	  	 	 	(43,730	) 	 	 	127,194	  	 	 	—	  	
Other	 	 	12	  	 	 	(11	) 	 	 	1,479	  	 	 	729	  	 	 	1,968	  	 	 	4,177	  	
Changes in operating assets and liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	—	  	 	 	—	  	 	 	(34,166	) 	 	 	6,139	  	 	 	(13,343	) 	 	 	(41,370	) 	
Inventories	 	 	—	  	 	 	—	  	 	 	(6,720	) 	 	 	4,315	  	 	 	(767	) 	 	 	(3,172	) 	
Other receivables	 	 	(8	) 	 	 	—	  	 	 	(16,298	) 	 	 	512	  	 	 	16,091	  	 	 	297	  	
Deferred tax assets	 	 	—	  	 	 	—	  	 	 	—	  	 	 	1,543	  	 	 	—	  	 	 	1,543	  	
Accounts payable	 	 	—	  	 	 	—	  	 	 	7,282	  	 	 	(25,671	) 	 	 	13,340	  	 	 	(5,049	) 	
Other accounts payable	 	 	7,858	  	 	 	3,436	  	 	 	10,368	  	 	 	2,912	  	 	 	(16,091	) 	 	 	8,483	  	
Accrued expenses	 	 	111	  	 	 	38,753	  	 	 	39,041	  	 	 	52,356	  	 	 	(126,269	) 	 	 	3,992	  	
Long term other payable	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(400	) 	 	 	(2,019	) 	 	 	(2,419	) 	
Other current assets	 	 	(41,235	) 	 	 	(51,681	) 	 	 	8,564	  	 	 	(38,923	) 	 	 	126,272	  	 	 	2,997	  	
Other current liabilities	 	 	—	  	 	 	—	  	 	 	687	  	 	 	275	  	 	 	—	  	 	 	962	  	
Payment of severance benefits	 	 	—	  	 	 	—	  	 	 	(6,428	) 	 	 	(245	) 	 	 	—	  	 	 	(6,673	) 	
Other	 	 	—	  	 	 	—	  	 	 	3,041	  	 	 	(3,751	) 	 	 	—	  	 	 	(710	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities before reorganization items	 	 	3,679	  	 	 	(3,098	) 	 	 	115,199	  	 	 	(7,737	) 	 	 	(78	) 	 	 	107,965	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash used for reorganization items	 	 	—	  	 	 	—	  	 	 	(51	) 	 	 	(1,522	) 	 	 	—	  	 	 	(1,573	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	 	 	3,679	  	 	 	(3,098	) 	 	 	115,148	  	 	 	(9,259	) 	 	 	(78	) 	 	 	106,392	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from disposal of plant, property and equipment	 	 	—	  	 	 	—	  	 	 	8	  	 	 	2	  	 	 	—	  	 	 	10	  	
Purchases of plant, property and equipment	 	 	—	  	 	 	—	  	 	 	(43,554	) 	 	 	(62	) 	 	 	—	  	 	 	(43,616	) 	
Payment for intellectual property registration	 	 	—	  	 	 	—	  	 	 	(553	) 	 	 	—	  	 	 	—	  	 	 	(553	) 	
Decrease in short-term financial instruments	 	 	—	  	 	 	—	  	 	 	—	  	 	 	329	  	 	 	—	  	 	 	329	  	
Decrease in guarantee deposits	 	 	—	  	 	 	—	  	 	 	219	  	 	 	979	  	 	 	—	  	 	 	1,198	  	
Collection of long-term intercompany loans	 	 	126,953	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(126,953	) 	 	 	—	  	
Other	 	 	—	  	 	 	—	  	 	 	(1,015	) 	 	 	(81	) 	 	 	—	  	 	 	(1,096	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) investing activities	 	 	126,953	  	 	 	—	  	 	 	(44,895	) 	 	 	1,167	  	 	 	(126,953	) 	 	 	(43,728	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flow from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from issuance of senior notes	 	 	—	  	 	 	246,685	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	246,685	  	
Debt issuance costs paid	 	 	—	  	 	 	(8,313	) 	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(8,313	) 	
Repayment of long-term borrowings	 	 	—	  	 	 	(188,703	) 	 	 	—	  	 	 	—	  	 	 	126,953	  	 	 	(61,750	) 	
Repayment of obligations under capital lease	 	 	—	  	 	 	—	  	 	 	(3,294	) 	 	 	(182	) 	 	 	—	  	 	 	(3,476	) 	
Distribution to stockholders	 	 	(130,689	) 	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(130,689	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	 	 	(130,689	) 	 	 	49,669	  	 	 	(3,294	) 	 	 	(182	) 	 	 	126,953	  	 	 	42,457	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchanges rate on cash and cash equivalents	 	 	—	  	 	 	—	  	 	 	(32	) 	 	 	2,080	  	 	 	78	  	 	 	2,126	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	 	 	(57	) 	 	 	46,571	  	 	 	66,927	  	 	 	(6,194	) 	 	 	—	  	 	 	107,247	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning of the year	 	 	136	  	 	 	24	  	 	 	45,443	  	 	 	19,322	  	 	 	—	  	 	 	64,925	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
End of the year	 	$	79	  	 	$	46,595	  	 	$	112,370	  	 	$	13,128	  	 	$	—	  	 	$	172,172	  	

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Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Condensed Consolidating Statement of Cash Flows
For the two-month period ended December 31, 2009
(Successor Company)

 	 	MagnaChip
Semiconductor
Corporation
(Parent)	 	 	Co-Issuers	 	 	Non-
Guarantors	 	 	Guarantors	 	 	Eliminations	 	 	Consolidated	 	
Cash flow from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(1,963	) 	 	$	(1,871	) 	 	$	(11,636	) 	 	$	(2,056	) 	 	$	15,563	  	 	$	(1,963	) 	
Adjustments to reconcile net loss to net cash provided by (used in) operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	—	  	 	 	—	  	 	 	11,168	  	 	 	50	  	 	 	—	  	 	 	11,218	  	
Provision for severance benefits	 	 	—	  	 	 	—	  	 	 	1,781	  	 	 	70	  	 	 	—	  	 	 	1,851	  	
Loss (gain) on foreign currency translation, net	 	 	—	  	 	 	8,976	  	 	 	(10,293	) 	 	 	(8,760	) 	 	 	—	  	 	 	(10,077	) 	
Loss on disposal of property, plant and equipment, net	 	 	—	  	 	 	—	  	 	 	17	  	 	 	—	  	 	 	—	  	 	 	17	  	
Loss on disposal of intangible assets, net	 	 	—	  	 	 	—	  	 	 	5	  	 	 	—	  	 	 	—	  	 	 	5	  	
Stock-based compensation	 	 	—	  	 	 	—	  	 	 	1,993	  	 	 	206	  	 	 	—	  	 	 	2,199	  	
Cash used for reorganization items	 	 	1,500	  	 	 	448	  	 	 	1,406	  	 	 	909	  	 	 	—	  	 	 	4,263	  	
Loss of related investment	 	 	2,032	  	 	 	2,225	  	 	 	—	  	 	 	11,772	  	 	 	(16,029	) 	 	 	—	  	
Other	 	 	—	  	 	 	—	  	 	 	(815	) 	 	 	148	  	 	 	—	  	 	 	(667	) 	
Changes in operating assets and liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	—	  	 	 	—	  	 	 	4,307	  	 	 	6,290	  	 	 	5,846	  	 	 	16,443	  	
Inventories	 	 	—	  	 	 	—	  	 	 	9,413	  	 	 	(3,113	) 	 	 	439	  	 	 	6,739	  	
Other receivables	 	 	—	  	 	 	—	  	 	 	1,880	  	 	 	(338	) 	 	 	213	  	 	 	1,755	  	
Deferred tax assets	 	 	—	  	 	 	—	  	 	 	—	  	 	 	664	  	 	 	14	  	 	 	678	  	
Accounts payable	 	 	—	  	 	 	—	  	 	 	(12,074	) 	 	 	3,750	  	 	 	(5,820	) 	 	 	(14,144	) 	
Other accounts payable	 	 	(129	) 	 	 	2	  	 	 	(10,860	) 	 	 	(1,311	) 	 	 	(213	) 	 	 	(12,511	) 	
Accrued expenses	 	 	(1,847	) 	 	 	337	  	 	 	5,058	  	 	 	9,806	  	 	 	(19,041	) 	 	 	(5,687	) 	
Long term other payable	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(48	) 	 	 	(829	) 	 	 	(877	) 	
Other current assets	 	 	13	  	 	 	(9,678	) 	 	 	3,787	  	 	 	(9,308	) 	 	 	18,378	  	 	 	3,192	  	
Other current liabilities	 	 	—	  	 	 	—	  	 	 	405	  	 	 	(704	) 	 	 	1,487	  	 	 	1,188	  	
Payment of severance benefits	 	 	—	  	 	 	—	  	 	 	(1,331	) 	 	 	(58	) 	 	 	—	  	 	 	(1,389	) 	
Other	 	 	—	  	 	 	—	  	 	 	(127	) 	 	 	(4	) 	 	 	6	  	 	 	(125	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities before reorganization items	 	 	(394	) 	 	 	439	  	 	 	(5,916	) 	 	 	7,965	  	 	 	14	  	 	 	2,108	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash used for reorganization items	 	 	(1,500	) 	 	 	(448	) 	 	 	(1,406	) 	 	 	(909	) 	 	 	—	  	 	 	(4,263	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	 	 	(1,894	) 	 	 	(9	) 	 	 	(7,322	) 	 	 	7,056	  	 	 	14	  	 	 	(2,155	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from disposal of plant, property and equipment	 	 	—	  	 	 	—	  	 	 	37	  	 	 	—	  	 	 	—	  	 	 	37	  	
Purchases of plant, property and equipment	 	 	—	  	 	 	—	  	 	 	(1,254	) 	 	 	(1	) 	 	 	(3	) 	 	 	(1,258	) 	
Payment for intellectual property registration	 	 	—	  	 	 	—	  	 	 	(70	) 	 	 	—	  	 	 	—	  	 	 	(70	) 	
Purchase of short-term financial instruments	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(329	) 	 	 	—	  	 	 	(329	) 	
Other	 	 	—	  	 	 	—	  	 	 	20	  	 	 	3	  	 	 	—	  	 	 	23	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in investing activities	 	 	—	  	 	 	—	  	 	 	(1,267	) 	 	 	(327	) 	 	 	(3	) 	 	 	(1,597	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flow from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchanges rate on cash and cash equivalents	 	 	—	  	 	 	—	  	 	 	1,261	  	 	 	(152	) 	 	 	(11	) 	 	 	1,098	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	 	 	(1,894	) 	 	 	(9	) 	 	 	(7,328	) 	 	 	6,577	  	 	 	—	  	 	 	(2,654	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning of the period	 	 	2,030	  	 	 	33	  	 	 	52,771	  	 	 	12,745	  	 	 	—	  	 	 	67,579	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
End of the period	 	$	136	  	 	$	24	  	 	$	45,443	  	 	$	19,322	  	 	$	—	  	 	$	64,925	  	

F-64

Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Condensed Consolidating Statement of Cash Flows
For the ten-month period ended October 25, 2009
(Predecessor Company)

 	 	MagnaChip
Semiconductor
LLC (Parent)	 	 	Co-Issuers	 	 	Non-
Guarantors	 	 	Guarantors	 	 	Eliminations	 	 	Consolidated	 	
Cash flow from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	841,106	  	 	$	68,143	  	 	$	51,617	  	 	$	31,495	  	 	$	(151,255	) 	 	$	841,106	  	
Adjustments to reconcile net income to net cash provided by (used in) operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	—	  	 	 	—	  	 	 	36,274	  	 	 	1,981	  	 	 	—	  	 	 	38,255	  	
Provision for severance benefits	 	 	—	  	 	 	—	  	 	 	8,512	  	 	 	323	  	 	 	—	  	 	 	8,835	  	
Amortization of debt issuance costs	 	 	—	  	 	 	685	  	 	 	151	  	 	 	—	  	 	 	—	  	 	 	836	  	
Loss (gain) on foreign currency translation, net	 	 	—	  	 	 	(14,384	) 	 	 	(43,701	) 	 	 	13,861	  	 	 	—	  	 	 	(44,224	) 	
Loss (gain) on disposal of property, plant and equipment, net	 	 	—	  	 	 	—	  	 	 	(235	) 	 	 	330	  	 	 	—	  	 	 	95	  	
Gain on disposal of intangible assets, net	 	 	—	  	 	 	—	  	 	 	(9,230	) 	 	 	—	  	 	 	—	  	 	 	(9,230	) 	
Restructuring and impairment charges	 	 	—	  	 	 	—	  	 	 	(1,120	) 	 	 	—	  	 	 	—	  	 	 	(1,120	) 	
Unit-based compensation	 	 	—	  	 	 	—	  	 	 	210	  	 	 	23	  	 	 	—	  	 	 	233	  	
Cash used for reorganization items	 	 	—	  	 	 	16	  	 	 	—	  	 	 	1,060	  	 	 	—	  	 	 	1,076	  	
Noncash reorganization items	 	 	(779,304	) 	 	 	508	  	 	 	(31,026	) 	 	 	4,173	  	 	 	—	  	 	 	(805,649	) 	
Earnings of related investment	 	 	(64,573	) 	 	 	(35,283	) 	 	 	—	  	 	 	(51,604	) 	 	 	151,460	  	 	 	—	  	
Other	 	 	—	  	 	 	—	  	 	 	1,877	  	 	 	845	  	 	 	—	  	 	 	2,722	  	
Changes in operating assets and liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	—	  	 	 	—	  	 	 	(34,658	) 	 	 	(9,735	) 	 	 	31,463	  	 	 	(12,930	) 	
Inventories	 	 	—	  	 	 	—	  	 	 	(2,421	) 	 	 	1,479	  	 	 	(221	) 	 	 	(1,163	) 	
Other receivables	 	 	—	  	 	 	—	  	 	 	(1,174	) 	 	 	2,894	  	 	 	(1,689	) 	 	 	31	  	
Deferred tax assets	 	 	—	  	 	 	—	  	 	 	—	  	 	 	1,054	  	 	 	—	  	 	 	1,054	  	
Accounts payable	 	 	—	  	 	 	—	  	 	 	22,745	  	 	 	14,984	  	 	 	(31,413	) 	 	 	6,316	  	
Other accounts payable	 	 	2,622	  	 	 	260	  	 	 	(17,303	) 	 	 	1,280	  	 	 	1,689	  	 	 	(11,452	) 	
Accrued expenses	 	 	(27	) 	 	 	22,395	  	 	 	45,513	  	 	 	41,324	  	 	 	(80,910	) 	 	 	28,295	  	
Long term other payable	 	 	—	  	 	 	—	  	 	 	626	  	 	 	412	  	 	 	(531	) 	 	 	507	  	
Other current assets	 	 	(40	) 	 	 	(42,252	) 	 	 	11,842	  	 	 	(39,412	) 	 	 	75,758	  	 	 	5,896	  	
Other current liabilities	 	 	—	  	 	 	(95	) 	 	 	725	  	 	 	(6,098	) 	 	 	5,507	  	 	 	39	  	
Payment of severance benefits	 	 	—	  	 	 	—	  	 	 	(4,010	) 	 	 	(310	) 	 	 	—	  	 	 	(4,320	) 	
Other	 	 	—	  	 	 	—	  	 	 	(520	) 	 	 	1,098	  	 	 	(1,094	) 	 	 	(516	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities before reorganization items	 	 	(216	) 	 	 	(7	) 	 	 	34,694	  	 	 	11,457	  	 	 	(1,236	) 	 	 	44,692	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash used for reorganization items	 	 	—	  	 	 	(16	) 	 	 	—	  	 	 	(1,060	) 	 	 	—	  	 	 	(1,076	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	 	 	(216	) 	 	 	(23	) 	 	 	34,694	  	 	 	10,397	  	 	 	(1,236	) 	 	 	43,616	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from disposal of plant, property and equipment	 	 	—	  	 	 	—	  	 	 	290	  	 	 	299	  	 	 	(260	) 	 	 	329	  	
Proceeds from disposal of intangible assets	 	 	—	  	 	 	—	  	 	 	9,374	  	 	 	1	  	 	 	—	  	 	 	9,375	  	
Purchases of plant, property and equipment	 	 	—	  	 	 	—	  	 	 	(7,753	) 	 	 	(20	) 	 	 	260	  	 	 	(7,513	) 	
Payment for intellectual property registration	 	 	—	  	 	 	—	  	 	 	(366	) 	 	 	—	  	 	 	—	  	 	 	(366	) 	
Decrease in restricted cash	 	 	—	  	 	 	—	  	 	 	11,409	  	 	 	—	  	 	 	—	  	 	 	11,409	  	
Other	 	 	—	  	 	 	—	  	 	 	(282	) 	 	 	1,949	  	 	 	(1,763	) 	 	 	(96	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by investing activities	 	 	—	  	 	 	—	  	 	 	12,672	  	 	 	2,229	  	 	 	(1,763	) 	 	 	13,138	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flow from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Issuance of new common units pursuant to the reorganization plan	 	 	35,280	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	35,280	  	
Repayment of short-term borrowings	 	 	(33,250	) 	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(33,250	) 	
Repayment of long-term borrowings	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(1,763	) 	 	 	1,763	  	 	 	—	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	 	 	2,030	  	 	 	—	  	 	 	—	  	 	 	(1,763	) 	 	 	1,763	  	 	 	2,030	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rates on cash and cash equivalents	 	 	—	  	 	 	—	  	 	 	5,200	  	 	 	(1,678	) 	 	 	1,236	  	 	 	4,758	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	 	 	1,814	  	 	 	(23	) 	 	 	52,566	  	 	 	9,185	  	 	 	—	  	 	 	63,542	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning of the period	 	 	216	  	 	 	56	  	 	 	205	  	 	 	3,560	  	 	 	—	  	 	 	4,037	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
End of the period	 	$	2,030	  	 	$	33	  	 	$	52,771	  	 	$	12,745	  	 	$	—	  	 	$	67,579	  	

F-65

Table of Contents
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE/UNIT DATA)
 
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2008
(Predecessor Company)

 	 	MagnaChip
Semiconductor
LLC (Parent)	 	 	Co-Issuers	 	 	Non-
Guarantors	 	 	Guarantors	 	 	Eliminations	 	 	Consolidated	 	
Cash flow from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(417,294	) 	 	$	(413,179	) 	 	$	(380,763	) 	 	$	(382,851	) 	 	$	1,176,793	  	 	$	(417,294	) 	
Adjustments to reconcile net loss to net cash provided by (used in) operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	—	  	 	 	—	  	 	 	68,698	  	 	 	3,262	  	 	 	—	  	 	 	71,960	  	
Provision for severance benefits	 	 	—	  	 	 	—	  	 	 	13,552	  	 	 	474	  	 	 	—	  	 	 	14,026	  	
Amortization of debt issuance costs	 	 	—	  	 	 	13,079	  	 	 	3,211	  	 	 	—	  	 	 	—	  	 	 	16,290	  	
Loss (gain) on foreign currency translation, net	 	 	—	  	 	 	8,808	  	 	 	212,287	  	 	 	(5,524	) 	 	 	—	  	 	 	215,571	  	
Loss (gain) on disposal of property, plant and equipment, net	 	 	—	  	 	 	—	  	 	 	(3,095	) 	 	 	1	  	 	 	—	  	 	 	(3,094	) 	
Restructuring and impairment charges	 	 	—	  	 	 	—	  	 	 	25,420	  	 	 	17,119	  	 	 	—	  	 	 	42,539	  	
Unit-based compensation	 	 	16	  	 	 	—	  	 	 	375	  	 	 	74	  	 	 	—	  	 	 	465	  	
Loss of related investment	 	 	413,183	  	 	 	382,574	  	 	 	—	  	 	 	380,731	  	 	 	(1,176,488	) 	 	 	—	  	
Other	 	 	—	  	 	 	1	  	 	 	(773	) 	 	 	372	  	 	 	—	  	 	 	(400	) 	
Changes in operating assets and liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts receivables	 	 	—	  	 	 	—	  	 	 	21,089	  	 	 	7,602	  	 	 	2,334	  	 	 	31,025	  	
Inventories	 	 	—	  	 	 	—	  	 	 	9,157	  	 	 	2,169	  	 	 	(152	) 	 	 	11,174	  	
Other receivables	 	 	—	  	 	 	—	  	 	 	(2,073	) 	 	 	6,373	  	 	 	(3,284	) 	 	 	1,016	  	
Deferred tax assets	 	 	—	  	 	 	—	  	 	 	—	  	 	 	1,462	  	 	 	28	  	 	 	1,490	  	
Accounts payable	 	 	—	  	 	 	—	  	 	 	15,478	  	 	 	(18,207	) 	 	 	(2,334	) 	 	 	(5,063	) 	
Other accounts payable	 	 	3,238	  	 	 	—	  	 	 	(25,092	) 	 	 	(1,317	) 	 	 	3,284	  	 	 	(19,887	) 	
Accrued expenses	 	 	101	  	 	 	20,428	  	 	 	22,857	  	 	 	12,619	  	 	 	(32,052	) 	 	 	23,953	  	
Long term other payable	 	 	—	  	 	 	—	  	 	 	(331	) 	 	 	450	  	 	 	2	  	 	 	121	  	
Other current assets	 	 	1,122	  	 	 	(12,623	) 	 	 	8,671	  	 	 	(18,870	) 	 	 	29,101	  	 	 	7,401	  	
Other current liabilities	 	 	—	  	 	 	(408	) 	 	 	(1,537	) 	 	 	179	  	 	 	3,061	  	 	 	1,295	  	
Payment of severance benefits	 	 	—	  	 	 	—	  	 	 	(6,432	) 	 	 	(73	) 	 	 	—	  	 	 	(6,505	) 	
Other	 	 	—	  	 	 	128	  	 	 	(4,948	) 	 	 	(8,323	) 	 	 	8,672	  	 	 	(4,471	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	 	 	366	  	 	 	(1,192	) 	 	 	(24,249	) 	 	 	(2,278	) 	 	 	8,965	  	 	 	(18,388	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from disposal of plant, property and equipment	 	 	—	  	 	 	—	  	 	 	3,122	  	 	 	—	  	 	 	—	  	 	 	3,122	  	
Purchases of plant, property and equipment	 	 	—	  	 	 	—	  	 	 	(26,772	) 	 	 	(1,836	) 	 	 	—	  	 	 	(28,608	) 	
Payment for intellectual property registration	 	 	—	  	 	 	—	  	 	 	(791	) 	 	 	(261	) 	 	 	—	  	 	 	(1,052	) 	
Increase in restricted cash	 	 	—	  	 	 	—	  	 	 	(13,517	) 	 	 	—	  	 	 	—	  	 	 	(13,517	) 	
Other	 	 	—	  	 	 	(45,000	) 	 	 	550	  	 	 	(45,066	) 	 	 	90,000	  	 	 	484	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in investing activities	 	 	—	  	 	 	(45,000	) 	 	 	(37,408	) 	 	 	(47,163	) 	 	 	90,000	  	 	 	(39,571	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flow from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from short-term borrowings	 	 	—	  	 	 	175,000	  	 	 	155,000	  	 	 	150,000	  	 	 	(300,000	) 	 	 	180,000	  	
Issuance of old common units	 	 	183	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	183	  	
Repayment of short-term borrowings	 	 	—	  	 	 	(160,000	) 	 	 	(110,000	) 	 	 	(105,000	) 	 	 	210,000	  	 	 	(165,000	) 	
Repurchase of old common units	 	 	(496	) 	 	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	(496	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	 	 	(313	) 	 	 	15,000	  	 	 	45,000	  	 	 	45,000	  	 	 	(90,000	) 	 	 	14,687	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchanges rate on cash and cash equivalents	 	 	—	  	 	 	—	  	 	 	(7,439	) 	 	 	(632	) 	 	 	(8,965	) 	 	 	(17,036	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	 	 	53	  	 	 	(31,192	) 	 	 	(24,096	) 	 	 	(5,073	) 	 	 	—	  	 	 	(60,308	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning of the year	 	 	163	  	 	 	31,248	  	 	 	24,301	  	 	 	8,633	  	 	 	—	  	 	 	64,345	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
End of the year	 	$	216	  	 	$	56	  	 	$	205	  	 	$	3,560	  	 	$	—	  	 	$	4,037	  	

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MagnaChip Semiconductor Corporation
9,500,000 Depositary Shares
Representing 9,500,000 Shares of Common Stock

 

 	 	 	 	 	
Barclays Capital	 	Deutsche Bank Securities	 	Goldman, Sachs & Co.	
 	 	 	
Citi	 	 	 	UBS Investment Bank	

Through and including                     , 2011 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13.	Other Expenses of Issuance and Distribution.	
The following table sets forth all expenses other than the underwriting discount, payable by the registrant in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee.

SEC Registration Fee	  	$	17,825	  	
FINRA Fees	  	 	25,500	  	
New York Stock Exchange Listing Fee	  	 	194,000	  	
Legal Fees and Expenses	  	 	4,900,000	  	
Printing Expenses	  	 	1,200,000	  	
Blue Sky Fees	  	 	20,000	  	
Transfer Agent’s Fees	  	 	12,500	  	
Accounting Fees and Expenses	  	 	3,430,000	  	
Miscellaneous	  	 	1,000,000	  	
 	  	 	 	 	
Total	  	$	10,799,825	  	

ITEM 14.	Indemnification of Officers and Directors.	
Section 145 of the Delaware General Corporation Law (DGCL) provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party or who is threatened to be made a party by reason of such person being or having been a director, officer, employee of or agent to the registrant. The statute provides that it is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
As permitted by the DGCL, our certificate of incorporation includes a provision that eliminates the personal liability of our directors for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability is not permitted by DGCL.
As permitted by the DGCL, our bylaws provide that (1) we are required to indemnify our directors and officers to the fullest extent permitted by the DGCL, subject to certain exceptions; (2) we are permitted to indemnify our other employees and agents to the extent that we indemnify our officers and directors; (3) we are required to advance expenses, as incurred, to our directors and officers in connection with any legal proceeding, subject to certain exceptions; and (4) the rights conferred in our bylaws are not exclusive.
We intend to enter into indemnification agreements with our directors and officers. The indemnification agreements will provide for indemnification and advancement of expenses to our directors and officers under certain circumstances for acts or omissions to the extent permissible under Delaware law. We also obtained directors’ and officers’ liability insurance, which insures against liabilities that our directors or officers may incur in such capacities. At present, we are not aware of any pending or threatened litigation or proceeding involving any of our directors, officers, employees or agents in which indemnification would be required or permitted. We believe that our charter and bylaw provisions are necessary to attract and retain qualified persons as directors and officers.
 
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Item 15.	Recent Sales of Unregistered Securities.	
The following relates to sales of securities that have occurred since January 1, 2008 and that have not been registered under the Securities Act:
Prior to the effectiveness of the registration statement of which this prospectus is a part, we will convert from a Delaware limited liability company into a Delaware corporation. At the time of the corporate conversion, all of the outstanding common units of MagnaChip Semiconductor LLC will be automatically converted into shares of our common stock and all of the outstanding warrants to purchase common units of MagnaChip Semiconductor LLC will be automatically converted into warrants to purchase shares of our common stock. The issuance of common stock and warrants to purchase common stock to our members in the corporate conversion will be exempt from registration under the Securities Act by virtue of the exemption provided under Section 3(a)(9) thereof as the common stock and warrants will be exchanged by us with our existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange. The issuance of common stock and warrants will also be exempt from registration under the Securities Act by virtue of Section 4(2) thereof as a transaction not involving a public offering or, with respect to certain of our existing security holders, Regulation S thereof as an issuance to non-U.S. persons in transactions that will take place outside of the U.S. In addition, as part of our corporate conversion, we will convert outstanding options to purchase common units of MagnaChip Semiconductor LLC into options to purchase shares of our common stock. The issuance of such options to purchase shares of our stock pursuant to such corporate conversion will be exempt from registration in reliance upon exemptions from the registration requirements provided by Rule 701 under the Securities Act relating to transactions occurring under compensatory benefit plans or provided by Regulation S to non-U.S. persons in transactions that will take place outside of the U.S.
In April 2010, our subsidiaries, MagnaChip Semiconductor S.A. and MagnaChip Semiconductor Finance Company, sold (and certain of our subsidiaries guaranteed) $250 million aggregate principal amount of 10.500% senior notes due 2018. We received net proceeds of $238.4 million pursuant to the sale of such notes. The initial purchasers of the foregoing notes were Goldman, Sachs & Co., Barclays Capital Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and UBS Securities LLC. The issuance of the notes to the initial purchasers was made in reliance on Section 4(2) under the Securities Act and the notes were subsequently resold by the initial purchasers pursuant to Rule 144A and Regulation S thereunder.
In March 2010, we issued to our director Nader Tavakoli a restricted unit bonus for 150,000 common units pursuant to the MagnaChip Semiconductor LLC 2009 Common Unit Plan. In March 2010, we also issued to certain of our directors and employees options to purchase up to 914,000 common units pursuant to the MagnaChip Semiconductor LLC 2009 Common Unit Plan at an exercise price of $2.12 per unit. The issuance of such restricted unit bonuses and options to purchase our common units was exempt from registration in reliance upon exemptions from the registration requirements provided by Rule 701 under the Securities Act relating to transactions occurring under compensatory benefit plans or provided by Regulation S to non-U.S. persons in transactions that took place outside of the U.S.
In December 2009, we issued to certain of our employees restricted unit bonuses for an aggregate of 7,084,000 common units pursuant to the MagnaChip Semiconductor LLC 2009 Common Unit Plan. In December 2009, we also issued to certain of our employees options to purchase up to 15,365,000 common units pursuant to the MagnaChip Semiconductor LLC 2009 Common Unit Plan at an exercise price of $1.16 per unit. The issuance of such restricted unit bonuses and options to purchase our common units was exempt from registration in reliance upon exemptions from the
 
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registration requirements provided by Rule 701 under the Securities Act relating to transactions occurring under compensatory benefit plans or provided by Regulation S to non-U.S. persons in transactions that took place outside of the U.S.
In November 2009, in connection with our emergence from reorganization proceedings, we issued an aggregate of 17,999,996 common units and warrants to purchase 15,000,000 common units to certain of our former creditors in satisfaction and retirement of their claims. The issuance of such common units and warrants and the distribution thereof was exempt from registration under applicable securities laws pursuant to Section 1145(a) of the U.S. Bankruptcy Code.
In November 2009, in connection with our emergence from reorganization proceedings, we issued an aggregate of 252,000,000 common units in a rights offering to affiliated funds of Avenue Capital Management II, L.P. and certain of our other former creditors who were accredited investors, as defined in Regulation D of the Securities Act, for an aggregate purchase price of $35,280,000. In connection with such rights offering we issued an additional 30,000,000 common units to affiliated funds of Avenue Capital Management II, L.P. as payment of a backstop commitment fee payable pursuant to our Chapter 11 plan of reorganization. The sale and issuance of such securities was exempt from registration under applicable securities laws pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
On July 4, 2008, one of our former employees exercised options to acquire 4,375 of our common units at a purchase price of $12,040.87. The issuance of these securities was exempt from registration under Section 4(2) of the Securities Act, by reason of the fact that the offering was a limited private placement to one knowledgeable investor who agreed not to resell the securities to the public.
On April 14, 2008, one of our former executives exercised options to acquire 143,272.50 of our common units at a purchase price of $143,272.50. Because the offering transaction took place outside the U.S. and the optionee was not a U.S. person, the issuance of these securities was exempt from registration under Regulation S.
On March 12, 2008, one of our former employees exercised options to acquire 2,437.50 of our common units at a purchase price of $7,312.50. Because the offering transaction took place outside the U.S. and the optionee was not a U.S. person, the issuance of these securities was exempt from registration under Regulation S.
On February 19, 2008, two of our former employees exercised options to acquire 11,375 of our common units for an aggregate purchase price of $20,890. Because the offering transactions took place outside the U.S. and neither of the optionees was a U.S. person, the issuance of these securities was exempt from registration under Regulation S.
 
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ITEM 16.	Exhibits.	

 	  1.1	  	  	Form of Underwriting Agreement	
 	 	
 	  2.1	  	  	Second Amended Chapter 11 Plan of Reorganization Proposed by the Official Committee of Unsecured Creditors of MagnaChip Semiconductor Finance Company, et al., dated as of September 24, 2009(3)	
 	 	
 	  3.1	  	  	Certificate of Formation of MagnaChip Semiconductor LLC (formerly System Semiconductor Holding LLC)(2)	
 	 	
 	  3.2	  	  	Certificate of Amendment to Certificate of Formation of MagnaChip Semiconductor LLC(2)	
 	 	
 	  3.3	  	  	Fifth Amended and Restated Limited Liability Company Operating Agreement of MagnaChip Semiconductor LLC(3)	
 	 	
 	  3.4	  	  	Form of Certificate of Incorporation of MagnaChip Semiconductor Corporation(2)	
 	 	
 	  3.5	  	  	Form of Bylaws of MagnaChip Semiconductor Corporation(2)	
 	 	
 	  3.6	  	  	Form of Plan of Conversion of MagnaChip Semiconductor LLC(4)	
 	 	
 	  4.1	  	  	Registration Rights Agreement, dated as of November 9, 2009, by and among MagnaChip Semiconductor LLC and each of the securityholders named therein(3)	
 	 	
 	  4.2	  	  	Form of Deposit Agreement, among MagnaChip Semiconductor Corporation, American Stock Transfer & Trust Company, LLC, as the depositary, custodian and registrar, and the holders and beneficial owners of depositary shares(4)	
 	 	
 	  4.3	  	  	[reserved]	
 	 	
 	  4.4	  	  	Indenture, dated as of April 9, 2010, by and among MagnaChip Semiconductor S.A., MagnaChip Semiconductor Finance Company, the guarantors as named therein and Wilmington Trust FSB, as trustee(3)	
 	 	
 	  4.5	  	  	Form of 10.500% Senior Notes due 2018 and related notation of guarantee (included in Exhibit 4.4)	
 	 	
 	  4.6	  	  	Exchange and Registration Rights Agreement, dated as of April 9, 2010, by and among MagnaChip Semiconductor S.A., MagnaChip Semiconductor Finance Company, the guarantors named therein, and Goldman, Sachs & Co., Barclays Capital Inc., Deutsche Bank Securities Inc. and Morgan Stanley & Co. Incorporated, as representatives of the several purchasers named therein(3)	
 	 	
 	  5.1	  	  	Opinion of Jones Day*	
 	 	
 	  5.2	  	  	Opinion of David Brill, General Counsel of American Stock Transfer & Trust Company, LLC*	
 	 	
 	  8.1	  	  	Tax Opinion of Jones Day*	
 	 	
 	10.1	  	  	Amended and Restated Credit Agreement, dated as of November 6, 2009, among MagnaChip Semiconductor S.A., MagnaChip Semiconductor Finance Company, the guarantors named therein, the lenders named therein, and Wilmington Trust FSB, as Administrative Agent(3)	
 	 	
 	10.2	  	  	Intellectual Property License Agreement, dated as of October 6, 2004, by and between Hynix Semiconductor Inc. and MagnaChip Semiconductor, Ltd. (Korea)(3)	
 	 	
 	10.3	  	  	Land Lease and Easement Agreement, dated as of October 6, 2004, by and between Hynix Semiconductor Inc. and MagnaChip Semiconductor, Ltd. (Korea)(1)(3)	
 	 	
 	10.4	  	  	First Amendment to Land Lease and Easement Agreement, dated as of December 30, 2005, by and between Hynix Semiconductor Inc. and MagnaChip Semiconductor, Ltd. (Korea)(3)	
 	 	
 	10.5	  	  	General Service Supply Agreement, dated as of October 6, 2004, by and between Hynix Semiconductor Inc. and MagnaChip Semiconductor, Ltd. (Korea)(1)(5)	
 
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 	10.6	  	  	First Amendment to the General Service Supply Agreement, dated as of December 30, 2005, by and between Hynix Semiconductor Inc. and MagnaChip Semiconductor, Ltd. (Korea)(3)	
 	 	
 	10.7	  	  	License Agreement (ModularBCD), dated as of March 18, 2005, by and between Advanced Analogic Technologies, Inc. and MagnaChip Semiconductor, Ltd. (Korea)(1)(2)	
 	 	
 	10.8	  	  	Amended & Restated License Agreement (TrenchDMOS), dated as of September 19, 2007, by and between Advanced Analogic Technologies, Inc. and MagnaChip Semiconductor, Ltd. (Korea)(1)(5)	
 	 	
 	10.9	  	  	Technology License Agreement, dated as of December 16, 1996, by and between Advanced RISC Machines Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to LG Semicon Company Limited)(1)(2)	
 	 	
 	10.10	  	  	Amendment to the Technology License Agreement, dated as of October 16, 2006, by and between ARM Limited and MagnaChip Semiconductor, Ltd. (Korea)(1)(5)	
 	 	
 	10.11	  	  	ARM7201TDSP Device License Agreement, dated as of August 26, 1997, by and between Advanced RISC Machines Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to LG Semicon Company Limited)(1)(2)	
 	 	
 	10.12	  	  	Technology License Agreement, dated as of October 5, 1995, by and between Advanced RISC Machines Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to LG Semicon Company Limited)(1)(5)	
 	 	
 	10.13	  	  	Technology License Agreement, dated as of July 2001, by and between ARM Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to Hynix Semiconductor Inc.)(1)(2)	
 	 	
 	10.14	  	  	Technology License Agreement, dated as of August 22, 2001, by and between ARM Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to Hynix Semiconductor Inc.)(1)(2)	
 	 	
 	10.15	  	  	Technology License Agreement, dated as of May 20, 2004, by and between ARM Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to Hynix Semiconductor Inc.)(2)	
 	 	
 	10.16	  	  	Design Migration Agreement, dated as of May 1, 2007, by and between ARM Limited and MagnaChip Semiconductor, Ltd. (Korea)(1)(5)	
 	 	
 	10.17	  	  	Basic Agreement on Joint Development and Grant of License, dated as of November 10, 2006, by and between MagnaChip Semiconductor, Ltd. and Silicon Works (English translation)(2)	
 	 	
 	10.18	  	  	Master Service Agreement, dated as of December 27, 2000 by and between Sharp Corporation and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to Hyundai Electronics Japan Co., Ltd) (English translation)(3)	
 	 	
 	10.19	  	  	Warrant Agreement, dated as of November 9, 2009, between MagnaChip Semiconductor LLC and American Stock Transfer & Trust Company, LLC(2)	
 	 	
 	10.20	  	  	MagnaChip Semiconductor LLC 2009 Common Unit Plan(2)	
 	 	
 	10.21	  	  	MagnaChip Semiconductor LLC 2009 Common Unit Plan form of Option Agreement (Non-U.S. Participants)(2)	
 	 	
 	10.22	  	  	MagnaChip Semiconductor LLC 2009 Common Unit Plan form of Option Agreement (U.S. Participants)(2)	
 	 	
 	10.23	  	  	MagnaChip Semiconductor LLC 2009 Common Unit Plan form of Restricted Unit Agreement (Non-U.S. Participants)(2)	
 
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 	10.24	  	  	MagnaChip Semiconductor LLC 2009 Common Unit Plan form of Restricted Unit Agreement (U.S. Participants)(2)	
 	 	
 	10.25	  	  	MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan	
 	 	
 	10.26	  	  	MagnaChip Semiconductor Corporation 2011 Employee Stock Purchase Plan	
 	 	
 	10.27	  	  	Amended and Restated Service Agreement, dated as of May 8, 2008, by and between MagnaChip Semiconductor, Ltd. (Korea) and Sang Park(3)	
 	 	
 	10.28	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Sang Park(2)	
 	 	
 	10.29	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Sang Park(2)	
 	 	
 	10.30	  	  	Entrustment Agreement, dated as of October 6, 2004, by and between MagnaChip Semiconductor, Ltd. (Korea) and Tae Young Hwang(3)	
 	 	
 	10.31	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Tae Young Hwang(2)	
 	 	
 	10.32	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Tae Young Hwang(2)	
 	 	
 	10.33	  	  	Offer Letter dated March 7, 2006, from MagnaChip Semiconductor LLC and MagnaChip Semiconductor, Inc. to Brent Rowe, as supplemented on December 20, 2006(2)	
 	 	
 	10.34	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Brent Rowe(2)	
 	 	
 	10.35	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Brent Rowe(2)	
 	 	
 	10.36	  	  	Offer Letter dated September 5, 2006, from MagnaChip Semiconductor LLC and MagnaChip Semiconductor, Ltd. to Margaret Sakai(2)	
 	 	
 	10.37	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Margaret Sakai(2)	
 	 	
 	10.38	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Margaret Sakai(2)	
 	 	
 	10.39	  	  	Offer Letter, dated as of July 1, 2007, by and between MagnaChip Semiconductor, Ltd. (Korea) and Heung Kyu Kim(2)	
 	 	
 	10.40	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Heung Kyu Kim(2)	
 	 	
 	10.41	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Heung Kyu Kim(2)	
 	 	
 	10.42	  	  	Offer Letter, dated as of June 20, 2007, by and between MagnaChip Semiconductor, Ltd. (Korea) and Tae Jong Lee(2)	
 	 	
 	10.43	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Tae Jong Lee(2)	
 	 	
 	10.44	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Tae Jong Lee(2)	
 	 	
 	10.45	  	  	Service Agreement, dated as of April 1, 2006, by and between MagnaChip Semiconductor, Ltd. (Korea) and John McFarland(2)	
 	 	
 	10.46	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and John McFarland(2)	
 
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 	10.47	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and John McFarland(2)	
 	 	
 	10.48	  	  	[reserved]	
 	 	
 	10.49	  	  	MagnaChip Semiconductor Corporation Form of Indemnification Agreement with Directors and Officers(2)	
 	 	
 	10.50	  	  	Form of Accredited Investor Certification delivered to the Official Committee of Unsecured Creditors of MagnaChip Semiconductor Finance Company, et al.(3)	
 	 	
 	10.51	  	  	Form of Subscription Agreement for common units of MagnaChip Semiconductor LLC (in connection with the Committee’s Plan of Reorganization under Chapter 11 of the Bankruptcy Code)(3)	
 	 	
 	10.52	  	  	Subscription Form for Rights Offering in connection with the Committee’s Plan of Reorganization under Chapter 11 of the Bankruptcy Code(3)	
 	 	
 	10.53	  	  	$35,000,000 Common Stock Backstop Commitment letter, dated as of September 23, 2009, from Avenue Capital Management II, L.P., solely in its capacity as investment advisor to Avenue Investments, L.P., Avenue International Master, L.P., Avenue Special Situations Fund IV, L.P., Avenue Special Situations Fund V, L.P. and Avenue CDP-Global Opportunities Fund, L.P. (included in Exhibit 2.1)	
 	 	
 	10.54	  	  	MagnaChip Semiconductor LLC Profit Sharing Plan as adopted on December 31, 2009 and as amended on February 15, 2010(1)(5)	
 	 	
 	10.55	  	  	MagnaChip Semiconductor Corporation 2011 Form of Stock Option Agreement (U.S. Participants)	
 	 	
 	10.56	  	  	MagnaChip Semiconductor Corporation 2011 Form of Stock Option Agreement (Non-U.S. Participants)	
 	 	
 	10.57	  	  	MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Units Agreement (U.S. Participants)	
 	 	
 	10.58	  	  	MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Units Agreement (Non-U.S. Participants)	
 	 	
 	10.59	  	  	MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Agreement (U.S. Participants)	
 	 	
 	10.60	  	  	MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Agreement (Non-U.S. Participants)	
 	 	
 	21.1  	  	  	Subsidiaries of the Registrant(2)	
 	 	
 	23.1  	  	  	Consent of Samil PricewaterhouseCoopers	
 	 	
 	23.2  	  	  	Consent of Jones Day (contained in Exhibit 5.1 and Exhibit 8.1)	
 	 	
 	23.3  	  	  	Consent of David Brill (contained in Exhibit 5.2)	
 	 	
 	24.1  	  	  	Power of Attorney of officers and directors of MagnaChip Semiconductor LLC(2)	
 
*	To be filed by amendment.	
Footnotes:
(1)	Certain portions of this document have been omitted pursuant to a grant of confidential treatment by the SEC.	
(2)	Previously filed as an exhibit to the Registration Statement on Form S-1 filed on March 15, 2010 (Registration No. 333-165467).	
(3)	Previously filed as an exhibit to Amendment No. 1 to Registration Statement on Form S-1 filed on April 20, 2010 (Registration No. 333-165467).	
(4)	Previously filed as an exhibit to Amendment No. 2 to Registration Statement on Form S-1 filed on May 11, 2010 (Registration No. 333-165467).	
(5)	Incorporated by reference to the respective exhibit to Amendment No. 2 to MagnaChip Semiconductor S.A.’s and MagnaChip Semiconductor Finance Company’s Registration Statement on Form S-4 (Registration No. 333-168516) filed on October 14, 2010.	
 
II-7

Table of Contents
Item 17.	Undertakings.	
We hereby undertake to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer, or controlling person of us in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, we will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and
(2) for purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
II-8

Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, MagnaChip Semiconductor LLC has duly caused this Amendment No. 9 to Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Seoul, Republic of Korea on February 18, 2011.

MagnaChip Semiconductor LLC	
By:	 	/S/    SANG PARK        	
 	 	Sang Park, Chief Executive	
 	 	Officer (Principal Executive Officer)	
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 9 to Registration Statement on Form S-1 has been signed below by the following persons on behalf of MagnaChip Semiconductor LLC and in the capacities and on the dates indicated:

 	 	Signature	  	Title	 	Date	
 	 	 	 	
 	 	/S/    SANG PARK        
Sang Park	  	Chief Executive Officer and Chairman
of the Board of Directors (Principal Executive Officer)	 	February 18, 2011	
 	 	 	 	
 	 	*
Margaret Sakai	  	Chief Financial Officer (Principal
Financial and Accounting
Officer)	 	February 18, 2011	
 	 	 	 	
 	 	*
Michael Elkins	  	Director	 	February 18, 2011	
 	 	 	 	
 	 	*
Randal Klein	  	Director	 	February 18, 2011	
 	 	 	 	
 	 	*
R. Douglas Norby	  	Director	 	February 18, 2011	
 	 	 	 	
 	 	*
Gidu Shroff	  	Director	 	February 18, 2011	
 	 	 	 	
 	 	*
Steven Tan	  	Director	 	February 18, 2011	
 	 	 	 	
 	 	*
Nader Tavakoli	  	Director	 	February 18, 2011	
 	 	 	 	
 	 	/S/    SANG PARK
*By                                                   
Attorney-in-fact	  	 	 	 	
 
II-9

Table of Contents
Exhibit Index

 	  1.1	  	  	Form of Underwriting Agreement	
 	 	
 	  2.1	  	  	Second Amended Chapter 11 Plan of Reorganization Proposed by the Official Committee of Unsecured Creditors of MagnaChip Semiconductor Finance Company, et al., dated as of September 24, 2009(3)	
 	 	
 	  3.1	  	  	Certificate of Formation of MagnaChip Semiconductor LLC (formerly System Semiconductor Holding LLC)(2)	
 	 	
 	  3.2	  	  	Certificate of Amendment to Certificate of Formation of MagnaChip Semiconductor LLC(2)	
 	 	
 	  3.3	  	  	Fifth Amended and Restated Limited Liability Company Operating Agreement of MagnaChip Semiconductor LLC(3)	
 	 	
 	  3.4	  	  	Form of Certificate of Incorporation of MagnaChip Semiconductor Corporation(2)	
 	 	
 	  3.5	  	  	Form of Bylaws of MagnaChip Semiconductor Corporation(2)	
 	 	
 	  3.6	  	  	Form of Plan of Conversion of MagnaChip Semiconductor LLC(4)	
 	 	
 	  4.1	  	  	Registration Rights Agreement, dated as of November 9, 2009, by and among MagnaChip Semiconductor LLC and each of the securityholders named therein(3)	
 	 	
 	  4.2	  	  	Form of Deposit Agreement, among MagnaChip Semiconductor Corporation, American Stock Transfer & Trust Company, LLC, as the depositary, custodian and registrar, and the holders and beneficial owners of depositary shares(4)	
 	 	
 	  4.3	  	  	[reserved]	
 	 	
 	  4.4	  	  	Indenture, dated as of April 9, 2010, by and among MagnaChip Semiconductor S.A., MagnaChip Semiconductor Finance Company, the guarantors as named therein and Wilmington Trust FSB, as trustee(3)	
 	 	
 	  4.5	  	  	Form of 10.500% Senior Notes due 2018 and notation of guarantee (included in Exhibit 4.4)	
 	 	
 	  4.6	  	  	Exchange and Registration Rights Agreement, dated as of April 9, 2010, by and among MagnaChip Semiconductor S.A., MagnaChip Semiconductor Finance Company, the guarantors named therein, and Goldman, Sachs & Co., Barclays Capital Inc., Deutsche Bank Securities Inc. and Morgan Stanley & Co. Incorporated, as representatives of the several purchasers named therein(3)	
 	 	
 	  5.1	  	  	Opinion of Jones Day*	
 	 	
 	  5.2	  	  	Opinion of David Brill, General Counsel of American Stock Transfer & Trust Company, LLC*	
 	 	
 	  8.1	  	  	Tax Opinion of Jones Day*	
 	 	
 	10.1	  	  	Amended and Restated Credit Agreement, dated as of November 6, 2009, among MagnaChip Semiconductor S.A., MagnaChip Semiconductor Finance Company, the guarantors named therein, the lenders named therein, and Wilmington Trust FSB, as Administrative Agent(3)	
 	 	
 	10.2	  	  	Intellectual Property License Agreement, dated as of October 6, 2004, by and between Hynix Semiconductor Inc. and MagnaChip Semiconductor, Ltd. (Korea)(3)	
 	 	
 	10.3	  	  	Land Lease and Easement Agreement, dated as of October 6, 2004, by and between Hynix Semiconductor Inc. and MagnaChip Semiconductor, Ltd. (Korea)(1)(3)	
 	 	
 	10.4	  	  	First Amendment to Land Lease and Easement Agreement, dated as of December 30, 2005, by and between Hynix Semiconductor Inc. and MagnaChip Semiconductor, Ltd. (Korea)(3)	
 	 	
 	10.5	  	  	General Service Supply Agreement, dated as of October 6, 2004, by and between Hynix Semiconductor Inc. and MagnaChip Semiconductor, Ltd. (Korea)(1)(5)	
 	 	
 	10.6	  	  	First Amendment to the General Service Supply Agreement, dated as of December 30, 2005, by and between Hynix Semiconductor Inc. and MagnaChip Semiconductor, Ltd. (Korea)(3)	

Table of Contents

 	10.7  	  	  	License Agreement (ModularBCD), dated as of March 18, 2005, by and between Advanced Analogic Technologies, Inc. and MagnaChip Semiconductor, Ltd. (Korea)(1)(2)	
 	 	
 	10.8  	  	  	Amended & Restated License Agreement (TrenchDMOS), dated as of September 19, 2007, by and between Advanced Analogic Technologies, Inc. and MagnaChip Semiconductor, Ltd. (Korea)(1)(5)	
 	 	
 	10.9  	  	  	Technology License Agreement, dated as of December 16, 1996, by and between Advanced RISC Machines Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to LG Semicon Company Limited)(1)(2)	
 	 	
 	10.10	  	  	Amendment to the Technology License Agreement, dated as of October 16, 2006, by and between ARM Limited and MagnaChip Semiconductor, Ltd. (Korea)(1)(5)	
 	 	
 	10.11	  	  	ARM7201TDSP Device License Agreement, dated as of August 26, 1997, by and between Advanced RISC Machines Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to LG Semicon Company Limited)(1)(2)	
 	 	
 	10.12	  	  	Technology License Agreement, dated as of October 5, 1995, by and between Advanced RISC Machines Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to LG Semicon Company Limited)(1)(5)	
 	 	
 	10.13	  	  	Technology License Agreement, dated as of July 2001, by and between ARM Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to Hynix Semiconductor Inc.)(1)(2)	
 	 	
 	10.14	  	  	Technology License Agreement, dated as of August 22, 2001, by and between ARM Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to Hynix Semiconductor Inc.)(1)(2)	
 	 	
 	10.15	  	  	Technology License Agreement, dated as of May 20, 2004, by and between ARM Limited and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to Hynix Semiconductor Inc.)(2)	
 	 	
 	10.16	  	  	Design Migration Agreement, dated as of May 1, 2007, by and between ARM Limited and MagnaChip Semiconductor, Ltd. (Korea)(1)(5)	
 	 	
 	10.17	  	  	Basic Agreement on Joint Development and Grant of License, dated as of November 10, 2006, by and between MagnaChip Semiconductor, Ltd. and Silicon Works (English translation)(2)	
 	 	
 	10.18	  	  	Master Service Agreement, dated as of December 27, 2000 by and between Sharp Corporation and MagnaChip Semiconductor, Ltd. (Korea) (successor in interest to Hyundai Electronics Japan Co., Ltd) (English translation)(3)	
 	 	
 	10.19	  	  	Warrant Agreement, dated as of November 9, 2009, between MagnaChip Semiconductor LLC and American Stock Transfer & Trust Company, LLC(2)	
 	 	
 	10.20	  	  	MagnaChip Semiconductor LLC 2009 Common Unit Plan(2)	
 	 	
 	10.21	  	  	MagnaChip Semiconductor LLC 2009 Common Unit Plan form of Option Agreement (Non-U.S. Participants)(2)	
 	 	
 	10.22	  	  	MagnaChip Semiconductor LLC 2009 Common Unit Plan form of Option Agreement (U.S. Participants)(2)	
 	 	
 	10.23	  	  	MagnaChip Semiconductor LLC 2009 Common Unit Plan form of Restricted Unit Agreement (Non-U.S. Participants)(2)	
 	 	
 	10.24	  	  	MagnaChip Semiconductor LLC 2009 Common Unit Plan form of Restricted Unit Agreement (U.S. Participants)(2)	
 	 	
 	10.25	  	  	MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan	
 	 	
 	10.26	  	  	MagnaChip Semiconductor Corporation 2011 Employee Stock Purchase Plan	

Table of Contents

 	10.27	  	  	Amended and Restated Service Agreement, dated as of May 8, 2008, by and between MagnaChip Semiconductor, Ltd. (Korea) and Sang Park(3)	
 	 	
 	10.28	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Sang Park(2)	
 	 	
 	10.29	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Sang Park(2)	
 	 	
 	10.30	  	  	Entrustment Agreement, dated as of October 6, 2004, by and between MagnaChip Semiconductor, Ltd. (Korea) and Tae Young Hwang(3)	
 	 	
 	10.31	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Tae Young Hwang(2)	
 	 	
 	10.32	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Tae Young Hwang(2)	
 	 	
 	10.33	  	  	Offer Letter dated March 7, 2006, from MagnaChip Semiconductor LLC and MagnaChip Semiconductor, Inc. to Brent Rowe, as supplemented on December 20, 2006(2)	
 	 	
 	10.34	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Brent Rowe(2)	
 	 	
 	10.35	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Brent Rowe(2)	
 	 	
 	10.36	  	  	Offer Letter dated September 5, 2006, from MagnaChip Semiconductor LLC and MagnaChip Semiconductor, Ltd. to Margaret Sakai(2)	
 	 	
 	10.37	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Margaret Sakai(2)	
 	 	
 	10.38	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Margaret Sakai(2)	
 	 	
 	10.39	  	  	Offer Letter, dated as of July 1, 2007, by and between MagnaChip Semiconductor, Ltd. (Korea) and Heung Kyu Kim(2)	
 	 	
 	10.40	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Heung Kyu Kim(2)	
 	 	
 	10.41	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Heung Kyu Kim(2)	
 	 	
 	10.42	  	  	Offer Letter, dated as of June 20, 2007, by and between MagnaChip Semiconductor, Ltd. (Korea) and Tae Jong Lee(2)	
 	 	
 	10.43	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Tae Jong Lee(2)	
 	 	
 	10.44	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and Tae Jong Lee(2)	
 	 	
 	10.45	  	  	Service Agreement, dated as of April 1, 2006, by and between MagnaChip Semiconductor, Ltd. (Korea) and John McFarland(2)	
 	 	
 	10.46	  	  	Notice of Grant of Unit Option, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and John McFarland(2)	
 	 	
 	10.47	  	  	Notice of Grant of Restricted Units, dated as of December 8, 2009, by and between MagnaChip Semiconductor LLC and John McFarland(2)	
 	 	
 	10.48	  	  	[reserved]	
 	 	
 	10.49	  	  	MagnaChip Semiconductor Corporation Form of Indemnification Agreement with Directors and Officers(2)	

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 	10.50	  	  	Form of Accredited Investor Certification delivered to the Official Committee of Unsecured Creditors of MagnaChip Semiconductor Finance Company, et al.(3)	
 	 	
 	10.51	  	  	Form of Subscription Agreement for common units of MagnaChip Semiconductor LLC (in connection with the Committee’s Plan of Reorganization under Chapter 11 of the Bankruptcy Code)(3)	
 	 	
 	10.52	  	  	Subscription Form for Rights Offering in connection with the Committee’s Plan of Reorganization under Chapter 11 of the Bankruptcy Code(3)	
 	 	
 	10.53	  	  	$35,000,000 Common Stock Backstop Commitment letter, dated as of September 23, 2009, from Avenue Capital Management II, L.P., solely in its capacity as investment advisor to Avenue Investments, L.P., Avenue International Master, L.P., Avenue Special Situations Fund IV, L.P., Avenue Special Situations Fund V, L.P. and Avenue CDP-Global Opportunities Fund, L.P. (included in Exhibit 2.1)	
 	 	
 	10.54	  	  	MagnaChip Semiconductor LLC Profit Sharing Plan as adopted on December 31, 2009 and as amended on February 15, 2010(1)(5)	
 	 	
 	10.55	  	  	MagnaChip Semiconductor Corporation 2011 Form of Stock Option Agreement (U.S. Participants)	
 	 	
 	10.56	  	  	MagnaChip Semiconductor Corporation 2011 Form of Stock Option Agreement (Non-U.S. Participants)	
 	 	
 	10.57	  	  	MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Units Agreement (U.S. Participants)	
 	 	
 	10.58	  	  	MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Units Agreement (Non-U.S. Participants)	
 	 	
 	10.59	  	  	MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Agreement (U.S. Participants)	
 	 	
 	10.60	  	  	MagnaChip Semiconductor Corporation 2011 Form of Restricted Stock Agreement (Non-U.S. Participants)	
 	 	
 	21.1  	  	  	Subsidiaries of the Registrant(2)	
 	 	
 	23.1  	  	  	Consent of Samil PricewaterhouseCoopers	
 	 	
 	23.2  	  	  	Consent of Jones Day (contained in Exhibit 5.1 and Exhibit 8.1)	
 	 	
 	23.3  	  	  	Consent of David Brill (contained in Exhibit 5.2)	
 	 	
 	24.1  	  	  	Power of Attorney of officers and directors of MagnaChip Semiconductor LLC(2)	
 
*	To be filed by amendment.	
Footnotes:
(1)	Certain portions of this document have been omitted pursuant to a grant of confidential treatment by the SEC.	
(2)	Previously filed as an exhibit to the Registration Statement on Form S-1 filed on March 15, 2010 (Registration No. 333-165467).	
(3)	Previously filed as an exhibit to Amendment No. 1 to Registration Statement on Form S-1 filed on April 20, 2010 (Registration No. 333-165467).	
(4)	Previously filed as an exhibit to Amendment No. 2 to Registration Statement on Form S-1 filed on May 11, 2010 (Registration No. 333-165467).	
(5)	Incorporated by reference to the respective exhibit to Amendment No. 2 to MagnaChip Semiconductor S.A.’s and MagnaChip Semiconductor Finance Company’s Registration Statement on Form S-4 (Registration No. 333-168516) filed on October 14, 2010.	

Exhibit 1.1
MagnaChip Semiconductor Corporation
Common Stock, par value $0.01 per share,
in the form of Depositary Shares
—
Underwriting Agreement
[            ], 2011
Barclays Capital Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
   As representatives of the several Underwriters
   named in Schedule I hereto
c/o Barclays Capital Inc.
   745 Seventh Avenue
   New York, NY 10019
Ladies and Gentlemen:
MagnaChip Semiconductor Corporation, a Delaware corporation (the “Company”), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the “Underwriters”) an aggregate of [                ] Depositary Shares (“DSs”) and, at the election of the Underwriters, up to [                ] additional DSs, each representing an ownership interest in one share of common stock, par value $0.01 per share (“Stock”), of the Company and the stockholders of the Company named in Schedule II hereto (the “Selling Stockholders”) propose, severally and not jointly, subject to the terms and conditions stated herein, to sell to the Underwriters an aggregate of [                ] DSs and, at the election of the Underwriters, up to [                ] additional DSs. The aggregate of [                ] DSs to be sold by the Company and the Selling Stockholders is herein called the “Firm DSs” and the aggregate of [                ] additional DSs to be sold by the Company and the Selling Stockholders at the election of the Underwriters is herein called the “Optional DSs”. The Firm DSs and the Optional DSs that the Underwriters elect to purchase pursuant to Section 2 hereof are herein collectively called the “DSs”. The shares of Stock represented by the Firm DSs to be sold by the Company and the Selling Stockholders are herein called the “Firm Shares” and the shares of Stock represented by Optional DSs to be sold by the Company and the Selling Stockholders are herein called the “Optional Shares”. The Firm Shares and the Optional Shares are herein collectively called the “Shares”.
The DSs are to be issued pursuant to a deposit agreement (the “Deposit Agreement”), dated as of [            ], 2011, among the Company, American Stock Transfer and Trust Company, LLC, as depositary (the “Depositary”), and holders from time to time of the DSs issued under the Deposit Agreement. Each DS will initially represent the right to receive one share of Stock deposited pursuant to the Deposit Agreement.
 
1

1. (a) The Company represents and warrants to, and agrees with, each of the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-165467) (the “Initial Registration Statement”) in respect of the Shares and the DSs has been filed with the Securities and Exchange Commission (the “Commission”); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto, to you for each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a “Rule 462(b) Registration Statement”), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Act”), which became effective upon filing, no other document with respect to the Initial Registration Statement has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Act is hereinafter called a “Preliminary Prospectus”; the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the Initial Registration Statement at the time it was declared effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any, became or hereafter becomes effective, are hereinafter collectively called the “Registration Statement”; the Preliminary Prospectus relating to the Shares and the DSs that was included in the Registration Statement immediately prior to the Applicable Time (as defined in Section 1(c) hereof) is hereinafter called the “Pricing Prospectus”; and such final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the “Prospectus”; and any “issuer free writing prospectus” as defined in Rule 433 under the Act relating to the Shares and the DSs is hereinafter called an “Issuer Free Writing Prospectus”);
(ii) No order preventing or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;  provided ,  however , that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Barclays Capital Inc. or Deutsche Bank Securities Inc. expressly for use therein;
(iii) For the purposes of this Agreement, the “Applicable Time” is [    ] (Eastern time) on the date of this Agreement. The Pricing Prospectus, as of the Applicable Time, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under
 
2

which they were made, not misleading; and each Issuer Free Writing Prospectus listed on Schedule III hereto does not conflict with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus and each such Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time and as of the Time of Delivery (as defined in Section 4 hereof), did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements or omissions made in an Issuer Free Writing Prospectus in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Barclays Capital Inc. or Deutsche Bank Securities Inc. expressly for use therein;
(iv) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to each part of the Registration Statement and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Barclays Capital Inc. or Deutsche Bank Securities Inc. expressly for use therein;
(v) Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included in the Pricing Prospectus and the Prospectus any loss or interference that is material to the business of the Company and its subsidiaries taken as a whole from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus and the Prospectus; and, since the respective dates as of which information is given in the Registration Statement, the Pricing Prospectus and the Prospectus, there has not been any change in the capital stock (other than as a result of the grant or exercise of rights pursuant to equity based incentive plans or arrangements for directors, officers and employees of the Company and its subsidiaries) or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders’ equity or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Pricing Prospectus and the Prospectus;
(vi) The Company and its subsidiaries have good title to all real property and all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Pricing Prospectus and the Prospectus and except to the extent the failure to have such title or the existence of such liens, charges, encumbrances and restrictions would not, individually or in the aggregate, have a material adverse effect on the financial position, stockholders’ equity, results of
 
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operations or prospects of the Company and its subsidiaries, taken as a whole (any such event, a “Material Adverse Effect”); and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries;
(vii) Each of the Company and MagnaChip Semiconductor, Ltd., a corporation incorporated under the laws of the Republic of Korea (“MagnaChip Korea”), has been duly incorporated and is validly existing as a corporation in good standing under its jurisdiction of incorporation, with power and authority to own its properties and conduct its business as described in the Pricing Prospectus and the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction; and each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, except in each case as would not have a Material Adverse Effect;
(viii) The Company has an authorized capitalization as set forth in the Pricing Prospectus and the Prospectus and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and conform to the description of the Stock contained in the Pricing Prospectus and the Prospectus; and all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company (except for director qualifying shares and as otherwise set forth in the Pricing Prospectus and Prospectus), free and clear of all liens, encumbrances, equities or claims; the holders of outstanding shares of capital stock of the Company are not entitled to preemptive or other rights to acquire the Shares or the DSs; there are no outstanding securities convertible into or exchangeable for, or warrants, rights or options to purchase from the Company, or obligations of the Company to issue, the Stock or any other class of capital stock of the Company (except as set forth in the Prospectus under “Description of Capital Stock” and except for securities, warrants, rights or options issued pursuant to equity incentive plans and other agreements of the Company described in the Pricing Prospectus as such plans and agreements are in effect as of the date of the Pricing Prospectus); the Shares may be freely deposited by the Company and the Selling Stockholders with the Depositary in accordance with the requirements of the Deposit Agreement against issuance of DSs; the DSs are freely transferable by the Company and the Selling Stockholders to or for the account of the several Underwriters and (to the extent described in the Prospectus) for the account of the initial purchasers thereof; and there are no restrictions on subsequent transfers of the Shares and the DSs under the laws of the United States except as described in the Prospectus under “Description of Depositary Shares” and as set forth in the Deposit Agreement;
(ix) The unissued Shares to be issued and sold by the Company to the Underwriters hereunder have been duly authorized and, when issued and delivered against payment therefor as provided herein, will be validly issued and fully paid and
 
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non-assessable and will conform to the description of the Stock contained in the Pricing Prospectus and the Prospectus;
(x) The Deposit Agreement has been duly authorized, executed and delivered by the Company, and constitutes a valid and legally binding agreement of the Company, enforceable in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles; upon issuance by the Depositary of DSs and the deposit of Shares in respect thereof in accordance with the provisions of the Deposit Agreement, such DSs will be duly and validly issued under the terms of the Deposit Agreement and the persons in whose names the DSs are registered will be entitled to the rights specified therein and in the Deposit Agreement; and the Deposit Agreement conforms to the descriptions thereof contained in the Pricing Prospectus and the Prospectus and will be substantially in the form previously delivered to you;
(xi) The issue and sale of the DSs by the Company, the Deposit of the Shares being deposited with the Depositary against issuance of the DSs, the compliance by the Company with all of the provisions of this Agreement and the Deposit Agreement and the consummation by the Company of the transactions herein and therein contemplated (a) will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor (b) will such action result in any violation of (i) the provisions of the Certificate of Incorporation or Bylaws of the Company or (ii) any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties except in the case of (a) or (b)(ii) above for any default, conflict, breach or violation that would not, individually or in the aggregate, have a Material Adverse Effect; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the DSs, for the deposit of the Shares being deposited with the Depositary against issuance of the DSs to be delivered or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Shares and the DSs and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws and the Financial Industry Regulatory Authority, Inc. (“FINRA”) in connection with the purchase and distribution of the DSs by the Underwriters;
(xii) Neither the Company nor any of its subsidiaries is (a) in violation of its Certificate of Incorporation or Bylaws or other governing documents, (b) in violation of any applicable statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over it or any of its properties, or (c) in default in the performance or observance of any obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound except in the case of clause (b) or (c) for such defaults or violations which would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect;
 
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(xiii) The statements set forth in the Pricing Prospectus and the Prospectus under the caption “Description of Capital Stock” and under the caption “Description of Depositary Shares”, insofar as they purport to constitute a summary of the terms of the Stock and the DSs, respectively, under the caption “Description of Other Indebtedness,” under the caption “Material U.S. Federal Income Tax Consequences to Non-U.S. Holders” and under the caption “Underwriting”, insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair in all material respects;
(xiv) Other than as set forth in the Pricing Prospectus and the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect; and, to the best of the Company’s knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others;
(xv) The Company is not and, after giving effect to the offering and sale of the DSs by the Company and the application of the proceeds thereof, will not be an “investment company”, as such term is defined in the United States Investment Company Act of 1940, as amended (the “Investment Company Act”);
(xvi) At the time of filing the Initial Registration Statement the Company was not and is not an “ineligible issuer,” as defined under Rule 405 under the Act;
(xvii) Samil PricewaterhouseCoopers, which has audited certain consolidated financial statements of the Company and its subsidiaries, is an independent registered public accounting firm as required by the Act and the rules and regulations of the Commission thereunder;
(xviii) The Company and its subsidiaries maintain a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that complies with the requirements of the Exchange Act and has been designed by the Company’s and its subsidiaries’ principal executive officers and principal financial officers, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Except as disclosed in the Pricing Prospectus, the Company’s and its subsidiaries’ internal control over financial reporting is effective and the Company and its subsidiaries are not aware of any material weaknesses in their internal control over financial reporting;
(xix) Except as disclosed in the Pricing Prospectus, since the date of the latest audited financial statements included in the Pricing Prospectus and the Prospectus, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;
(xx) The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is made
 
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known to the Company’s principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective;
(xxi) Except as described in the Pricing Prospectus and the Prospectus, no material relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, shareholders, customers or suppliers of the Company, on the other hand, that is required to be disclosed in the Pricing Prospectus and the Prospectus pursuant to Section 404 of Regulation S-K;
(xxii) No labor disturbance by the employees of the Company or its subsidiaries exists or, to the knowledge of the Company, is imminent that would reasonably be expected to have a Material Adverse Effect;
(xxiii) Except as described in the Pricing Prospectus and the Prospectus, the Company and each of its subsidiaries have filed all U.S. federal and other state and local and non-U.S. tax returns required to be filed through the date hereof or the Time of Delivery, subject to permitted extensions, and have paid all taxes due and payable, other than those being contested in good faith and for which adequate reserves have been established in accordance with U.S. generally accepted accounting principles (“GAAP”) or those currently payable without penalty or interest or where the failure to file or pay would not, individually and in the aggregate, reasonably be expected to have a Material Adverse Effect. No tax deficiency has been determined adversely to the Company or any of its subsidiaries except those tax assessments for which adequate reserves have been established in accordance with GAAP or where the failure to pay such assessments would not, individually and in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company and its subsidiaries do not have any knowledge of any tax deficiencies that would, in the aggregate, reasonably be expected to have a Material Adverse Effect;
(xxiv) There are no stamp, issue, registration, documentary or transfer taxes or other similar taxes, fees or charges under U.S. federal law or the laws of any state, or any political subdivision thereof, required to be paid in connection with (A) the deposit with the Depositary of Shares by the Company and the Selling Stockholders against the issuance of DSs or (B) the execution and delivery of this Agreement or the issuance or sale by the Company and the Selling Stockholders of the Shares and DSs;
(xxvi) Neither the Company nor any of its subsidiaries, nor, to the knowledge of the Company, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries, has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, unlawful rebate, payoff, influence payment, kickback or other unlawful payment;
(xxvii) The Company and each of its subsidiaries have such permits, licenses, patents, franchises, certificates of need and other approvals or authorizations of governmental or regulatory authorities (“Permits”) as are necessary under applicable law to own their properties and conduct their businesses in the manner described in the Pricing Prospectus and the Prospectus, except for any of the foregoing that would not, in the aggregate, reasonably be expected to have a Material Adverse Effect; each of the
 
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Company and its subsidiaries has fulfilled and performed all of its obligations with respect to the Permits, and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other impairment of the rights of the holder or any such Permits, except for any of the foregoing that would not reasonably be expected to have a Material Adverse Effect;
(xxviii) The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, inventions, methods, processes, know-how, software, systems and technology (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) used in the conduct of their respective businesses without, to their knowledge, infringing, misappropriating or otherwise violating the rights of others except where the infringement, misappropriation or other violation would not reasonably be expected to have a Material Adverse Effect. The Company and each of its subsidiaries have no reason to believe that the conduct of their respective businesses will infringe, misappropriate or otherwise violate, and have not received any notice of any claim of any infringement, misappropriation or violation of, any proprietary rights of others that would reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries is aware of any material pending or threatened claim to the contrary or any material pending or threatened challenge by any other person to the rights of the Company or its subsidiaries with respect to any of the foregoing;
(xxix) Except for such matters as would not reasonably be expected to have a Material Adverse Effect, the Company and its subsidiaries (i) are in compliance with all laws, regulations, ordinances, rules, orders, judgments, decrees, permits or other legal requirements of any governmental authority, including without limitation any international, national, state, provincial, regional, or local authority, relating to the protection of human health or safety, the environment, or natural resources, or to hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”) applicable to such entity, which compliance includes, without limitation, obtaining, maintaining and complying with all permits and authorizations and approvals required by Environmental Laws to conduct their respective businesses, and (ii) have not received notice of any actual or alleged violation of Environmental Laws, or of any potential liability for or other obligation concerning the presence, disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants. Except as described in the Pricing Prospectus and the Prospectus and except for such matters as would not reasonably be expected to have a Material Adverse Effect, (A) there are no proceedings that are pending, or known to be contemplated, against the Company or any of its subsidiaries under Environmental Laws in which a governmental authority is also a party, other than such proceedings regarding which it is reasonably believed no monetary sanctions of $100,000 or more will be imposed and (B) the Company and its subsidiaries are not aware of any issues regarding compliance with Environmental Laws, or liabilities or other obligations under Environmental Laws or concerning hazardous or toxic substances or wastes, pollutants or contaminants;
(xxx) No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such
 
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subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except as described in the Pricing Prospectus and the Prospectus (including the risk factors discussions therein);
(xxxi) The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened;
(xxxii) Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC;
(xxxiii) The Company and each of its subsidiaries carry, or are covered by, insurance from insurers of recognized financial responsibility in such amounts and covering such risks as the Company and its subsidiaries reasonably believe is adequate for the conduct of their respective businesses and the value of their respective properties, except where the failure to carry or maintain such insurance would not, individually or in the aggregate, have a Material Adverse Effect;
(xxxiv) The Company has no liability for any prohibited transaction or accumulated funding deficiency (within the meaning of Section 412 of the Internal Revenue Code) or any complete or partial withdrawal liability with respect to any pension, profit sharing or other plan which is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), to which the Company makes or ever has made a contribution and in which any employee of the Company is or has ever been a participant except as would not reasonably be expected to have a Material Adverse Effect. With respect to such plans, the Company is in compliance in all material respects with all applicable provisions of ERISA;
(xxxv) Except as described under the caption “Underwriting” in the Pricing Prospectus and the Prospectus, there are no contracts, agreements or understandings between the Company and any other person other than the Underwriters pursuant to this Agreement that would give rise to a valid claim against the Company or any of the Underwriters for a brokerage commission, finder’s fee or like payment in connection with the issuance, purchase and sale of the Shares or DSs;
(xxxvi) The statistical and market-related data included in the Pricing Prospectus and the Prospectus are based on or derived from sources that the Company believes to be reliable and accurate in all material respects and represent its good faith estimates
 
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that are made on the basis of data derived from such sources. The Company has obtained the written consent to the use of such data from such sources to the extent required;
(xxxvii) The unaudited pro forma consolidated financial statements (including the notes thereto) under the caption “Unaudited Pro Forma Consolidated Financial Information” included in the Pricing Prospectus and the Prospectus have been prepared in good faith and the Company believes that they substantially comply with the applicable requirements of Regulation S-X and the Commission’s rules and guidelines with respect to pro forma financial statements. The assumptions and computations used in preparing the pro forma financial statements and the other pro forma financial data included in the Pricing Prospectus and the Prospectus are made on a reasonable basis and in good faith, and present fairly in all material respects the historical financial information and impact of the “fresh start” accounting and the offering and sales of the DSs as contemplated by the Pricing Prospectus and the Prospectus;
(xxxviii) Each certificate signed by any officer of the Company and delivered to the Underwriters or counsel for the Underwriters pursuant to, or in connection with, this Agreement shall be deemed to be a representation and warranty by the Company to the Underwriters as to the matters covered by such certificate; and
(xxxix) Prior to the date hereof, none of the Company, its subsidiaries nor any of their affiliates has taken, directly or indirectly, any action which is designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares or the DSs;
(b) Each of the Selling Stockholders severally, and not jointly, represents and warrants to, and agrees with, each of the Underwriters and the Company that:
(i) Except for such consents, approvals, authorizations and orders as have been obtained and made under the Act or from FINRA and such as may be required under state securities laws, all consents, approvals, authorizations and orders necessary for the execution and delivery by such Selling Stockholder of this Agreement and the Power of Attorney and the Custody Agreement hereinafter referred to, and for the sale and delivery of the Shares and DSs to be sold by such Selling Stockholder hereunder, have been obtained; and such Selling Stockholder has full right, power and authority to enter into this Agreement, the Power of Attorney and the Custody Agreement and to sell, assign, transfer and deliver the Shares and DSs to be sold by such Selling Stockholder hereunder;
(ii) With respect to Shares deposited by each Selling Stockholder with the Depositary, the Deposit Agreement is enforceable against such Selling Stockholder in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency, reorganization and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles;
(iii) The sale of the Shares and DSs to be sold by such Selling Stockholder hereunder and the compliance by such Selling Stockholder with all of the provisions of this Agreement, the Deposit Agreement, the Power of Attorney and the Custody Agreement applicable to such Selling Stockholder and the consummation by such Selling Stockholder of the transactions herein and therein contemplated will not (a) conflict with
 
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or result in a breach or violation of any of the terms or provisions of, or constitute a default under, (1) any statute to which such Selling Stockholder is subject, (2) any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Selling Stockholder is a party or by which such Selling Stockholder is bound or to which any of the property or assets of such Selling Stockholder is subject, nor (b) will such action result in (1) any violation of the provisions of the organizational documents of such Selling Stockholder or (2) any statute applicable to such Selling Stockholder or any order, rule or regulation of any court or governmental agency or body having jurisdiction over such Selling Stockholder or the property of such Selling Stockholder, except, in the case of (a) or (b)(2) above, for such conflicts, breaches, violations or defaults as would not reasonably be expected to result individually or in the aggregate in a Selling Stockholder Material Adverse Effect;
(iv) Such Selling Stockholder has, and immediately prior to the each Time of Delivery such Selling Stockholder will have, good and valid title to the Shares to be sold by such Selling Stockholder hereunder, free and clear of all liens, encumbrances, equities or claims, except for liens, encumbrances, equities or claims created by this Agreement, the Lock-Up Agreement, the Custody Agreement and the Power of Attorney, in each case to which such Selling Stockholder is a party; and, upon delivery of such Shares and payment therefor pursuant hereto, good and valid title to such Shares, free and clear of all liens, encumbrances, equities or claims, will pass to the several Underwriters, except for liens, encumbrances, equities or claims created by this Agreement, the Lock-Up Agreement, the Custody Agreement and the Power of Attorney, in each case to which such Selling Stockholder is a party;
(v) Such Selling Stockholder has executed and delivered to the Underwriters a lock-up agreement (each, a “Lock-Up Agreement”) substantially as set forth in Schedule IV(a) hereto; each such Lock-Up Agreement has been duly authorized by such Selling Stockholder;
(vi) Such Selling Stockholder has not taken and will not take, directly or indirectly, any action which is designed to or which has constituted or which would reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares or the DSs;
(vii) To the extent that any statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto are made in reliance upon and in conformity with such Selling Stockholder’s Information (as defined below), such Selling Stockholder Information contained therein will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in respect of such Selling Stockholder’s Information. For purposes of this Agreement, with respect to each Selling Stockholder, “Selling Stockholder’s Information” shall mean any written information furnished to the Company by such Selling Stockholder expressly for use in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto or any Issuer Free Writing Prospectus, it being understood that the only such information furnished by each Selling Stockholder consists of the statements contained with respect to such Selling Stockholder under the caption “Principal and Selling Stockholders”;
 
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(viii) Such Selling Stockholder will deliver to you prior to or at the First Time of Delivery (as hereinafter defined) a properly completed and executed United States Treasury Department Form W-9 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof);
(ix) The Shares to be sold by such Selling Stockholder hereunder have been deposited under the Deposit Agreement pursuant to the Custody Agreement (as defined below) with the Depositary and placed in custody under the Amended and Restated Custody Agreement, in the form heretofore furnished to you (the “Custody Agreement”), duly executed and delivered by such Selling Stockholder to American Stock Transfer & Trust Company, LLC, as custodian (the “Custodian”), and such Selling Stockholder has duly executed and delivered an Amended and Restated Power of Attorney, in the form heretofore furnished to you (the “Power of Attorney”), appointing the persons indicated in Schedule II hereto, and each of them, as such Selling Stockholder’s attorneys-in-fact (the “Attorneys-in-Fact”) with authority to execute and deliver this Agreement on behalf of such Selling Stockholder, to determine the purchase price to be paid by the Underwriters to the Selling Stockholders as provided in Section 2 hereof to authorize the delivery of the Shares to be sold by such Selling Stockholder hereunder and otherwise to act on behalf of such Selling Stockholder in connection with the transactions contemplated by this Agreement and the Custody Agreement; and
(x) The Shares held in custody for such Selling Stockholder under the Custody Agreement are subject to the interests of the Underwriters hereunder; the arrangements made by such Selling Stockholder for such custody, and the appointment by such Selling Stockholder of the Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable; the obligations of such Selling Stockholder hereunder shall not be terminated by operation of law, whether by the death or incapacity of any individual Selling Stockholder or, in the case of an estate or trust, by the death or incapacity of any executor or trustee or the termination of such estate or trust, or in the case of a partnership, limited liability company or corporation, by the dissolution of such partnership, limited liability company or corporation, or by the occurrence of any other event; if any individual Selling Stockholder or any such executor or trustee should die or become incapacitated, or if any such estate or trust should be terminated, or if any such partnership, limited liability company or corporation should be dissolved, or if any other such event should occur, before the delivery of the Shares hereunder, the Shares to be sold by such Selling Stockholder shall be delivered by or on behalf of such Selling Stockholder in accordance with the terms and conditions of this Agreement and of the Custody Agreements; and actions taken by the Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid as if such death, incapacity, termination, dissolution or other event had not occurred, regardless of whether or not the Custodian, the Attorneys-in-Fact, or any of them, shall have received notice of such death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the Company and each of the Selling Stockholders agree, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company and each of the Selling Stockholders, at a purchase price per DS of $[        ], the number of Firm DSs (to be adjusted by you so as to eliminate fractional shares) determined by multiplying the aggregate number of DSs to be sold by the Company and
 
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each of the Selling Stockholders as set forth opposite their respective names in Schedule II hereto by a fraction, the numerator of which is the aggregate number of Firm DSs to be purchased by such Underwriter as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the aggregate number of Firm DSs to be purchased by all of the Underwriters from the Company and all of the Selling Stockholders hereunder and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional DSs as provided below, the Company and each of the Selling Stockholders agree, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company and each of the Selling Stockholders, at the purchase price per DS set forth in clause (a) of this Section 2, that portion of the number of Optional DSs as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional DSs by a fraction the numerator of which is the maximum number of Optional DSs which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional DSs that all of the Underwriters are entitled to purchase hereunder.
The Company and the Selling Stockholders, as and to the extent indicated in Schedule II hereto, hereby grant, severally and not jointly, to the Underwriters the right to purchase at their election up to [            ] Optional DSs, at the purchase price per DS set forth in the paragraph above, for the sole purpose of covering sales of shares in excess of the number of Firm DSs, provided that the purchase price per Optional DS shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Firm DSs but not payable on the Optional DSs. Any such election to purchase Optional DSs shall be made in proportion to the maximum number of Optional DSs to be sold by the Company and each Selling Stockholder as set forth in Schedule II hereto. Any such election to purchase Optional DSs may be exercised only by written notice from you to the Company, given within a period of 30 calendar days after the date of this Agreement and setting forth the aggregate number of Optional DSs to be purchased and the date on which such Optional DSs are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless you, the Company and the Attorneys in Fact otherwise agree in writing, earlier than two or later than ten days after the date of such notice.
3. Upon the authorization by you of the release of the Firm DSs, the several Underwriters propose to offer the Firm DSs for sale upon the terms and conditions set forth in the Prospectus.
4. (a) The DSs to be purchased by each Underwriter hereunder, in book-entry form, and in such authorized denominations and registered in such names as Barclays Capital Inc. may request upon at least forty-eight hours’ prior notice to the Company and the Selling Stockholders shall be delivered by or on behalf of the Company and the Selling Stockholders to Barclays Capital Inc., through the facilities of the Depository Trust Company (“DTC”), for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Company and the Custodian to Barclays Capital Inc. at least forty-eight hours in advance. The time and date of such delivery and payment shall be, with respect to the Firm DSs, 9:30 a.m., New York time, on [            ], 2011
 
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or such other time and date as Barclays Capital Inc. and the Company may agree upon in writing, and, with respect to the Optional DSs, 9:30 a.m., New York time, on the date specified by Barclays Capital Inc. in the written notice given by Barclays Capital Inc. of the Underwriters’ election to purchase such Optional DSs, or such other time and date as Barclays Capital Inc. and the Company may agree upon in writing. Such time and date for delivery of the Firm DSs is herein called the “First Time of Delivery”, such time and date for delivery of the Optional DSs, if not the First Time of Delivery, is herein called the “Second Time of Delivery”, and each such time and date for delivery is herein called a “Time of Delivery”.
(b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 8 hereof, including the cross receipt for the DSs and any additional documents requested by the Underwriters pursuant to Section 8(o) hereof, will be delivered at the offices of Latham & Watkins LLP, 505 Montgomery Street, Suite 2000, San Francisco, California 94111 (the “Closing Location”), and the DSs will be delivered at the Designated Office, all at such Time of Delivery. A meeting will be held at the Closing Location at noon, New York City time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, “New York Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission’s close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or the Prospectus prior to the last Time of Delivery which shall be disapproved by you promptly after reasonable notice thereof; to advise you and each of the Selling Stockholders, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any amendment or supplement to the Prospectus has been filed and to furnish you and each of the Selling Stockholders with copies thereof; to file promptly all material required to be filed by the Company with the Commission pursuant to Rule 433(d) under the Act; to file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is required in connection with the offering or sale of the DSs; to advise you and the Selling Stockholders, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus in respect of the DSs, of the suspension of the qualification of the DSs for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the
 
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Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus or suspending any such qualification, to promptly use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may reasonably request to qualify the DSs for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the DSs, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction or to subject itself to taxation in any such jurisdiction in which it is not otherwise subject to taxation;
(c) Prior to 10:00 a.m., New York City time, on the New York Business Day next succeeding the date of this Agreement and from time to time, to furnish the Underwriters with written and electronic copies of the Prospectus in New York City in such quantities as you may reasonably request, and, if the delivery of a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the DSs and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is delivered, not misleading, or, if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus in order to comply with the Act, to notify you and upon your request to prepare and furnish without charge to each Underwriter and to any dealer in securities as many written and electronic copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance; and in case any Underwriter is required to deliver a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) in connection with sales of any of the DSs at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many written and electronic copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as practicable, but in any event not later than sixteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to and including the date 180 days after the date of the Prospectus (the “Lock-Up Period”), not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose, except as provided hereunder, of any securities of the Company that are substantially similar to the Shares or the DSs, including but not limited to any options
 
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or warrants to purchase shares of Stock or any securities that are convertible into or exchangeable for, or that represent the right to receive, Stock or any such substantially similar securities (other than pursuant to equity incentive plans existing on, or upon the conversion, exercise or exchange of securities outstanding as of, the date of this Agreement and), without your prior written consent; provided, however, that the foregoing provision is not intended to prevent the filing by the Company of a resale registration statement in accordance with terms of the Registration Rights Agreement, dated as of November 9, 2009, among the Company and the other parties thereto, during the Lock-Up Period; and provided, further, that if (1) during the last 17 days of the initial Lock-Up Period, the Company releases earnings results or announces material news or a material event or (2) prior to the expiration of the initial Lock-Up Period, the Company announces that it will release earnings results during the 15-day period following the last day of the initial Lock-Up Period, then in each case the Lock-Up Period will be automatically extended until the expiration of the 18-day period beginning on the date of release of the earnings results or the announcement of the material news or material event, as applicable, unless Barclays Capital Inc. and Deutsche Bank Securities Inc. waive, in writing, such extension; the Company will provide Barclays Capital Inc. and Deutsche Bank Securities Inc. and each stockholder subject to the Lock-Up Period pursuant to the lockup letters described in Section 8(k) with prior notice of any such announcement that gives rise to an extension of the Lock-up Period;
(f) To furnish to its stockholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders’ equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), to make available to its stockholders consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; provided that the Company shall not be required to provide documents that are available through the Commission’s Electronic Data Gathering, Analysis and Retrieval System;
(g) During a period of three years from the effective date of the Registration Statement, to furnish to you copies of all reports or other communications (financial or other) furnished to stockholders, and to deliver to you (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as you may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission); provided that the Company shall not be required to provide documents that are available through the Commission’s Electronic Data Gathering, Analysis and Retrieval System;
(h) To use the net proceeds received by it from the sale of the DSs pursuant to this Agreement in the manner specified in the Pricing Prospectus and the Prospectus under the caption “Use of Proceeds”;
 
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(i) Prior to each Time of Delivery to deposit the Stock with the Depositary in accordance with the provisions of the Deposit Agreement and otherwise to comply with the Deposit Agreement so that DSs issued by the Depositary against receipt of such Stock and delivered to the Underwriters at such Time of Delivery;
(j) To use its reasonable best efforts to list, subject to notice of issuance, the Shares and the DSs on the New York Stock Exchange (the “NYSE”);
(k) To file with the Commission such information on Form 10-Q or Form 10-K as may be required by Rule 463 under the Act;
(l) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Act; and
(m) Upon request of any Underwriter, to furnish, or cause to be furnished, to such Underwriter an electronic version of the Company’s trademarks, servicemarks and corporate logo for use on the website, if any, operated by such Underwriter for the purpose of facilitating the on-line offering of the Shares or the DSs (the “License”);  provided, however , that the License shall be used solely for the purpose described above, is granted without any fee and may not be assigned or transferred.
6. (a) The Company and each of the Selling Stockholders, severally and not jointly, represents and agrees that, without the prior consent of Barclays Capital Inc. and Deutsche Bank Securities Inc., it has not made and will not make any offer relating to the DSs that would constitute a “free writing prospectus” as defined in Rule 405 under the Act; each Underwriter, severally and not jointly, represents and agrees that, without the prior consent of the Company, Barclays Capital Inc. and Deutsche Bank Securities Inc., it has not made and will not make any offer relating to the DSs that would constitute a free writing prospectus; any such free writing prospectus the use of which has been consented to by the Company, Barclays Capital Inc. and Deutsche Bank Securities Inc. is listed on Schedule III hereto;
(b) The Company has complied and will comply with the requirements of Rule 433 under the Act applicable to any Issuer Free Writing Prospectus, including timely filing with the Commission or retention where required and legending; and the Company represents that it has satisfied and agrees that it will satisfy the conditions under Rule 433 under the Act to avoid a requirement to file with the Commission any electronic road show;
(c) The Company agrees that if at any time following issuance of an Issuer Free Writing Prospectus any event occurred or occurs as a result of which such Issuer Free Writing Prospectus would conflict with the information in the Registration Statement, the Pricing Prospectus or the Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Company will give prompt notice thereof to Barclays Capital Inc. and Deutsche Bank Securities Inc. and, if requested by Barclays Capital Inc. and Deutsche Bank Securities
 
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Inc., will prepare and furnish without charge to each Underwriter an Issuer Free Writing Prospectus or other document reasonably acceptable to Barclays Capital Inc. and Deutsche Bank Securities Inc. which will correct such conflict, statement or omission; provided, however, that this representation and warranty shall not apply to any statements or omissions in an Issuer Free Writing Prospectus made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Barclays Capital Inc. or Deutsche Bank Securities Inc. expressly for use therein.
7. The Company covenants and agrees with the several Underwriters and each of the Selling Stockholders that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of the Shares and the DSs under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the fees, charges and disbursements of one (1) firm of counsel to all of the Selling Stockholders selected by the holders of a majority of the Shares sold by the Selling Stockholders hereunder; (iii) the cost of printing or producing any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares and the DSs; (iv) all expenses in connection with the qualification of the Shares and the DSs for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky survey (v) all fees and expenses in connection with listing the Shares and the DSs on the NYSE; (vi) the filing fees incident to, and the fees and disbursements of counsel for the Underwriters in connection with, securing any required review by the Financial Industry Regulatory Authority of the terms of the sale of the Shares and the DSs; (vii) all expenses and taxes arising as a result of the deposit by the Company and the Selling Stockholders of the Shares with the Depositary and the issuance and delivery of the DSs in exchange therefor by the Depositary to the Company and the Selling Stockholders, of the sale and delivery of the DSs by the Company and the Selling Stockholders to or for the account of the Underwriters, including any income, capital gains, withholding, transfer or other tax asserted against an Underwriter by reason of the purchase and sale of a DS pursuant to this Agreement; (viii) the fees and expenses (including fees and disbursements of counsel), if any, of the Depositary, other than the fees and expenses to be paid by holders of DSs (other than the Underwriters in connection with the initial purchase of DSs); (ix) the cost of preparing stock certificates, if any, and DSs; (x) the cost and charges of any transfer agent or registrar; (xi) any stamp, issue, registration, documentary, transfer or other similar taxes and duties, including interest and penalties, payable in any relevant jurisdiction incident to the sale and delivery of the Shares and the DSs to be sold by the Company to the Underwriters hereunder; (xii) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section; and (xiii) the Selling Stockholders’ fees and expenses of the Attorneys in Fact and the Custodian. Each of the Selling Stockholders agrees severally and not jointly with one another, the Company and the several Underwriters that it will pay or cause to be paid all costs and expenses incident to the performance of such Selling Stockholder’s obligations hereunder which are
 
18

not otherwise specifically provided for in this Section other than “Registration Expenses” as defined in the Registration Rights Agreement, dated as of November 9, 2009, among the Company and the other parties signatory thereto, which shall be paid by the Company, including: (i) any fees and expenses of counsel for such Selling Stockholder other than as provided above, and (ii) all expenses and transfer and similar taxes incident to the sale and delivery of the Shares and the DSs to be sold by such Selling Stockholder to the Underwriters hereunder. It is understood, however, that the Company shall bear, and the Selling Stockholders shall not be required to pay or to reimburse the Company for, the cost of any other matters not directly relating to the sale and purchase of the Shares and the DSs pursuant to this Agreement, and that, except as provided in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, and any advertising expenses connected with any offers they may make. In connection with the “road show” undertaken in connection with the marketing of the offering of the Shares and the DSs, (i) the Company and the Underwriters will each bear their respective proportional share of the costs associated with any aircraft used; (ii) the Company and the Underwriters will each pay their own costs associated with hotel accommodations; (iii) the Underwriters will pay the costs and expenses associated with ground transportation, group functions and any electronic “road show.” All payments to be made by the Company hereunder shall be made without withholding or deduction for or on account of any present or future taxes, duties or governmental charges imposed by or on behalf of the relevant taxing jurisdictions or the United States whatsoever unless the Company is compelled by law to deduct or withhold such taxes, duties or charges. In that event, the Company shall pay such additional amounts as may be necessary in order that the net amounts received after such withholding or deduction shall equal the amounts that would have been received if no withholding or deduction had been made.
8. The obligations of the Underwriters hereunder, as to the DSs to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company and the Selling Stockholders herein are, at and as of such Time of Delivery, true and correct, the condition that the Company and the Selling Stockholders shall have performed all of its obligations hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) under the Act within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; all material required to be filed by the Company pursuant to Rule 433(d) under the Act shall have been filed with the Commission within the applicable time period prescribed for such filing by Rule 433; if the Company has elected to rely upon Rule 462(b) under the Act, the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; no stop order suspending or preventing the use of the Prospectus or any Issuer Free Writing Prospectus shall have been initiated or threatened by the
 
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Commission; and all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction;
(b) Latham & Watkins LLP, counsel for the Underwriters, shall have furnished to you such opinion or opinions, dated such Time of Delivery, substantially in form and substance reasonably satisfactory to you, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters;
(c) Jones Day, counsel for the Company, and Kim & Chang, counsel for MagnaChip Korea, shall have furnished to you their written opinion or opinions of local counsel, dated such Time of Delivery, substantially in the form attached as Annex I(a)(1) and Annex I(a)(2) hereto, respectively;
(d) The respective counsel for each of the Selling Stockholders, as indicated in Schedule II hereto, each shall have furnished to you their written opinion with respect to each of the Selling Stockholders for whom they are acting as counsel, dated such Time of Delivery, substantially in the form attached as Annex I(b) hereto;
(e) David Brill, counsel for the Depositary, shall have furnished to you his written opinion, dated such Time of Delivery, substantially in the form attached as Annex I(c) hereto;
(f) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, Samil PricewaterhouseCoopers shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex II hereto (the executed copy of the letter delivered prior to the execution of this Agreement is attached as Annex II(a) hereto and a draft of the form of letter to be delivered on the effective date of any post-effective amendment to the Registration Statement and as of each Time of Delivery is attached as Annex II(b) hereto);
(g) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Pricing Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus and the Prospectus, and (ii) since the date as of which information is given in the Pricing Prospectus there shall not have been any change in the capital stock (other than as a result of the grant or exercise of rights pursuant to equity based incentive plans or arrangements for directors, officers and employees of the Company and its subsidiaries outstanding as of the date of the Pricing Prospectus) or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders’ equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Pricing Prospectus and the
 
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Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of Barclays Capital Inc. and Deutsche Bank Securities Inc. so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the DSs being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus;
(h) On or after the Applicable Time (i) no downgrading shall have occurred in the rating accorded the Company’s debt securities by any “nationally recognized statistical rating organization”, as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities;
(i) On or after the Applicable Time there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the NYSE; (ii) a suspension or material limitation in trading in the Company’s securities on the NYSE; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in the judgment of Barclays Capital Inc. and Deutsche Bank Securities Inc. makes it impracticable or inadvisable to proceed with the public offering or the delivery of the DSs being delivered at such Time of Delivery on the terms and in the manner contemplated in the Pricing Prospectus and the Prospectus;
(j) The DSs at such Time of Delivery shall have been duly listed, subject to notice of issuance, on the NYSE; and upon cancellation of the DSs on [    ], 2011, the Shares shall be duly listed, subject to notice of issuance, on the NYSE;
(k) The Company shall have obtained and delivered to the Underwriters executed copies of an agreement from the Selling Stockholders and each other stockholder of the Company listed on Schedule IV(b) hereto holding 1% or greater of the outstanding shares of capital stock of the Company, substantially as set forth in Schedule IV(a) hereto;
(l) The Depositary shall have furnished or caused to be furnished to you as of such Time of Delivery certificates satisfactory to you evidencing the deposit with it of the Shares being so deposited against issuance of the DSs to be delivered by the Company at such Time of Delivery;
(m) The Company shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement;
(n) The Company and each of the Selling Stockholders shall have furnished or caused to be furnished to you at such Time of Delivery certificates of officers of the Company and each of the Selling Stockholders, respectively, satisfactory to
 
21

you as to the accuracy of the representations and warranties of the Company and each such Selling Stockholder, respectively, herein at and as of such Time of Delivery, as to the performance by the Company and each such Selling Stockholder of all of their respective obligations hereunder to be performed at or prior to such Time of Delivery, and as to such other matters as you may reasonably request, and the Company shall have furnished or caused to be furnished certificates as to the matters set forth in subsections (a) and (g) of this Section; and
(o) The Company shall have furnished to you on the date of the Prospectus at a time prior to the execution of this Agreement and at such Time of Delivery a certificate of the chief financial officer of the Company, substantially in the form attached as Annex III hereto.
9. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, any amendment or supplement thereto, or any Issuer Free Writing Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement thereto or any Issuer Free Writing Prospectus in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Barclays Capital Inc. or Deutsche Bank Securities Inc. expressly for use therein.
(b) Each of the Selling Stockholders, severally and not jointly, will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, any amendment or supplement thereto or any Issuer Free Writing Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus, any such amendment or supplement or any Issuer Free Writing Prospectus in reliance upon and in conformity with such Selling Stockholder’s Information, it being understood that the only such information furnished by each Selling Stockholder consists of the statements
 
22

contained with respect to such Selling Stockholder under the caption “Principal and Selling Stockholders”; and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that such Selling Stockholder shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement thereto or any Issuer Free Writing Prospectus in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Barclays Capital Inc. or Deutsche Bank Securities Inc. expressly for use therein; and provided further that the liability of a Selling Stockholder pursuant to this subsection (b) shall not exceed the product of the number of Shares sold by such Selling Stockholder and the initial public offering price of the DSs as set forth in the Prospectus after deducting any underwriting discounts and commissions received by the Underwriters, but without deducting expenses of the Company or Selling Stockholders (“Net Proceeds”).
(c) Each Underwriter, severally and not jointly, will indemnify and hold harmless the Company and each Selling Stockholder against any losses, claims, damages or liabilities to which the Company or such Selling Stockholder may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto or any Issuer Free Writing Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement thereto or any Issuer Free Writing Prospectus in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Barclays Capital Inc. or Deutsche Bank Securities Inc. expressly for use therein; and will reimburse the Company and each Selling Stockholder for any legal or other expenses reasonably incurred by the Company or such Selling Stockholder in connection with investigating or defending any such action or claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection (a),(b) or (c) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission to so notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the
 
23

indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. It is understood that the indemnifying party shall not, in connection with any one action or proceeding or separate but substantially similar actions or proceedings arising out of generally the same allegations, be liable for the fees and expenses of more than one separate firm of attorneys at any time for all indemnified parties (except to the extent that local counsel (in addition to any regular counsel) is required to effectively defend against any such action or proceeding). No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a), (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholders (relative as to each other and severally with respect to each other) on the one hand and the Underwriters on the other from the offering of the DSs. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (d) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Selling Stockholders (relative as to each other and severally with respect to each other) on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Stockholders (relative as to each other and severally as to each other) on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Selling Stockholders (relative as to each other and severally with respect to each other) bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or a Selling Stockholder on the one hand or the Underwriters on the other and the parties’ relative intent, knowledge, access to information and opportunity to
 
24

correct or prevent such statement or omission. The Company, each of the Selling Stockholders and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e), (i) no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the DSs underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and (ii) no Selling Stockholder shall be required to contribute any amount in excess of the amount by which the Net Proceeds exceeds the amount of any damages which such Selling Stockholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint. Further, each of the Selling Stockholder’s obligations to contribute pursuant to this subsection (e) are several and not joint.
(f) The obligations of the Company and the Selling Stockholders under this Section 9 shall be in addition to any liability which the Company and the respective Selling Stockholders may otherwise have and shall extend, upon the same terms and conditions, to any affiliate of each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 9 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Company) and to any affiliate of the Company or any Selling Stockholder and each person, if any, who controls the Company or any Selling Stockholder within the meaning of the Act.
10. (a) If any Underwriter shall default in its obligation to purchase the DSs which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such DSs on the terms contained herein. If within thirty six hours after such default by any Underwriter you do not arrange for the purchase of such DSs, then the Company and the Selling Stockholders shall be entitled to a further period of thirty six hours within which to procure another party or other parties satisfactory to you to purchase such DSs on such terms. In the event that, within the respective prescribed periods, you notify the Company and the Selling Stockholders that you have so arranged for the purchase of such DSs, or the Company and the Selling Stockholders notify you that they have so arranged for the purchase of such DSs, you or the Company and the Selling Stockholders shall have the right to postpone a Time of Delivery for a period of not more than seven days, in order to
 
25

effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your reasonable opinion may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such DSs.
(b) If, after giving effect to any arrangements for the purchase of the DSs of a defaulting Underwriter or Underwriters by you and the Company and the Selling Stockholders as provided in subsection (a) above, the aggregate number of such DSs which remains unpurchased does not exceed one-eleventh of the aggregate number of all the DSs to be purchased at such Time of Delivery, then the Company and the Selling Stockholders shall have the right to require each non-defaulting Underwriter to purchase the number of DSs which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of DSs which such Underwriter agreed to purchase hereunder) of the DSs of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the DSs of a defaulting Underwriter or Underwriters by you and the Company and the Selling Stockholders as provided in subsection (a) above, the aggregate number of such DSs which remains unpurchased exceeds one-eleventh of the aggregate number of all of the DSs to be purchased at such Time of Delivery, or if the Company and the Selling Stockholders shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase DSs of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Company and the Selling Stockholders to sell the Optional DSs) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company or the Selling Stockholders, except for the expenses to be borne by the Company and the Selling Stockholders and the Underwriters as provided in Section 7 hereof and the indemnity and contribution agreements in Section 9 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default.
11. The respective indemnities, agreements, representations, warranties and other statements of the Company, the Selling Stockholders and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company, or any of the Selling Stockholders, or any officer or director or controlling person of the Company, or any controlling person of any Selling Stockholder, and shall survive delivery of and payment for the DSs.
12. If this Agreement shall be terminated pursuant to Section 10 hereof, neither the Company nor the Selling Stockholders shall then be under any liability to any Underwriter except as provided in Sections 7 and 9 hereof; but, if for any other reason any DSs are not delivered by or on behalf of the Company and the Selling Stockholders
 
26

as provided herein, the Company will reimburse the Underwriters through Barclays Capital Inc. and Deutsche Bank Securities Inc. for all of their documented out-of-pocket expenses approved in writing by Barclays Capital Inc. and Deutsche Bank Securities Inc., including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the DSs not so delivered, but the Company and the Selling Stockholders shall then be under no further liability to any Underwriter in respect of the DSs not so delivered except as provided in Sections 7 and 9 hereof.
13. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by Barclays Capital Inc. and Deutsche Bank Securities Inc. or, as stated herein, by Barclays Capital Inc., on behalf of you as the representatives.
All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the representatives in care of Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019, Attention: Syndicate Registration, and Deutsche Bank Securities Inc., 60 Wall Street, New York, New York 10005, Attention: Equity Capital Markets Syndicate, Fax: 212-979-9344; if to any Selling Stockholder shall be delivered or sent by mail, telex or facsimile transmission to counsel for such Selling Stockholder at its address set forth in Schedule II hereto; and if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Secretary; provided, however, that any notice to an Underwriter pursuant to Section 8(d) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters’ Questionnaire or telex constituting such Questionnaire, which address will be supplied to the Company or the Selling Stockholders by you on request; provided, however, that notices under subsection 5(e) shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the representatives at Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019, Attention: Syndicate Registration, and Deutsche Bank Securities Inc., 60 Wall Street, New York, New York 10005, Attention: Equity Capital Markets Syndicate, Fax: 212-979-9344. Any such statements, requests, notices or agreements shall take effect upon receipt thereof.
In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Company, which information may include the name and address of their respective clients, as well as other information that will allow the Underwriters to properly identify their respective clients.
14. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Company and the Selling Stockholders and, to the extent provided in Sections 9 and 11 hereof, the officers and directors of the Company and each person who controls the Company, any Selling Stockholder or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any
 
27

of the DSs from any Underwriter shall be deemed a successor or assign by reason merely of such purchase.
15. Time shall be of the essence of this Agreement. As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.
16. The Company acknowledges and agrees that (i) the purchase and sale of the Shares and the DSs pursuant to this Agreement is an arm’s-length commercial transaction between the Company and the Selling Stockholders, on the one hand, and the several Underwriters, on the other, (ii) in connection therewith and with the process leading to such transaction each Underwriter is acting solely as a principal and not the agent or fiduciary of the Company or the Selling Stockholders, (iii) no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company or the Selling Stockholders with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company or the Selling Stockholders on other matters) or any other obligation to the Company or the Selling Stockholders except the obligations expressly set forth in this Agreement and (iv) the Company and the Selling Stockholders have consulted their own legal and financial advisors to the extent they deemed appropriate. The Company and the Selling Stockholders agree that they will not claim that the Underwriters, or any of them, has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company or the Selling Stockholders, in connection with such transaction or the process leading thereto.
17. This Agreement supersedes all prior agreements and understandings (whether written or oral) among the Company, the Selling Stockholders and the Underwriters, or any of them, with respect to the subject matter hereof.
18. THIS AGREEMENT AND ANY MATTERS RELATED TO THIS TRANSACTION SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAWS OF THE STATE OF NEW YORK. The Company and each Selling Stockholder agrees that any suit or proceeding arising in respect of this Agreement or our engagement will be tried exclusively in the U.S. District Court for the Southern District of New York or, if that court does not have subject matter jurisdiction, in any state court located in The City and County of New York and the Company and each Selling Stockholder agrees to submit to the jurisdiction of, and to venue in, such courts.
19. The Company, the Selling Stockholders and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
20. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument.
21. Notwithstanding anything herein to the contrary, the Company and the Selling Stockholders (and the Company’s and the Selling Stockholders’ employees,
 
28

representatives and other agents) are authorized to disclose to any and all persons the U.S. federal and state income tax treatment and tax structure of the potential transaction and all materials of any kind (including tax opinions and other tax analyses) provided to the Company and the Selling Stockholders relating to that treatment and structure, without the Underwriters imposing any limitation of any kind. However, any information relating to the tax treatment and tax structure shall remain confidential (and the foregoing sentence shall not apply) to the extent necessary to enable any person to comply with securities laws. For this purpose, “tax structure” is limited to any facts that may be relevant to that treatment.
[Signature page follows]
 
29

If the foregoing is in accordance with your understanding, please sign and return to us counterparts hereof for the Company and each of the Representatives plus one for each counsel, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this Agreement and such acceptance hereof shall constitute a binding agreement between each of the Underwriters and the Company. It is understood that your acceptance of this Agreement on behalf of each of the Underwriters is pursuant to the authority set forth in a form of agreement among Underwriters, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof.

Very truly yours,	
 	
MAGNACHIP SEMICONDUCTOR CORPORATION	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	
 	
[Selling Stockholders]	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	

Accepted as of the date hereof:
BARCLAYS CAPITAL INC.
DEUTSCHE BANK SECURITIES INC.
GOLDMAN, SACHS & CO.
   On their own behalf and on behalf of the several
   Underwriters named on Schedule I hereto

BARCLAYS CAPITAL INC.	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	
 	
DEUTSCHE BANK SECURITIES INC.	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	
 	
GOLDMAN, SACHS & CO.	
 	 	
By:	 	 	
 	 	(Goldman, Sachs & Co.)	

SCHEDULE I

Underwriter	  	Total
Number of
Firm DSs
to be
Purchased	 	  	Number of
Optional
DSs to be
Purchased if
Maximum
Option
Exercised	 	
Barclays Capital Inc.	  	 	 	 	  	 	 	 	
Deutsche Bank Securities Inc.	  	 	 	 	  	 	 	 	
Goldman, Sachs & Co.	  	 	 	 	  	 	 	 	
Citigroup Global Markets Inc.	  	 	 	 	  	 	 	 	
UBS Securities LLC	  	 	 	 	  	 	 	 	

Total	  	 	 	 	  	 	 	 	

SCHEDULE II

 	  	Total Number
of
Firm DSs
to be Sold	 	  	Number of Optional
DSs to be
Sold if
Maximum Option
Exercised	 	
The Company.	  	 	 	 	  	 	 	 	
 	 	 	
The Selling Stockholders:	  	 	 	 	  	 	 	 	
Avenue Special Situations Fund V, L.P. (a)(b)	  	 	 	 	  	 	 	 	
Avenue Special Situations Fund IV, L.P. (a)(b)	  	 	 	 	  	 	 	 	
Avenue International Master, L.P. (a)(b)(d)	  	 	 	 	  	 	 	 	
Avenue CDP-Global Opportunities Fund, L.P. (a)(b)(d)	  	 	 	 	  	 	 	 	
Avenue Investments, L.P. (a) (b)	  	 	 	 	  	 	 	 	
Southpaw Credit Opportunity Master Fund, L.P. (c) (d)	  	 	 	 	  	 	 	 	
Wilshire Institutional Master Fund SPC - Wilshire Southpaw Opportunity Segregated Portfolio (c) (d)	  	 	 	 	  	 	 	 	
GPC 76, LLC (c)	  	 	 	 	  	 	 	 	
Tennenbaum Multi-Strategy Fund SPV (Cayman) Ltd. (a)(d)(e)	  	 	 	 	  	 	 	 	
O’Connor Capital Structure Opportunity Master Limited (a)(d)(f)	  	 	 	 	  	 	 	 	
Deutsche Bank Securities Inc. (a)(g)	  	 	 	 	  	 	 	 	
Carlyle Strategic Partners LP (a)(h)	  	 	 	 	  	 	 	 	
Caspian Capital Partners LP (a)(i)	  	 	 	 	  	 	 	 	
Mariner LDC (a)(i)(j)	  	 	 	 	  	 	 	 	
Quattro Fund, Ltd (a)(k)	  	 	 	 	  	 	 	 	
Quattro Distressed Opportunities Fund LP (a) (d) (k)	  	 	 	 	  	 	 	 	
 	  	 	 	 	  	 	 	 	
Total	  	 	 	 	  	 	 	 	

(a)	This Selling Stockholder has appointed Michael Elkins and Randal Klein, and each of them, as Attorneys-in-Fact for such Selling Stockholder.	
(b)	This Selling Stockholder is represented by Akin Gump Strauss Hauer & Feld LLP, 1700 Pacific Ave., Suite 4100, Dallas, TX 75201.	
(c)	This Selling Stockholder is represented by Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, NY 10038, and has appointed Kevin Wyman and Howard Golden , and each of them, as Attorneys-in-Fact for such Selling Stockholder.	

(d)	This Selling Stockholder is represented by Walkers Global, Walker House, 87 Mary Street, George Town, Grand Cayman KY1-9001, Cayman Islands.	
(e)	This Selling Stockholder is represented by Skadden, Arps, Slate, Meagher & Flom LLP, Four Time Square, New York, NY 10036-6522.	
(f)	This Selling Stockholder is represented by Sidley Austin LLP, One South Dearborn, Chicago, Illinois 60603.	
(g)	This Selling Stockholder is represented by White & Case LLP, 1155 Avenue of the Americas, New York, NY 10036-2787.	
(h)	This Selling Stockholder is represented by Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, NY 10017.	
(i)	This Selling Stockholder is represented by Winston & Strawn LLP, 200 Park Avenue, New York, NY 10166-4193.	
(j)	This Selling Stockholder is represented by Stuarts Walker Hersant, 4th Floor Cayman Financial Centre, Dr. Roy’s Drive, P.O. Box 2510, Grand Cayman KY1-1104, Cayman Islands.	
(k)	This Selling Stockholder is represented by Alston & Bird LLP, 90 Park Avenue, New York, NY 10016.	

SCHEDULE III
Issuer Free Writing Prospectuses
Issuer Free Writing Prospectus, filed with the Commission on July 28, 2010 (Accepted at 16:23:59)
Issuer Free Writing Prospectus, filed with the Commission on July 28, 2010 (Accepted at 17:11:29)
Issuer Free Writing Prospectus, filed with the Commission on July 30, 2010
Issuer Free Writing Prospectus, filed with the Commission on September 3, 2010
[Others]

SCHEDULE IV(a)
Form of Lock-up Agreement
                    , 2011
Barclays Capital Inc.
Deutsche Bank Securities Inc.
    As representatives of the several
    Underwriters named in Schedule I to the
    Underwriting Agreement referenced below
c/o Barclays Capital Inc.
   745 Seventh Avenue
   New York, NY 10019
 
 	Re:	MagnaChip Semiconductor Corporation - Lock-Up Agreement	
Ladies and Gentlemen:
The undersigned understands that you, as representatives (the “Representatives”), propose to enter into an Underwriting Agreement on behalf of the several Underwriters named in Schedule I to such agreement (collectively, the “Underwriters”), with MagnaChip Semiconductor Corporation, a Delaware corporation to be incorporated pursuant to the conversion of MagnaChip Semiconductor LLC pursuant to Delaware law (the “Company”), providing for a public offering (the “Offering”) of the Common Stock of the Company (the “Shares”) pursuant to a Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission (the “SEC”). The undersigned is an owner of record or the beneficial owner of certain common units or securities convertible into or exchangeable or exercisable for common units of MagnaChip Semiconductor LLC to be converted into Shares or securities convertible into or exchangeable or exercisable for Shares in connection with the Offering.
In consideration of the agreement by the Underwriters to offer and sell the Shares, and of other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the undersigned agrees that except as expressly provided below, during the period specified in the following paragraph (the “Lock-Up Period”), the undersigned will not offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares of Common Stock of the Company, or any options or warrants to purchase any shares of Common Stock of the Company, or any securities convertible into, exchangeable for or that represent the right to receive shares of Common Stock of the Company, whether now owned or hereinafter acquired, owned directly by the undersigned (including holding as a custodian) or with respect to which the undersigned has beneficial ownership within the rules and regulations of the SEC (collectively the “Undersigned’s Shares”) other than any shares sold pursuant to the Offering or as otherwise provided herein. The foregoing restriction is expressly agreed to preclude the undersigned from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Undersigned’s Shares even if such Shares would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Undersigned’s Shares or with respect to any security that includes, relates to, or derives any significant part of its value from such Shares. For the avoidance of doubt, this Lock-Up Agreement is not intended to prevent the undersigned from causing a resale registration statement to be filed in accordance with its demand registration rights pursuant to the Registration Rights Agreement dated as of November 9, 2009, as amended to date, during the Lock-Up Period.

The initial Lock-Up Period will commence on the date of this Lock-Up Agreement and continue for 180 days after the public offering date set forth on the final prospectus used to sell the Shares (the “Public Offering Date”) pursuant to the Underwriting Agreement; provided, however, that if (1) during the last 17 days of the initial Lock-Up Period, the Company releases earnings results or announces material news or a material event or (2) prior to the expiration of the initial Lock-Up Period, the Company announces that it will release earnings results during the 15-day period following the last day of the initial Lock-Up Period, then in each case the Lock-Up Period will be automatically extended until the expiration of the 18-day period beginning on the date of release of the earnings results or the announcement of the material news or material event, as applicable, unless each of Barclays Capital Inc. and Deutsche Bank Securities Inc. waives, in writing, such extension.
The undersigned hereby acknowledges that the Company has agreed in the Underwriting Agreement to provide written notice of any event that would result in an extension of the Lock-Up Period pursuant to the previous paragraph to the undersigned (in accordance with the Underwriting Agreement) and agrees that any such notice properly delivered will be deemed to have been given to, and received by, the undersigned. The undersigned hereby further agrees that, prior to engaging in any transaction or taking any other action that is subject to the terms of this Lock-Up Agreement during the period from the date of this Lock-Up Agreement to and including the 34th day following the expiration of the initial Lock-Up Period, it will give notice thereof to the Company and will not consummate such transaction or take any such action unless the Lock-Up Period (as such may have been extended pursuant to the previous paragraph) has expired. The Company shall promptly notify the undersigned in writing in the event the Lock-Up Period is extended pursuant to the previous paragraph.
Notwithstanding the foregoing, the undersigned may transfer the Undersigned’s Shares (i) as a bona fide gift or gifts or by will, testamentary document or intestate succession, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, (iii) in dispositions not involving a change in beneficial ownership, (iv) in dispositions to a spouse, former spouse, child or other dependent pursuant to a domestic relations order or settlement agreement, (v) if the undersigned is a trust, to any beneficiary of the undersigned or to the estate of any such beneficiary, (vi) if the undersigned is a corporation, limited liability company or partnership, to any affiliate (within the meaning set forth in Rule 405 as promulgated by the SEC under the Securities Act of 1933, as amended (the “Securities Act”), (vii) if the undersigned is a partnership or limited liability company, to the partners, former partners, members or former members of the undersigned, as applicable, or to the estates of any such partners, former partners, members or former members, (viii) to the extent involving transactions of shares of the Shares or other securities acquired in open market transactions after the Public Offering Date or (ix) with the prior written consent of each of Barclays Capital Inc. and Deutsche Bank Securities Inc. on behalf of the Underwriters; provided, however, that in any of (ii), (iii), (v), (vi) or (vii) such transfer shall not involve a disposition for value, and provided further that in any of (i) through (vii) above, but not (viii) that it shall be a condition to the transfer that the transferee execute an agreement stating that the transferee is receiving and holding such capital stock subject to the provisions of this Lock-Up Agreement and there shall be no further transfer of such capital stock except in accordance with this Lock-Up Agreement; and provided further that, in the cases of (i) through (viii) above, it shall be a condition to any such transfer that no public reports, including but not limited to reports pursuant to Rule 144 of the Securities Act, pursuant to Section 13 or Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or pursuant to any other regulatory agency are required to be filed by the undersigned during the Lock-Up Period (as may have been extended pursuant to the terms of this Lock-Up Agreement) and no such reports are voluntarily filed, and no public announcements are voluntarily made, by the undersigned during the Lock-Up Period (as may have been extended pursuant to the terms of this Lock-Up Agreement). For purposes of this Lock-Up Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. The undersigned now has, and, except as contemplated by clauses (i) through (ix) above, for the duration of this Lock-Up Agreement will have, good and marketable title to the Undersigned’s Shares, free and clear of all liens, encumbrances, and claims whatsoever. The undersigned

also agrees and consents to the entry, during the Lock-Up Period only, of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the Undersigned’s Shares except in compliance with the foregoing restrictions.
In addition to the provisions of the preceding paragraph and notwithstanding anything to the contrary herein, the undersigned may enter into an agreement to allow brokerage sales of all or a portion of the Undersigned’s Shares pursuant to Rule 10b5-1 of the Exchange Act, provided that (i) no public announcement or disclosure of entry into such agreement is made or required to be made and (ii) any such brokerage sales may not occur prior to the expiration of the Lock-Up Period (as the same may have been extended as provided for above).
This Lock-Up Agreement shall lapse and become null and void (i) upon written notice from the Company to each of Barclays Capital Inc. and Deutsche Bank Securities Inc. that the Company does not intend to proceed with the Offering or wishes to terminate the engagement of the Underwriters of the Offering, (ii) if the Underwriting Agreement is not executed by the parties thereto prior to August 31, 2011, or (iii) the Offering shall not have occurred on or before August 31, 2011;  provided  that in the cases of (ii) and (iii), the Company may, by written notice to you prior to August 31, 2011, extend such date to a date no later than November 30, 2011.

The undersigned understands that the Company and the Underwriters are relying upon this Lock-Up Agreement in proceeding toward consummation of the Offering. The undersigned further understands that this Lock-Up Agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors, and assigns.

Very truly yours,	

 
Exact Name of Shareholder	

 
Authorized Signature	

 
Title	
Please complete the table below, using a different line for each unique AST Account Number that evidences the common units and securities. For the avoidance of doubt, the table below does not in any way modify or limit the terms of this Lock-Up Agreement.

 	 	Number of Common Units and Securities Convertible
Into or Exchangeable or Exercisable for Common
Units of MagnaChip Semiconductor LLC Owned by
Shareholder On the Date Hereof:	  	AST Account Number:	  	Registered Holder’s Name if Common Units or
Securities are Not Owned Directly by Shareholder:	 	 	

 	 	 	  	 	  	 	 	 	

 	 	 	  	 	  	 	 	 	

SCHEDULE IV(b)
Stockholders Party to Lock-up Agreements
 
1.	Avenue-CDP Global Opportunities Fund, L.P.	
2.	Avenue Special Situations Fund IV, L.P.	
3.	Avenue Special Situations Fund V, L.P.	
4.	Avenue International Master, L.P.	
5.	Avenue Investments, L.P.	
6.	Carlyle Strategic Partners LP	
7.	Caspian Capital Partners LP	
8.	Deutsche Bank Securities Inc.	
9.	GPC 76, LLC	
10.	Mariner LDC	
11.	O’Connor Capital Structure Opportunity Master Limited	
12.	Quattro Distressed Opportunities Fund LP	
13.	Quattro Fund, Ltd	
14.	Southpaw Credit Opportunity Master Fund, L.P.	
15.	Tennenbaum Multi-Strategy Fund SPV (Cayman) Ltd.	
16.	Wilshire Institutional Master Fund SPC - Wilshire Southpaw Opportunity Segregated Portfolio	

ANNEX I(a)(1)
FORM OF JONES DAY OPINION
 
1.	The Company is a corporation duly incorporated, existing and in good standing under the laws of the State of Delaware, with the corporate power and authority to conduct its business and to own or lease its properties as described in the Time of Sale Prospectus (as defined below) and the Final Prospectus (as defined below).	
 
2.	The Company is qualified to do business as a foreign corporation and is in good standing as a foreign corporation in each jurisdiction and as of the dates listed on  Exhibit A  attached to this letter.	
 
3.	The Underwriting Agreement has been authorized by all necessary corporate action of, and has been executed and delivered by, the Company.	
 
4.	The Company has an authorized equity capitalization as set forth under the captions “Capitalization,” “Description of Capital Stock–Common Stock” and “—Preferred Stock” in the Time of Sale Prospectus and the Final Prospectus. All of the shares of Common Stock issued and outstanding immediately prior to the issuance and delivery of the Primary Shares represented by Depositary Shares as contemplated by the Underwriting Agreement have been authorized by all necessary corporate action of the Company, and are validly issued, fully paid and nonassessable.	
 
5.	The Primary Shares have been authorized by all necessary corporate action of the Company and, when the Depositary Shares are issued and delivered pursuant to the Underwriting Agreement and the Deposit Agreement against payment of the consideration therefor as provided in the Underwriting Agreement, the Primary Shares will be validly issued, fully paid and nonassessable.	
 
6.	The holders of shares of Common Stock are not entitled to any pre-emptive rights pursuant to the General Corporation Law of the State of Delaware, the Certificate of Incorporation of the Company or the Bylaws of the Company.	
 
7.	The Depositary Shares, when issued and delivered pursuant to the terms of the Underwriting Agreement and the Deposit Agreement against payment of the consideration therefore as provided in the Underwriting Agreement, will be validly issued and will entitle the holders thereof to the rights specified in the Deposit Agreement. The Depositary Receipts (as defined in the Deposit Agreement) evidencing the Depositary Shares pursuant to the terms of the Deposit Agreement will entitle the holders thereof to the rights specified therein and in the Deposit Agreement.	
 
8.	The Deposit Agreement has been authorized by all necessary corporate action of, and executed and delivered by, the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.	
 
9.	No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required in connection with the execution, delivery or performance of the Underwriting Agreement and the Deposit Agreement by the Company, or in connection with	

 	the deposit of the Primary Shares with the Depositary pursuant to the terms of the Deposit Agreement or the issuance or sale of the Depositary Shares (including the Shares represented thereby) by the Company to the Underwriters, except (i) such as have been obtained or made under the Securities Act of 1933 (the “ Securities Act ”) and the Securities Exchange Act of 1934 (the “ Exchange Act ”), and the rules and regulations thereunder, or (ii) as may be required under state securities or “blue sky” laws.	
 
10.	The execution, delivery and performance of the Underwriting Agreement and the Deposit Agreement by the Company, the deposit of the Primary Shares with the Depositary pursuant to the terms of the Deposit Agreement, the issuance and sale of the Depositary Shares (including the Shares represented thereby) by the Company and the compliance with the terms and provisions of the Underwriting Agreement and Deposit Agreement by the Company will not violate any law or regulation known to us to be generally applicable to transactions of this type (other than federal and state securities or “blue sky” laws, as to which we express no opinion in this paragraph), or any order or decree of any court, arbitrator or governmental agency that is binding upon the Company, its subsidiaries or their respective properties or violate or result in a default under any of the terms and provisions of the Certificate of Incorporation and the Bylaws of the Company or any agreement to which the Company is a party or bound (this opinion being limited (i) to those orders and decrees identified on  Exhibit B  attached hereto and to those agreements identified on Exhibit C  attached hereto and (ii) in that we express no opinion with respect to any violation or default (a) not readily ascertainable from the face of any such order, decree or agreement, (b) arising under or based upon any cross-default provision insofar as it relates to a violation or default under an agreement not identified on  Exhibit C  attached hereto or (c) arising as a result of any violation of or default under any agreement or covenant by failure to comply with any financial or numerical requirement requiring computation).	
 
11.	The statements contained in the Time of Sale Prospectus and the Final Prospectus under the captions “Material U.S. Federal Income Tax Consequences,” “Description of Capital Stock,” “Description of Depositary Shares,” “Description of Certain Indebtedness,” “Management—Compensation Discussion and Analysis—MagnaChip Semiconductor LLC 2009 Common Unit Plan,” “Management—Compensation Discussion and Analysis—2011 Equity Incentive Plan,” “Management—Compensation Discussion and Analysis—2011 Employee Stock Purchase Plan,” and “Management—Compensation Discussion and Analysis—Agreements with Executives and Potential Payments Upon Termination or Change of Control,” insofar as such statements purport to summarize legal matters or provisions of documents referred to therein, present fair summaries of such legal matters and documents in all material respects.	
 
12.	To our Actual Knowledge, there is no litigation nor any governmental proceedings, pending or threatened, that would be required to be described in the Final Prospectus under the Securities Act that are not described as required.	
 
13.	The Company is not and, solely after giving effect to the offer and sale of the Depositary Shares (including the Shares represented thereby) and the application of the net proceeds from such sale as described under the caption “Use of Proceeds” in the Final Prospectus, will not be, required to register as an “investment company,” as such term is defined in the Investment Company Act of 1940.	

We have participated in the preparation of the Company’s registration statement on Form S-1, as amended (Registration No. 333-165467) (the “ Registration Statement ”), the preliminary prospectus dated February       , 2011 (the “ Preliminary Prospectus ”)[, the free writing prospectus dated [              ], 2011, filed by the Company pursuant to Rule 433 under the Securities Act (the “ Specified IFWP[s] ”)] (together with the Preliminary Prospectus and the information set forth on  Schedule I  to the Underwriting Agreement, the “ Time of Sale Prospectus ”), and the prospectus dated March       , 2011 (the “ Final Prospectus ”). From time to time, we have had discussions with certain officers, directors and employees of the Company, with representatives of Samil PricewaterhouseCoopers, the independent registered public accounting firm who examined the financial statements of the Company included in the Registration Statement, the Time of Sale Prospectus and the Final Prospectus; with the Underwriters and with counsel to the Underwriters concerning the information contained in the Registration Statement, the Time of Sale Prospectus and the Final Prospectus and the proposed responses to various items in Form S-1. Based upon our participation and discussions described above, we are of the view that the Registration Statement, at the time the Registration Statement became effective under the Securities Act, and the Final Prospectus, as of its date, complied as to form in all material respects with the Securities Act and the rules and regulations of the Securities and Exchange Commission (the “ Commission ”) thereunder, except that we express no view with respect to (i) the financial statements, financial schedules and other financial data included therein or (ii) the information referred to under the caption “Experts” as having been included therein on the authority of Samil PricewaterhouseCoopers as experts.
We have not independently verified and are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness (except as and to the extent set forth in paragraph 11 above) of the information contained in the Registration Statement, the Time of Sale Prospectus and the Final Prospectus. Based upon our participation and discussions described above, however, no facts have come to our attention that cause us to believe that the Registration Statement, at the time the Registration Statement became effective under the Securities Act, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Time of Sale Prospectus, as of        [a.m.][p.m.] New York City time on [              ], 2011 (which is the time that you have informed us was prior to the first contract of sale of any Depositary Shares by the Underwriters), included any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or that the Final Prospectus, as of its date and as of the date hereof, included or includes any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that we express no view with respect to (i) the financial statements, financial schedules and other financial data included therein or (ii) the information referred to under the caption “Experts” as having been included therein on the authority of Samil PricewaterhouseCoopers as experts.
The Registration Statement has become effective under the Securities Act, and, to our knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending or threatened by the Commission. The Final Prospectus has been filed with the Commission pursuant to and in compliance with Rule 424(b) under the Securities Act [Each Specified IFWP[s] has been filed with the Commission pursuant to Rule 433(d) under the Securities Act.]

ANNEX I(a)(2)
FORM OF KIM & CHANG OPINION
(1) The Company has been duly incorporated and is validly existing as a limited liability company (yuhan hoesa) under the laws of Korea, with corporate power and authority to own its properties and conduct its business as described in the Registration Statement, the Preliminary Prospectus and the Prospectus and is qualified to conduct such business in Korea;
(2) To our knowledge and other than as set forth in the Registration Statement, the Preliminary Prospectus and the Prospectus, the compliance by the Issuer with the terms and conditions of the Transaction Documents and the performance by the Issuer of its obligations thereunder (a) will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument of which the Company is a party for which copies have been provided to us by the Company and the list of such documents is attached hereto as Exhibit I, except for such conflict, breach, violation or default which is not reasonably expected to have a material adverse effect on the current or future consolidated financial position, unitholders’ equity or results of operations of the Company and its subsidiaries (“Material Adverse Effect”), and (b) will not result in any violation of the provisions of the Articles of Incorporation or any statute or any rule or regulation, or decree, having the force of law, of any governmental agency or body in Korea having jurisdiction over the Company or any of its properties or assets, which, in our experience, are normally applicable to the Company in connection with transactions of the type contemplated in the Transaction Documents; and
(3) To our knowledge and other than as set forth in the Registration Statement, the Preliminary Prospectus and the Prospectus, there are no legal or governmental proceedings pending to which the Company is a party which, if determined adversely to the Company, would individually or in the aggregate have a Material Adverse Effect.

ANNEX I(b)
FORM OF SELLING STOCKHOLDER COUNSEL OPINION
 
1.	The Underwriting Agreement has been duly authorized by all necessary partnership action and duly and validly executed and delivered by or on behalf of the Selling Stockholder acting through the Attorneys-in-Fact.	
 
2.	Each of the Power of Attorney and the Custody Agreement has been duly authorized by all necessary partnership action, executed and delivered by the Selling Stockholder and constitutes the valid and binding obligation of the Selling Stockholder, enforceable against the Selling Stockholder in accordance with its terms.	
 
3.	With respect to the Firm Shares deposited by the Selling Stockholder with the Depositary (the “Deposited Shares”), the Deposit Agreement constitutes a valid and binding obligation of the Selling Stockholder, enforceable against the Selling Stockholder in accordance with its terms.	
 
4.	Assuming that the Depositary acquires the Deposited Shares deposited with it without notice of an adverse claim thereto, upon (a) the Company’s registration of the Depositary as the registered owner of the Deposited Shares and (b) the issuance by the Depositary to or upon the order of the person or persons named in the Custody Agreement of the Firm DSs specified in Section 2.4 of the Deposit Agreement in accordance with the terms of the Deposit Agreement, the Depositary, to the extent the Depositary’s rights are governed by the NY UCC, (x) will acquire such Deposited Shares free of any adverse claim and (y) will be a protected purchaser thereof.	
 
5.	Upon (a) delivery to The Depository Trust Company (“DTC”) (and registration of its nominee, Cede & Co., as the registered owner by the Depositary) of the Firm DSs to be purchased by the Underwriters under the Underwriting Agreement, (b) payment by the Underwriters of the purchase price for such Firm DSs specified in Section 2 of the Underwriting Agreement in accordance with the terms of the Underwriting Agreement and (c) indication by DTC in its records by book entry that such Firm DSs have been credited solely to a securities account of Barclays Capital Inc. (“ Barclays ”), as representative of the Underwriters, at DTC, (x) DTC will be a protected purchaser thereof and (y) Barclays, as representative of the Underwriters, will have acquired a valid security entitlement thereto and, to the extent governed by the NY UCC, an action based on an adverse claim thereto may not be asserted against Barclays, as representative of the Underwriters, assuming that DTC has no notice of an adverse claim to such Firm DSs and Barclays, as representative of the Underwriters, has no notice of an adverse claim to such financial asset.	
 
6.	(a) The sale of the Firm DSs and the underlying Firm Shares and the performance by the Selling Stockholder of its obligations under the Underwriting Agreement, the Power of Attorney, the Custody Agreement and the Deposit Agreement, and the consummation of the transactions contemplated therein will not (i) result in any violation of the provisions of the certificate of limited partnership or the limited partnership agreement of the Selling Stockholder, or any applicable [Included Law] of any governmental agency or body having jurisdiction over the Selling Stockholder, or any of its properties or (ii) conflict with or result in a breach or violation of any terms or provisions of, or constitute a default under, any (A) indenture(s), (B) note(s), (C) loan agreements(s), (D) mortgages(s), (E) deed(s) of trust, (F)	

 	security agreements, (G) other written agreement(s) and instrument(s) creating, evidencing or securing indebtedness, and (H) other written agreement(s) or instruments, in each case of (A) through (H) identified to us by an officer or member of the Selling Stockholder or its direct or indirect general partner as material to the Selling Stockholder and listed on  Schedule [    ]  hereto or any court or governmental (w) orders, (x) writs, (y) judgments or (z) decrees directed to the Selling Stockholder, in each case of (w) through (z) identified to us by an officer or member of the Selling Stockholder or its direct or indirect general partner as material to the Selling Stockholder and listed on  Schedule [    ]  hereto; and (b) no consent, approval, authorization, order, registration or qualification of or with any governmental agency or body is required under the [Included Laws] for the sale of the Firm DSs or the underlying Firm Shares or the consummation by the Selling Stockholder of the other transactions contemplated by the Underwriting Agreement, except such consents, approvals, authorizations, registrations or qualifications as may be required under federal securities Laws or state securities or Blue Sky Laws in connection with the purchase and distribution of the Firm DSs and the underlying Firm Shares by the Underwriters.	
In rendering the above opinions, such counsel may rely upon a certificate of the Selling Stockholder in respect of matters of fact with respect to the Selling Stockholder.

ANNEX I(c)
FORM OF DEPOSITARY COUNSEL OPINION
The Deposit Agreement has been duly authorized, executed and delivered by the Depositary and constitutes a valid and legally binding obligation of the Depositary, enforceable against the Depositary in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

ANNEX II(a)
FORM OF SAMIL PRICEWATERHOUSECOOPERS LETTER
We have audited (i) the consolidated financial statements of MagnaChip Semiconductor Corporation, successor to MagnaChip Semiconductor LLC (the “Company”), and subsidiaries as of December 31, 2010 and 2009 and for the year ended December 31, 2010 and for the two-month period ended December 31, 2009 and (ii) the consolidated financial statements of the Company for the ten-month period ended October 25, 2009 and for the year ended December 31, 2008, all included in the registration statement (No. 333-165467) on Form S-1 filed by the Company under the Securities Act of 1933,as amended (the “Act”); our reports with respect thereto are also included in such registration statement. Such registration statement, as amended on April 20, 2010, May 11, 2010, May 21, 2010, June 3, 2010, June 16, 2010, October 4, 2010, November 4, 2010, February 1, 2011, February [    ], 2011 and March [    ], 2011, is herein referred to as the “Registration Statement”.
In connection with the Registration Statement:
 
1.	We are an independent registered public accounting firm with respect to the Company within the meaning of the Act and the applicable rules and regulations thereunder adopted by the Securities and Exchange Commission (“SEC”) and the Public Company Accounting Oversight Board (United States) (“PCAOB”).	
 
2.	In our opinion, the consolidated financial statements audited by us and included in the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the Act and the related rules and regulations adopted by the SEC.	
 
3.	We have not audited any financial statements of the Company as of any date or for any period subsequent to December 31, 2010. Therefore, we are unable to and do not express any opinion on the financial position, results of operations or cash flows as of any date or for any period subsequent to December 31, 2010.	
 
4.	For purposes of this letter, we have read the minutes of the 2011 meetings of the unitholders/stockholders, the Board of Directors, the compensation committee and the audit committee of the Company as set forth in the minute books at March [    ], 2011, officials of the Company having advised us that the minutes of all such meetings through that date were set forth therein, and have carried out other procedures to March [    ], 2011 (our work did not extend to the period from March [    ], 2011 to March [    ], 2011, inclusive) as follows:	
With respect to the period from January 1, 2011 to January 31, 2011, we have:
 
 	a.	read the unaudited consolidated financial data of the Company and subsidiaries for January of both 2011 and 2010 furnished to us by the Company, officials of the Company having advised us that no such financial data as of any date or for any period subsequent to January 31, 2011 were available. The financial information for January of both 2011 and 2010 is incomplete in that it omits the statement of cash flows and other disclosures.	
 
 	b.	inquired of certain officials of the Company who have responsibility for financial and accounting matters as to whether the unaudited consolidated financial data referred to in a. above are stated on a basis substantially consistent with that of the audited consolidated financial statements included in the Registration Statement.	

The foregoing procedures do not constitute an audit conducted in accordance with standards of the PCAOB. Also, they would not necessarily reveal matters of significance with respect to the comments in the following paragraph. Accordingly, we make no representations as to the sufficiency of the foregoing procedures for your purposes.
 
5.	Nothing came to our attention as a result of the foregoing procedures, however, that caused us to believe that (i) at January 31, 2011 there was any change in the capital stock, increase in long-term debt, or decrease in consolidated net current assets (working capital) or stockholders’ equity of the Company and subsidiaries consolidated as compared with amounts shown in the December 31, 2010 consolidated balance sheet of the Company included in the Registration Statement, or (ii) for the period from January 1, 2011 to January 31, 2011, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated net sales or in the total or per-share/unit amounts of net income attributable to common shares/units, except in all instances for changes, increases or decreases which the Registration Statement discloses have occurred or may occur and except that the unaudited condensed consolidated balance sheet as of January 31, 2011, which we were furnished by the Company, showed an increase in long-term debt from December 31, 2010 and the unaudited condensed consolidated statement of operations for the period from January 1, 2011 to January 31, 2011, which we were furnished by the Company, showed a decrease in net sales from the corresponding period in the preceding year as follows (in thousands of US dollars):	

 	  	Long-term debt	 	
December 31, 2010	  	$	246,882	  	
January 31, 2011	  	$	246,905	  	

 	  	Net sales	 	
January 1, 2010 - January 31, 2010	  	$	67,827	  	
January 1, 2011 - January 31, 2011	  	$	55,592	  	
 
6.	As mentioned in 4.a., Company officials have advised us that no consolidated financial data as of any date or for any period subsequent to January 31, 2011 are available; accordingly, the procedures carried out by us with respect to changes in financial statement items after January 31, 2011 have, of necessity, been even more limited than those with respect to the periods referred to in 4. We have inquired of certain officials of the Company who have responsibility for financial and accounting matters as to whether (a) at March [    ], 2011 there was any change in the capital stock, increase in long-term debt, or decrease in consolidated net current assets (working capital) or stockholders’ equity of the Company and subsidiaries consolidated as compared with amounts shown in the December 31, 2010 consolidated balance sheet of the Company included in the Registration Statement; or (b) for the period from January 1, 2011 to March [    ], 2011, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated net sales or in the total or per-share/unit amounts of net income attributable to common shares/units.	
Those officials referred to above stated that they cannot comment on any such increases or decreases in consolidated net current assets (working capital), stockholders’ equity, consolidated

net sales, or the total or per-share/unit amounts of net income attributable to common shares/units for the periods referred to above.
On the basis of these inquiries and our reading of the minutes as described in 4, nothing came to our attention that caused us to believe that there was any such change in capital stock and increase in long-term debt, [except that we have been informed by officials of the Company that there continues to be a increase in long-term debt that is estimated to be approximately the same as set forth in 5, and] except in all instances for changes, increases or decreases which the Registration Statement discloses have occurred or may occur.
 
7.	For purposes of this letter, we have also read the items identified by you on the attached copy of the prospectus forming part of the Registration Statement and have performed the following procedures, which were applied as indicated with respect to the symbols explained below. We make no comment as to whether the SEC would view any non-GAAP financial information included in this Registration Statement as being compliant with the requirements of Regulation G or Item 10 of Regulation S-K.	

A	  	Compared to a corresponding amount in the audited consolidated financial statements of the Company included in the Registration Statement and found such amounts to be in agreement, after giving effect for rounding differences, if applicable. However, we make no comment as to the appropriateness or manner in which the Company’s classifications between Display Solutions, Power Solutions, Semiconductor Manufacturing Services and All other sales have been made. We make no comment as to the appropriateness of the Company’s methodology in allocating costs to each segment. We make no comment about the Company’s definition, calculation or presentation of its net sales by geographic region. We make no comment as to whether the use of proceeds of 10.5% senior notes due 2018 to fund working capital and for general corporate purposes will actually occur.	
 	 	
B	  	Compared to a corresponding amount in the audited consolidated financial statements of the Company not included in the Registration Statement and found such amounts to be in agreement, after giving effect for rounding differences, if applicable.	
 	 	
C	  	Recomputed the amounts, percentages or ratios derived from the audited consolidated financial statements of the Company included in the Registration Statement, and found the computation to be mathematically correct, except for rounding differences. However, we make no comment as to the reasons given for the related changes between periods. We also make no comment as to the company’s definition of total capitalization.	
 	 	
D	  	Recomputed the amounts, percentages or ratios derived from the audited consolidated financial statements of the Company not included in the Registration Statement and found the computation	

 	 	 	
 	  	to be mathematically correct, except for rounding differences. However, we make no comment as to the reasons given for the related changes between periods.	
 	 	
E	  	Recomputed from the actual column for the proposed use of proceeds of the shares to be offered by means of this Registration Statement as described under “Use of Proceeds” and found such amounts to be in agreement. However, we make no comment as to whether the sale of the shares will be consummated or the use of proceeds as described therein will actually occur. We also make no comment as to the company’s definition of total capitalization.	
 	 	
F	  	Compared amount or percentage to corresponding amount or percentage in the schedules prepared by the Company from its accounting records and found such amount or percentage to be in agreement. We (a) agreed the amounts on the schedules to the Company’s accounting records for the corresponding period and found them to be in agreement, except for rounding differences; and (b) proved the mathematical accuracy of the schedules, except for rounding differences. However, we make no comment about the Company’s definition, calculation or presentation of its 10 largest customers, its net sales through its direct sales force or through its network of authorized agents and distributors, its net sales to LG Display or its revenue from customers in geographic regions.	
 	 	
G	  	Compared with a corresponding amount included in the Company’s accounting records and found such amounts to be in agreement.	
 	 	
H	  	Compared to the schedules prepared by the Company and recomputed the depreciation and amortization associated with continuing operations and found such amounts to be in agreement. We (a) agreed total depreciation and amortization amounts on the schedules to the Company’s accounting records for the corresponding period and found them to be in agreement, except for rounding differences; and (b) proved the mathematical accuracy of the schedules, except for rounding differences. However, we make no comment as to the appropriateness or manner of classifications between Display Solutions, Power Solutions, Semiconductor Manufacturing Services and All other, which are collectively considered as continuing operations, and Imaging Solutions. We make no comment as to the appropriateness of the Company’s methodology in calculating the allocation ratio of each segment.	
 	 	
I	  	Compared or recomputed amount or percentage to a schedule prepared by the Company from its accounting records, as applicable, and found such amount or percentage to be in	

 	 	 	
 	  	agreement, except for rounding differences. We (a) compared the amounts on the schedule to corresponding amounts appearing in the accounting records and found such amounts to be in agreement and (b) determined that the schedule was mathematically correct, except for rounding differences. However, we make no comment with respect to classification or reasons given for changes between periods.	
 	 	
J	  	Compared to a schedule prepared by the Company from its accounting records and found such amounts to be in agreement. We (a) compared the amounts on the schedule to corresponding amounts appearing in the accounting records and found such amounts to be in agreement and (b) determined that the schedule was mathematically correct, except for rounding differences. It should be noted that Adjusted EBITDA and Adjusted Net Income (loss) are not measures of operating performance or liquidity defined by generally accepted accounting principles and may not be comparable to similarly titled measures presented by other companies. We make no comment about the Company’s definition, calculation or presentation of Adjusted EBITDA and Adjusted Net Income (loss) or their usefulness for any purpose.	
 	 	
K	  	Compared with a corresponding amount included in the Company’s unaudited pro forma financial statements included in the Registration Statement and found such amounts to be in agreement.	
 	 	
L	  	Compared the information included under the heading “Selected Historical Consolidated Financial and Operating Data of MagnaChip Semiconductor LLC” with the requirements of Item 301 of Regulation S-K. We also inquired of certain officials of the Company who have responsibility for financial and accounting matters whether this information conforms in all material respects with the disclosure requirements of Item 301 of Regulation S-K. Nothing came to our attention as a result of the foregoing procedures that caused us to believe that this information does not conform in all material respects with the disclosure requirements of Item 301 of Regulation S-K.	

 	 	 	
M	  	Recomputed net tangible book value; net tangible book value per share; pro forma net tangible book value after giving effect to the offering; pro forma net tangible book value per share after giving effect to the offering; increase in pro forma net tangible book value per share to existing stockholders; decrease in pro forma net tangible book value per share attributable to new investors; dilution per share to new investors at December 31, 2010, based on the applicable assumptions specified under “Dilution” in the Registration Statement; using assumptions and amounts shown on a schedule prepared by management and found the computations to be correct, except for rounding differences.
 
The Company computed net tangible book value as shareholders’ equity (defined as total assets minus total liabilities) less all debt issuance costs which are included in other current and other non-current assets, and intangible assets, as shown on the Company’s balance sheet as of December 31, 2010 included in the Registration Statement.
 
The Company computed net tangible book value per share by dividing net tangible book value at December 31, 2010 by the number of common shares outstanding at that date also as shown in such December 31, 2010 balance sheet.
 
The Company computed pro forma net tangible book value after giving effect to the offering as net tangible book value, after giving effect to the sale of [         ] shares at the initial public offering price of $[         ] per share and after deducting the estimated underwriting discounts and commissions of $[         ] million, and estimated offering expenses payable of $[         ] million.
 
The Company computed pro forma net tangible book value per share after giving effect to the offering by dividing pro forma net tangible book value after giving effect to the offering at December 31, 2010 by the number of common shares outstanding at that date also as shown in such December 31, 2010 balance sheet, as adjusted for the common shares assumed to be sold by the Company under the Registration Statement (a total of [         ] common shares).
 
However, we make no comment as to the definition of net tangible assets, net tangible book value, pro forma net tangible book value after giving effect to the offering, net tangible book value per share, or pro forma net tangible book value per share after giving effect to the offering. Further, we make no comment on whether the offering or actions indicated in Registration Statement will actually take place.	

 	 	 	
N	  	Compared or recomputed amount to a schedule prepared by the Company and found such amount to be in agreement. We (a) compared the amounts on the schedule to corresponding amounts from accounting records and found such amounts to be in agreement and (b) recomputed the amounts expressed in US Dollars (USD), based on the corresponding amounts expressed in Korean Won (KRW), using exchange rates of USD 1 : KRW 1,138.82 for compensation paid for January 2010; USD 1 : KRW 1,157.08 for February 2010; USD 1 : KRW 1,137.64 for March 2010; USD 1 : KRW 1,117.11 for April 2010; USD 1 : KRW 1,163.11 for May 2010; USD 1 : KRW 1,212.33 for June 2010; USD 1 : KRW 1,207.30 for July 2010; USD 1 : KRW 1,179.92 for August 2010; USD 1 : KRW 1,167.01 for September 2010; USD 1 : KRW 1,123.45 for October 2010; USD 1 : KRW 1,126.20 for November 2010; USD 1 : KRW 1,147.55 for December 2010; USD 1 : KRW 1,301.69 for the ten-month period ended October 25, 2009; USD 1 : KRW 1,172.17 for November 2009; USD 1 : KRW 1,164.78 for December 2009; and USD 1 : KRW 1,098.66 for 2008, respectively, giving effect to rounding where applicable, and found such amounts to be mathematically correct. However, we make no comment on the appropriateness of the exchange rate used to translate the relevant figures recorded in KRW to USD.
 
We make no comment regarding the completeness or appropriateness of the Company’s determination of what constitutes executive compensation for purposes of the SEC disclosure requirements on executive compensation.	
 	 	
O	  	Compared or recomputed amount to a schedule prepared by the Company and found such amount to be in agreement. We (a) compared the amounts on the schedule to corresponding amounts from accounting records and found such amounts to be in agreement and (b) recomputed the amounts expressed in US Dollars (USD), based on the corresponding amounts expressed in Korean Won (KRW), using exchange rates of USD 1 : KRW 1,133.70 for compensation paid on March 17, 2010 and USD 1 : KRW 1,132.90 on March 22, 2010, respectively, giving effect to rounding where applicable, and found such amounts to be mathematically correct. However, we make no comment on the appropriateness of the exchange rate used to translate the relevant figures recorded in KRW to USD.
 
We make no comment regarding the completeness or appropriateness of the Company’s determination of what constitutes executive compensation for purposes of the SEC disclosure requirements on executive compensation.	

 	 	 	
P	  	Compared to a corresponding amount in the Company’s unaudited consolidated interim financial statements not included in the Registration Statement and found such amounts to be in agreement after giving effect to rounding differences, if applicable.	
 	 	
Q	  	Recomputed the amounts, percentages or ratios derived from the unaudited consolidated interim financial statements of the Company not included in the Registration Statement and found the computation to be mathematically correct, except for rounding differences. However, we make no comment as to the reasons given for the related changes between periods.	
 
8.	Our audit of the consolidated financial statements for the periods referred to in the introductory paragraph of this letter comprised audit tests and procedures deemed necessary for the purpose of expressing an opinion on such financial statements taken as a whole. For none of the periods referred to therein, or any other period, did we perform audit tests for the purpose of expressing an opinion on individual balances of accounts or summaries of selected transactions such as those enumerated above, and, accordingly, we express no opinion thereon.	
 
9.	At your request, we have:	
 
 	a.	Read the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2010, included in the Registration Statement.	
 
 	b.	Inquired of certain officials of the Company who have responsibility for financial and accounting matters about:	
 
 	(i)	the basis for their determination of the pro forma adjustments, and	
 
 	(ii)	whether the unaudited pro forma condensed consolidated financial statement referred to in 9.a. complies as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X.	
 
 	c.	Proved the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the unaudited pro forma condensed consolidated financial statement.	
The foregoing procedures are substantially less in scope than an examination, the objective of which is the expression of an opinion on management’s assumptions, the pro forma adjustments, and the application of those adjustments to historical financial information. Accordingly, we do not express such an opinion. The foregoing procedures would not necessarily reveal matters of significance with respect to the comments in the following paragraph. Accordingly, we make no representation about the sufficiency of such procedures for your purposes.
 
10.	Nothing came to our attention as a result of the procedures specified in paragraph 9, however, that caused us to believe that the unaudited pro forma condensed consolidated financial statement referred to in 9.a. included in the Registration Statement does not comply as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X and that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of that statement. Had we performed additional procedures or had we made an	

 	examination of the condensed consolidated pro forma financial statement, other matters might have come to our attention that would have been reported to you.	
 
11.	It should be understood that we make no representations regarding questions of legal interpretation or regarding the sufficiency for your purposes of the procedures enumerated in paragraph 7; also, such procedures would not necessarily reveal any material misstatement of the amounts or percentages listed above. Further, we have addressed ourselves solely to the foregoing data as set forth in the Registration Statement and make no representations regarding the adequacy of disclosure or regarding whether any material facts have been omitted.	
 
12.	This letter is solely for the information of the addressees and to assist Barclays Capital Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co., Citigroup Global Markets Inc. and UBS Securities LLC in conducting and documenting their investigation of the affairs of the Company in connection with the offering of the securities covered by the Registration Statement, and is not to be used, circulated, quoted, or otherwise referred to within or without the underwriting group for any other purpose, including but not limited to the registration, purchase, or sale of securities, nor is it to be filed with or referred to in whole or in part in the Registration Statement or any other document, except that reference may be made to it in the underwriting agreement or in any list of closing documents pertaining to the offering of the securities covered by the Registration Statement.	

ANNEX II(b)
FORM OF SAMIL PRICEWATERHOUSECOOPERS LETTER
We refer to our letter of [date], relating to the Registration Statement (No. 333-165467) of MagnaChip Semiconductor Corporation (the “Company”). We reaffirm as of the date hereof (and as though made on the date hereof) all statements made in that letter, except that for the purposes of this letter:
 
1.	The Registration Statement to which this letter relates is as amended as of [effective date].	
 
2.	The reading of minutes described in paragraph 4 of that letter has been carried out through [new cutoff date].	
 
3.	The procedures and inquiries covered in paragraph 4 of that letter were carried out to [new cutoff date] (our work did not extend to the period from  [next day after new cutoff date]  to  [date of letter] , inclusive).	
 
4.	The references to [old cutoff date] in paragraph 6 of that letter are changed to [new cutoff date].	
 
5.	The procedures performed in paragraph 7 of that letter are amended to include the attached copy of the Registration Statement.	
This letter is solely for the information of the addressees and to assist Barclays Capital Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co., Citigroup Global Markets Inc. and UBS Securities LLC in conducting and documenting their investigation of the affairs of the Company in connection with the offering of the securities covered by the Registration Statement, and it is not to be used, circulated, quoted, or otherwise referred to for any other purpose, including but not limited to the registration, purchase, or sale of securities, nor is it to be filed with or referred to in whole or in part in the Registration Statement or any other document, except that reference may be made to it in the underwriting agreement or in any list of closing documents pertaining to the offering of the securities covered by the Registration Statement.

ANNEX III
FORM OF CFO CERTIFICATE
[            ], 2011
I, Margaret Sakai, do hereby certify that I am the Senior Vice President and Chief Financial Officer of MagnaChip Semiconductor Corporation, successor to MagnaChip Semiconductor LLC (the “Company”), and, solely in my capacity as such, and based upon an examination of the Company’s consolidated financial records and schedules undertaken by myself or members of my staff who are responsible for the Company’s financial and accounting matters, do hereby certify that:
 
 	1.	I am providing this certificate in connection with the offering by the Company of depositary shares, each representing an ownership interest in one share of common stock, par value $0.01 per share, of the Company (the “DSs”), pursuant to an underwriting agreement dated as of [              ], 2011 by and among the Company and Barclays Capital Inc., Deutsche Bank Securities Inc. and Goldman, Sachs & Co., as representatives of the underwriters named therein (collectively, the “Underwriters”), as described in the registration statement (No. 333-165467) on Form S-1 filed by the Company under the Securities Act of 1933, as amended (as amended, the “Registration Statement”), relating to the DSs.	
 
 	2.	I am familiar with the accounting, operations and records systems of the Company and its consolidated subsidiaries. I have read and am familiar with the disclosures contained in the Registration Statement. I have supervised the compilation of, and reviewed the financial statements and other financial data included in the Registration Statement.	
 
 	3.	I have reviewed the circled information contained in the Registration Statement contained in [            ] (the “Pro Forma Data”).	
 
 	4.	The Pro Forma Data accurately give pro forma effect in compliance with Article 11 of Regulation S-X to the Company’s historical financial data. The Pro Forma Data were prepared under my supervision and are true, accurate and complete in all material respects.	
I understand that this certificate is being furnished to the Underwriters solely to assist them in conducting their due diligence investigation of the Company and its subsidiaries in connection with the offering of the DSs. This certificate may not be relied upon for any other purpose or by any other party.
[Signature Page to Follow]

IN WITNESS WHEREOF, the undersigned has executed and delivered this Chief Financial Officer’s certificate on behalf of the Company as of the date first written above.

By:	 	 	

Name:	 	Margaret Sakai	
Title:	 	Senior Vice President and Chief
Financial Officer	

Exhibit 10.25
MAGNACHIP SEMICONDUCTOR
CORPORATION
2011 EQUITY INCENTIVE PLAN

TABLE OF CONTENTS

 	  	 	  	 	  	Page	 	
 	 	 	
1.	  	Establishment, Purpose and Term of Plan	  	 	1	  	
 	 	 	 	
 	  	1.1	  	Establishment	  	 	1	  	
 	  	1.2	  	Purpose	  	 	1	  	
 	  	1.3	  	Term of Plan	  	 	1	  	
 	 	 	
2.	  	Definitions and Construction	  	 	1	  	
 	 	 	 	
 	  	2.1	  	Definitions	  	 	1	  	
 	  	2.2	  	Construction	  	 	8	  	
 	 	 	
3.	  	Administration	  	 	9	  	
 	 	 	 	
 	  	3.1	  	Administration by the Committee	  	 	9	  	
 	  	3.2	  	Authority of Officers	  	 	9	  	
 	  	3.3	  	Administration with Respect to Insiders	  	 	9	  	
 	  	3.4	  	Committee Complying with Section 162(m)	  	 	9	  	
 	  	3.5	  	Powers of the Committee	  	 	9	  	
 	  	3.6	  	Option or SAR Repricing	  	 	10	  	
 	  	3.7	  	Indemnification	  	 	11	  	
 	 	 	
4.	  	Shares Subject to Plan	  	 	11	  	
 	 	 	 	
 	  	4.1	  	Maximum Number of Shares Issuable	  	 	11	  	
 	  	4.2	  	Annual Increase in Maximum Number of Shares Issuable	  	 	11	  	
 	  	4.3	  	Adjustment for Unissued or Forfeited Predecessor Plan Shares	  	 	11	  	
 	  	4.4	  	Share Counting	  	 	12	  	
 	  	4.5	  	Adjustments for Changes in Capital Structure	  	 	12	  	
 	  	4.6	  	Assumption or Substitution of Awards	  	 	13	  	
 	 	 	
5.	  	Eligibility, Participation and Award Limitations	  	 	13	  	
 	 	 	 	
 	  	5.1	  	Persons Eligible for Awards	  	 	13	  	
 	  	5.2	  	Participation in the Plan	  	 	13	  	
 	  	5.3	  	Incentive Stock Option Limitations	  	 	13	  	
 	 	 	
6.	  	Stock Options	  	 	14	  	
 	 	 	 	
 	  	6.1	  	Exercise Price	  	 	14	  	
 	  	6.2	  	Exercisability and Term of Options	  	 	14	  	
 	  	6.3	  	Payment of Exercise Price	  	 	15	  	
 	  	6.4	  	Effect of Termination of Service	  	 	16	  	
 	  	6.5	  	Transferability of Options	  	 	17	  	
 	 	 	
7.	  	Stock Appreciation Rights	  	 	17	  	
 	 	 	 	
 	  	7.1	  	Types of SARs Authorized	  	 	17	  	
 	  	7.2	  	Exercise Price	  	 	17	  	
 	  	7.3	  	Exercisability and Term of SARs	  	 	18	  	
 	  	7.4	  	Exercise of SARs	  	 	18	  	

i

TABLE OF CONTENTS
(continued)

 	  	 	  	 	  	Page	
 	 	 	 	
 	  	7.5	  	Deemed Exercise of SARs	  	18	
 	  	7.6	  	Effect of Termination of Service	  	19	
 	  	7.7	  	Transferability of SARs	  	19	
 	 	 	
8.	  	Restricted Stock Awards	  	19	
 	 	 	 	
 	  	8.1	  	Types of Restricted Stock Awards Authorized	  	19	
 	  	8.2	  	Purchase Price	  	19	
 	  	8.3	  	Purchase Period	  	20	
 	  	8.4	  	Payment of Purchase Price	  	20	
 	  	8.5	  	Vesting and Restrictions on Transfer	  	20	
 	  	8.6	  	Voting Rights; Dividends and Distributions	  	20	
 	  	8.7	  	Effect of Termination of Service	  	21	
 	  	8.8	  	Nontransferability of Restricted Stock Award Rights	  	21	
 	 	 	
9.	  	Restricted Stock Unit Awards	  	21	
 	 	 	 	
 	  	9.1	  	Grant of Restricted Stock Unit Awards	  	21	
 	  	9.2	  	Purchase Price	  	21	
 	  	9.3	  	Vesting	  	22	
 	  	9.4	  	Voting Rights, Dividend Equivalent Rights and Distributions	  	22	
 	  	9.5	  	Effect of Termination of Service	  	22	
 	  	9.6	  	Settlement of Restricted Stock Unit Awards	  	23	
 	  	9.7	  	Nontransferability of Restricted Stock Unit Awards	  	23	
 	 	 	
10.	  	Performance Awards	  	23	
 	 	 	 	
 	  	10.1	  	Types of Performance Awards Authorized	  	23	
 	  	10.2	  	Initial Value of Performance Shares and Performance Units	  	23	
 	  	10.3	  	Establishment of Performance Period, Performance Goals and Performance Award Formula	  	24	
 	  	10.4	  	Measurement of Performance Goals	  	24	
 	  	10.5	  	Settlement of Performance Awards	  	26	
 	  	10.6	  	Voting Rights; Dividend Equivalent Rights and Distributions	  	27	
 	  	10.7	  	Effect of Termination of Service	  	28	
 	  	10.8	  	Nontransferability of Performance Awards	  	28	
 	 	 	
11.	  	Cash-Based Awards and Other Stock-Based Awards	  	28	
 	 	 	 	
 	  	11.1	  	Grant of Cash-Based Awards	  	28	
 	  	11.2	  	Grant of Other Stock-Based Awards	  	29	
 	  	11.3	  	Value of Cash-Based and Other Stock-Based Awards	  	29	
 	  	11.4	  	Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards	  	29	
 	  	11.5	  	Voting Rights; Dividend Equivalent Rights and Distributions	  	29	
 	  	11.6	  	Effect of Termination of Service	  	30	
 	  	11.7	  	Nontransferability of Cash-Based Awards and Other Stock-Based Awards	  	30	

ii

TABLE OF CONTENTS
(continued)

 	  	 	  	Page	 	
 	 	 	
12.	  	Standard Forms of Award Agreement	  	 	30	  	
 	 	 	 	
 	  	12.1	  	Award Agreements	  	 	30	  	
 	  	12.2	  	Authority to Vary Terms	  	 	30	  	
 	 	 	
13.	  	Change in Control	  	 	31	  	
 	 	 	 	
 	  	13.1	  	Effect of Change in Control on Awards	  	 	31	  	
 	  	13.2	  	Effect of Change in Control on Nonemployee Director Awards	  	 	32	  	
 	  	13.3	  	Federal Excise Tax Under Section 4999 of the Code	  	 	32	  	
 	 	 	
14.	  	Compliance with Securities Law	  	 	32	  	
 	 	 	
15.	  	Compliance with Section 409A	  	 	33	  	
 	 	 	 	
 	  	15.1	  	Awards Subject to Section 409A	  	 	33	  	
 	  	15.2	  	Deferral and/or Distribution Elections	  	 	33	  	
 	  	15.3	  	Subsequent Elections	  	 	34	  	
 	  	15.4	  	Payment of Section 409A Deferred Compensation	  	 	34	  	
 	 	 	
16.	  	Tax Withholding	  	 	36	  	
 	 	 	 	
 	  	16.1	  	Tax Withholding in General	  	 	36	  	
 	  	16.2	  	Withholding in or Directed Sale of Shares	  	 	37	  	
 	 	 	
17.	  	Amendment, Suspension or Termination of Plan	  	 	37	  	
 	 	 	
18.	  	Miscellaneous Provisions	  	 	37	  	
 	 	 	 	
 	  	18.1	  	Repurchase Rights	  	 	37	  	
 	  	18.2	  	Forfeiture Events	  	 	38	  	
 	  	18.3	  	Provision of Information	  	 	38	  	
 	  	18.4	  	Rights as Employee, Consultant or Director	  	 	38	  	
 	  	18.5	  	Rights as a Stockholder	  	 	38	  	
 	  	18.6	  	Delivery of Title to Shares	  	 	39	  	
 	  	18.7	  	Fractional Shares	  	 	39	  	
 	  	18.8	  	Retirement and Welfare Plans	  	 	39	  	
 	  	18.9	  	Beneficiary Designation	  	 	39	  	
 	  	18.10	  	Severability	  	 	39	  	
 	  	18.11	  	No Constraint on Corporate Action	  	 	39	  	
 	  	18.12	  	Unfunded Obligation	  	 	39	  	
 	  	18.13	  	Choice of Law	  	 	40	  	
 
iii

MagnaChip Semiconductor Corporation
2011 Equity Incentive Plan
1.ESTABLISHMENT, PURPOSEAND TERMOF PLAN.
1.1 Establishment. The MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan (the “Plan”) is hereby established effective as of [              ], 2011, the effective date of the Conversion (the  “ Effective Date ” ).
1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan seeks to achieve this purpose by providing for Awards in the form of Options, Stock Appreciation Rights, Restricted Stock Purchase Rights, Restricted Stock Bonuses, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards.
1.3 Term of Plan. The Plan shall continue in effect until its termination by the Committee; provided, however, that all Awards shall be granted, if at all, within ten (10) years from the Effective Date.
2.DEFINITIONSAND CONSTRUCTION.
2.1 Definitions. Whenever used herein, the following terms shall have their respective meanings set forth below:
(a) “Affiliate” means (i) a parent entity, other than a Parent Corporation, that directly, or indirectly through one or more intermediary entities, controls the Company or (ii) a subsidiary entity, other than a Subsidiary Corporation, that is controlled by the Company directly or indirectly through one or more intermediary entities. For this purpose, the terms “parent,” “subsidiary,” “control” and “controlled by” shall have the meanings assigned such terms for the purposes of registration of securities on Form S-8 under the Securities Act.
(b) “Award” means any Option, Stock Appreciation Right, Restricted Stock Purchase Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award or Other Stock-Based Award granted under the Plan.
(c) “Award Agreement” means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions applicable to an Award.
(d) “Board” means the Board of Directors of the Company.
(e) “Cash-Based Award” means an Award denominated in cash and granted pursuant to Section 11.

(f) “Cashless Exercise” means a Cashless Exercise as defined in Section 6.3(b)(i).
(g) “Cause” means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between a Participant and a Participating Company applicable to an Award, any of the following: (i) the Participant’s failure to substantially perform the Participant’s customary duties with a Participating Company in the ordinary course (other than such failure resulting from the Participant’s incapacity due to physical or mental illness) that, if susceptible to cure, has not been cured as determined by the Participating Company within 30 days after a written demand for substantial performance is delivered to the Participant by the Participating Company, which demand specifically identifies the manner in which the Participating Company believes that the Participant has not substantially performed the Participant’s duties; (ii) the Participant’s gross negligence, intentional misconduct or fraud in the performance of his or her Service; (iii) the Participant’s indictment (or equivalent) for a felony or to a crime involving fraud or dishonesty; (iv) a judicial determination that the Participant committed fraud or dishonesty against any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity; (v) the Participant’s material violation of one or more of the Participating Company Group’s policies applicable to the Participant’s Service as may be in effect from time to time; or (vi) the Participant’s conduct that brings or could reasonably be expected to bring the Participating Company Group into public disgrace or disrepute and that has a material adverse effect on the business of the Participating Company Group.
(h) “Change in Control” means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement, the occurrence of any one or a combination of the following:
(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total Fair Market Value or total combined voting power of the Company’s then-outstanding securities entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall not be deemed to have occurred if such degree of beneficial ownership results from any of the following: (A) an acquisition by any person who on the Effective Date is the beneficial owner of more than fifty percent (50%) of such voting power, (B) any acquisition directly from the Company, including, without limitation, pursuant to or in connection with a public offering of securities, (C) any acquisition by the Company, (D) any acquisition by a trustee or other fiduciary under an employee benefit plan of a Participating Company or (E) any acquisition by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or
(ii) an Ownership Change Event or series of related Ownership Change Events (collectively, a “Transaction”) in which the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting
 
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power of the outstanding securities entitled to vote generally in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1(ee)(iii), the entity to which the assets of the Company were transferred (the  “ Transferee ” ), as the case may be; or
(iii) approval by the stockholders of a plan of complete liquidation or dissolution of the Company;
provided, however, that a Change in Control shall be deemed not to include a transaction described in subsections (i) or (ii) of this Section 2.1(h) in which a majority of the members of the board of directors of the continuing, surviving or successor entity, or parent thereof, immediately after such transaction is comprised of Incumbent Directors.
For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Committee shall determine whether multiple acquisitions of the voting securities of the Company and/or multiple Ownership Change Events are related and to be treated in the aggregate as a single Change in Control, and its determination shall be final, binding and conclusive.
(i) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations or administrative guidelines promulgated thereunder.
(j) “Committee” means the Compensation Committee and such other committee or subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. If, at any time, there is no committee of the Board then authorized or properly constituted to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.
(k) “Company” means MagnaChip Semiconductor Corporation, a Delaware corporation, or any successor corporation thereto.
(l) “Consultant” means a person engaged to provide consulting or advisory services (other than as an Employee or a member of the Board) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on registration on Form S-8 under the Securities Act.
(m) “Conversion” means the conversion of MagnaChip Semiconductor LLC, a Delaware limited liability company, into the Company pursuant to Section 18-216 of the Delaware Limited Liability Company Act.
(n) “Covered Employee” means, at any time the Plan is subject to Section 162(m), any Employee who is or may reasonably be expected to become a “covered employee” as defined in Section 162(m), or any successor statute, and who is designated, either
 
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as an individual Employee or a member of a class of Employees, by the Committee no later than the earlier of (i) the date that is ninety (90) days after the beginning of the Performance Period, or (ii) the date on which twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered Employee” under this Plan for such applicable Performance Period.
(o) “Director” means a member of the Board.
(p) “Disability” means the permanent and total disability of the Participant, within the meaning of Section 22(e)(3) of the Code.
(q) “Dividend Equivalent Right” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash dividends paid on one share of Stock for each share of Stock represented by an Award held by such Participant.
(r) “Employee” means any person treated as an employee (including an Officer or a member of the Board who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a member of the Board nor payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be. For purposes of an individual’s rights, if any, under the terms of the Plan as of the time of the Company’s determination of whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individual’s status as an Employee.
(s) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(t) “Fair Market Value” means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:
(i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock as quoted on the national or regional securities exchange or quotation system constituting the primary market for the Stock, as reported in  The Wall Street Journal  or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or quotation system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded or quoted prior to the relevant date, or such other appropriate day as shall be determined by the Committee, in its discretion.
 
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(ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair Market Value of a share of Stock on the basis of the opening, closing, or average of the high and low sale prices of a share of Stock on such date or the preceding trading day, the actual sale price of a share of Stock received by a Participant, any other reasonable basis using actual transactions in the Stock as reported on a national or regional securities exchange or quotation system, or on any other basis consistent with the requirements of Section 409A. The Committee may also determine the Fair Market Value upon the average selling price of the Stock during a specified period that is within thirty (30) days before or thirty (30) days after such date, provided that, with respect to the grant of an Option or SAR, the commitment to grant such Award based on such valuation method must be irrevocable before the beginning of the specified period. The Committee may vary its method of determination of the Fair Market Value as provided in this Section for different purposes under the Plan to the extent consistent with the requirements of Section 409A.
(iii) If, on such date, the Stock is not listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be as determined by the Committee in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse, and in a manner consistent with the requirements of Section 409A.
(u) “Incentive Stock Option” means an Option intended to be (as set forth in the Award Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.
(v) “Incumbent Director” means a director who either (i) is a member of the Board as of the Effective Date or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but excluding a director who was elected or nominated in connection with an actual or threatened proxy contest relating to the election of directors of the Company).
(w) “Insider” means an Officer, Director or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act.
(x) “Net Exercise” means a Net Exercise as defined in Section 6.3(b)(iii).
(y) “Nonemployee Director” means a Director who is not an Employee.
(z) “Nonemployee Director Award” means any Award granted to a Nonemployee Director.
(aa) “Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Award Agreement) or which does not qualify as an incentive stock option within the meaning of Section 422(b) of the Code.
(bb) “Officer” means any person designated by the Board as an officer of the Company.
 
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(cc) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.
(dd) “Other Stock-Based Award” means an Award denominated in shares of Stock and granted pursuant to Section 11.
(ee) “Ownership Change Event” means the occurrence of any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of securities of the Company representing more than fifty percent (50%) of the total combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of Directors; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).
(ff) “Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.
(gg) “Participant” means any eligible person who has been granted one or more Awards.
(hh) “Participating Company” means the Company or any Parent Corporation, Subsidiary Corporation or Affiliate.
(ii) “Participating Company Group” means, at any point in time, the Company and all other entities collectively which are then Participating Companies.
(jj) “Performance Award” means an Award of Performance Shares or Performance Units.
(kk) “Performance Award Formula” means, for any Performance Award, a formula or table established by the Committee pursuant to Section 10.3 which provides the basis for computing the value of a Performance Award at one or more levels of attainment of the applicable Performance Goal(s) measured as of the end of the applicable Performance Period.
(ll) “Performance-Based Compensation” means compensation under an Award that satisfies the requirements of Section 162(m) for certain performance-based compensation paid to Covered Employees.
(mm) “Performance Goal” means a performance goal established by the Committee pursuant to Section 10.3.
(nn) “Performance Period” means a period established by the Committee pursuant to Section 10.3 at the end of which one or more Performance Goals are to be measured.
 
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(oo) “Performance Share” means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Share, as determined by the Committee, based upon attainment of applicable Performance Goal(s).
(pp) “Performance Unit” means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Unit, as determined by the Committee, based upon attainment of applicable Performance Goal(s).
(qq) “Predecessor Plan” means the MagnaChip Semiconductor LLC 2009 Common Unit Plan, as amended.
(rr) “Restricted Stock Award” means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase Right.
(ss) “Restricted Stock Bonus” means Stock granted to a Participant pursuant to Section 8.
(tt) “Restricted Stock Purchase Right” means a right to purchase Stock granted to a Participant pursuant to Section 8.
(uu) “Restricted Stock Unit” means a right granted to a Participant pursuant to Section 9 to receive on a future date or event a share of Stock or cash in lieu thereof, as determined by the Committee.
(vv) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.
(ww) “SAR” or “Stock Appreciation Right” means a right granted to a Participant pursuant to Section 7 to receive payment, for each share of Stock subject to such Award, of an amount equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the Award over the exercise price thereof.
(xx) “Section 162(m)” means Section 162(m) of the Code.
(yy) “Section 409A” means Section 409A of the Code.
(zz) “Section 409A Deferred Compensation” means compensation provided pursuant to an Award that constitutes nonqualified deferred compensation within the meaning of Section 409A.
(aaa) “Securities Act” means the Securities Act of 1933, as amended.
(bbb) “Service” means a Participant’s employment or service with the Participating Company Group, whether as an Employee, a Director or a Consultant. Unless otherwise provided by the Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders such Service or a change in the Participating Company for which the Participant renders such Service, provided that there is no interruption or termination of the Participant’s Service. Furthermore, a
 
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Participant’s Service shall not be deemed to have been interrupted or terminated if the Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company. However, unless otherwise provided by the Committee, if any such leave taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such leave the Participant’s Service shall be deemed to have terminated, unless the Participant’s right to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, an unpaid leave of absence shall not be treated as Service for purposes of determining vesting under the Participant’s Award Agreement. A Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the business entity for which the Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination.
(ccc) “Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.5.
(ddd) “Stock Tender Exercise” means a Stock Tender Exercise as defined in Section 6.3(b)(ii).
(eee) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.
(fff) “Ten Percent Owner” means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.
(ggg) “Trading Compliance Policy” means the written policy of the Company pertaining to the purchase, sale, transfer or other disposition of the Company’s equity securities by Directors, Officers, Employees or other service providers who may possess material, nonpublic information regarding the Company or its securities.
(hhh) “Vesting Conditions” mean those conditions established in accordance with the Plan prior to the satisfaction of which an Award or shares subject to an Award remain subject to forfeiture or a repurchase option in favor of the Company exercisable for the Participant’s monetary purchase price, if any, for such shares upon the Participant’s termination of Service.
2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
 
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3.ADMINISTRATION.
3.1 Administration by the Committee. The Plan shall be administered by the Committee. All questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein. All expenses reasonably incurred by the Company in the administration of the Plan shall be paid by the Company.
3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election that is the responsibility of or that is allocated to the Company herein, provided that the Officer has actual authority with respect to such matter, right, obligation, determination or election. The Board or Committee may, in its discretion, delegate to a committee comprised of one or more Officers the authority to grant one or more Awards, without further approval of the Board or the Committee, to any Employee, other than a person who, at the time of such grant, is an Insider or a Covered Person; provided, however, that (a) the exercise price per share of each such Award which is an Option or SAR shall be not less than the Fair Market Value per share of the Stock on the effective date of grant (or, if the Stock has not traded on such date, on the last day preceding the effective date of grant on which the Stock was traded), (b) each such Award shall be subject to the terms and conditions of the appropriate standard form of Award Agreement approved by the Board or the Committee and shall conform to the provisions of the Plan, and (c) each such Award shall conform to guidelines as shall be established from time to time by resolution of the Board or the Committee.
3.3 Administration with Respect to Insiders. With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3.
3.4 Committee Complying with Section 162(m). If the Company is a “publicly held corporation” within the meaning of Section 162(m), the Board may establish a Committee of “outside directors” within the meaning of Section 162(m) to approve the grant of any Award intended to result in the payment of Performance-Based Compensation.
3.5 Powers of the Committee. In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Stock, units or monetary value to be subject to each Award;
 
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(b) to determine the type of Award granted;
(c) to determine the Fair Market Value of shares of Stock or other property;
(d) to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of shares, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the Performance Measures, Performance Period, Performance Award Formula and Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (vi) the time of the expiration of any Award, (vii) the effect of the Participant’s termination of Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;
(e) to determine whether an Award will be settled in shares of Stock, cash, other property or in any combination thereof;
(f) to approve one or more forms of Award Agreement;
(g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any shares acquired pursuant thereto;
(h) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any shares acquired pursuant thereto, including with respect to the period following a Participant’s termination of Service;
(i) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose citizens may be granted Awards; and
(j) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law.
3.6 Option or SAR Repricing. Without the affirmative vote of holders of a majority of the shares of Stock cast in person or by proxy at a meeting of the stockholders of the Company at which a quorum representing a majority of all outstanding shares of Stock is present or represented by proxy, the Committee shall not approve a program providing for either (a) the cancellation of outstanding Options or SARs having exercise prices per share greater than the then Fair Market Value of a share of Stock ( “ Underwater Awards ” ) and the grant in substitution therefore of new Options or SARs having a lower exercise price or payments in cash, or (b) the
 
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amendment of outstanding Underwater Awards to reduce the exercise price thereof. This Section shall not apply to adjustments pursuant to the assumption of or substitution for an Option or SAR in a manner that would comply with Section 424(a) or Section 409A of the Code or to an adjustment pursuant to Section 4.5.
3.7 Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, to the extent permitted by applicable law, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.
4.SHARES SUBJECTTO PLAN.
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Sections 4.2, 4.3, 4.4 and 4.5, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be equal to [              ] 1  and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.
4.2 Annual Increase in Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.5, the maximum aggregate number of shares of Stock that may be issued under the Plan as set forth in Section 4.1 shall be cumulatively increased automatically on January 1, 2012 and on each subsequent January 1 through and including January 1, 2021, by a number of shares (the “ Annual Increase ”) equal to the smaller of (a) two percent (2%) of the number of shares of Stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Board.
4.3 Adjustment for Unissued or Forfeited Predecessor Plan Shares. The maximum aggregate number of shares of Stock that may be issued under the Plan as set forth in Section 4.1 shall be cumulatively increased from time to time by:
(a) the number of shares of Stock subject to that portion of any option or other award outstanding pursuant to the Predecessor Plan as of the Effective Date which, on or

1	Amount to equal number of shares of common stock (as adjusted by the conversion ratio in the Conversion) remaining available for grant under 2009 Common Unit Plan upon its termination immediately following the Conversion. Number to be determined and inserted prior to approval of plan by Company stockholders.	
 
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after the Effective Date, expires or is terminated or canceled for any reason without having been exercised or settled in full; and
(b) the number of shares of Stock acquired pursuant to the Predecessor Plan subject to forfeiture or repurchase by the Company at the Participant’s purchase price which, on or after the Effective Date, is so forfeited or repurchased;
provided further, however, that the aggregate number of shares of Stock authorized for issuance under the Predecessor Plan that may become authorized for issuance under the Plan pursuant to this Section 4.3 shall not exceed [              ] 2 .
4.4 Share Counting. If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an amount not greater than the Participant’s purchase price, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be available for issuance under the Plan. Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to Section 16.2 shall not again be available for issuance under the Plan. Upon payment in shares of Stock pursuant to the exercise of an SAR, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which such SAR was exercised. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant, or by means of a Net Exercise, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised.
4.5 Adjustments for Changes in Capital Structure. Subject to any required action by the stockholders of the Company and the requirements of Sections 409A and 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting regular, periodic cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards, the number of shares resulting from any prior Annual Increase, the Award limits set forth in Section 5.3, and in the exercise or purchase price per share under any outstanding Award in order to prevent dilution or enlargement of Participants’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are

2	Amount to equal number of unvested shares (as adjusted by the conversion ratio in the Conversion) subject to options and restricted stock awards outstanding under the 2009 Common Unit Plan at the time of its termination immediately following the Conversion. Number to be determined and inserted prior to approval of plan by Company stockholders.	
 
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exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the “ New Shares ” ), the Committee may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise or purchase price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number, and in no event may the exercise or purchase price under any Award be decreased to an amount less than the par value, if any, of the stock subject to such Award. The Committee in its discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate, including modification of Performance Goals, Performance Award Formulas and Performance Periods. The adjustments determined by the Committee pursuant to this Section shall be final, binding and conclusive.
4.6 Assumption or Substitution of Awards. The Committee may, without affecting the number of shares of Stock reserved or available hereunder, authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A and any other applicable provisions of the Code.
5.ELIGIBILITY, PARTICIPATIONAND AWARD LIMITATIONS.
5.1 Persons Eligible for Awards. Awards may be granted only to Employees, Consultants and Directors.
5.2 Participation in the Plan. Awards are granted solely at the discretion of the Committee. Eligible persons may be granted more than one Award. However, eligibility in accordance with this Section shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.
5.3 Incentive Stock Option Limitations.
(a) Maximum Number of Shares Issuable Pursuant to Incentive Stock Options. Subject to adjustment as provided in Section 4.5, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed [              ] 3  shares, cumulatively increased on January 1, 2012 and on each subsequent January 1, through and including January 1, 2021, by a number of shares equal to the smaller of the Annual Increase determined under Section 4.2 or [              ] 4  shares. The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to all

3	Amount to equal the number in Sec. 4.1, as determined under footnote 1. Number to be determined and inserted prior to approval of plan by Company stockholders.	
4	Amount to equal 4% of the number of shares of common stock estimated to be outstanding immediately after completion of the IPO. Number to be determined and inserted prior to approval of plan by Company stockholders. This number (required by Sec. 422 regs) is intentionally set at twice the 2% annual evergreen increase so that the 2% evergreen will continue to apply regardless of future dilution.	
 
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Awards other than Incentive Stock Options shall be the number of shares determined in accordance with Section 4.1, subject to adjustment as provided in Sections 4.2, 4.3, 4.4 and 4.5.
(b) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an  “ ISO-Qualifying Corporation ” ). Any person who is not an Employee of an ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option.
(c) Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options (granted under all stock option plans of the Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a limitation different from that set forth in this Section, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Upon exercise, shares issued pursuant to each such portion shall be separately identified.
6.STOCK OPTIONS.
Options shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee shall from time to time establish. Award Agreements evidencing Options may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
6.1 Exercise Price. The exercise price for each Option shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner that would qualify under the provisions of Section 409A or 424(a) of the Code.
6.2 Exercisability and Term of Options. Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the
 
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Award Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option and (c) no Option granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable until at least six (6) months following the date of grant of such Option (except in the event of such Employee’s death, disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act). Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, each Option shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.
6.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or in cash equivalent; (ii) if permitted by the Committee and subject to the limitations contained in Section 6.3(b), by means of (1) a Cashless Exercise, (2) a Stock Tender Exercise or (3) a Net Exercise; (iii) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (iv) by any combination thereof. The Committee may at any time or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.
(b) Limitations on Forms of Consideration.
(i) Cashless Exercise. A “Cashless Exercise” means the delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise, including with respect to one or more Participants specified by the Company notwithstanding that such program or procedures may be available to other Participants.
(ii) Stock Tender Exercise. A “Stock Tender Exercise” means the delivery of a property executed exercise notice accompanied by a Participant’s tender to the Company, or attestation to the ownership, in a form acceptable to the Company of whole shares of Stock owned by the Participant having a Fair Market Value that does not exceed the aggregate exercise price for the shares with respect to which the Option is exercised. A Stock Tender Exercise shall not be permitted if it would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. If required by the Company, an Option may not be exercised by tender to the Company, or attestation to the
 
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ownership, of shares of Stock unless such shares either have been owned by the Participant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.
(iii) Net Exercise. A “Net Exercise” means the delivery of a properly executed exercise notice followed by a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to a Participant upon the exercise of an Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate exercise price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued.
6.4 Effect of Termination of Service.
(a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided by this Plan and unless otherwise provided by the Committee, an Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall terminate.
(i) Disability. If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the date of expiration of the Option’s term as set forth in the Award Agreement evidencing such Option (the  “ Option Expiration Date ” ).
(ii) Death. If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participant’s termination of Service.
(iii) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the Participant’s Service is terminated for Cause or if, following the Participant’s termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.
(iv) Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent
 
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unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than termination of Service for Cause, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 14 below, the Option shall remain exercisable until the later of (i) thirty (30) days after the date such exercise first would no longer be prevented by such provisions or (ii) the end of the applicable time period under Section 6.4(a), but in any event no later than the Option Expiration Date.
6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. An Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act or, in the case of an Incentive Stock Option, only as permitted by applicable regulations under Section 421 of the Code in a manner that does not disqualify such Option as an Incentive Stock Option.
7. STOCK APPRECIATION RIGHTS.
Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing SARs may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a related Option (a “Tandem SAR ” ) or may be granted independently of any Option (a  “ Freestanding SAR ” ). A Tandem SAR may only be granted concurrently with the grant of the related Option.
7.2 Exercise Price. The exercise price for each SAR shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR shall be the exercise price per share under the related Option and (b) the exercise price per share subject to a Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the SAR. Notwithstanding the foregoing, an SAR may be granted with an exercise price lower than the minimum exercise price set forth above if such SAR is granted pursuant to an assumption or substitution for another stock appreciation right in a manner that would qualify under the provisions of Section 409A of the Code.
 
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7.3 Exercisability and Term of SARs.
(a) Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent, and only to the extent, that the related Option is exercisable, subject to such provisions as the Committee may specify where the Tandem SAR is granted with respect to less than the full number of shares of Stock subject to the related Option. The Committee may, in its discretion, provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised without the advance approval of the Company and, if such approval is not given, then the Option shall nevertheless remain exercisable in accordance with its terms. A Tandem SAR shall terminate and cease to be exercisable no later than the date on which the related Option expires or is terminated or canceled. Upon the exercise of a Tandem SAR with respect to some or all of the shares subject to such SAR, the related Option shall be canceled automatically as to the number of shares with respect to which the Tandem SAR was exercised. Upon the exercise of an Option related to a Tandem SAR as to some or all of the shares subject to such Option, the related Tandem SAR shall be canceled automatically as to the number of shares with respect to which the related Option was exercised.
(b) Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR; provided, however, that (i) no Freestanding SAR shall be exercisable after the expiration of ten (10) years after the effective date of grant of such SAR and (ii) no Freestanding SAR granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable until at least six (6) months following the date of grant of such SAR (except in the event of such Employee’s death, disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act). Subject to the foregoing, unless otherwise specified by the Committee in the grant of a Freestanding SAR, each Freestanding SAR shall terminate ten (10) years after the effective date of grant of the SAR, unless earlier terminated in accordance with its provisions.
7.4 Exercise of SARs. Upon the exercise (or deemed exercise pursuant to Section 7.5) of an SAR, the Participant (or the Participant’s legal representative or other person who acquired the right to exercise the SAR by reason of the Participant’s death) shall be entitled to receive payment of an amount for each share with respect to which the SAR is exercised equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price. Payment of such amount shall be made (a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum upon the date of exercise of the SAR and (b) in the case of a Freestanding SAR, in cash, shares of Stock, or any combination thereof as determined by the Committee, in a lump sum upon the date of exercise of the SAR. When payment is to be made in shares of Stock, the number of shares to be issued shall be determined on the basis of the Fair Market Value of a share of Stock on the date of exercise of the SAR. For purposes of Section 7, an SAR shall be deemed exercised on the date on which the Company receives notice of exercise from the Participant or as otherwise provided in Section 7.5.
7.5 Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or expire, the SAR by its terms remains exercisable immediately prior to
 
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such termination or expiration and, if so exercised, would result in a payment to the holder of such SAR, then any portion of such SAR which has not previously been exercised shall automatically be deemed to be exercised as of such date with respect to such portion.
7.6 Effect of Termination of Service. Subject to earlier termination of the SAR as otherwise provided herein and unless otherwise provided by the Committee, an SAR shall be exercisable after a Participant’s termination of Service only to the extent and during the applicable time period determined in accordance with Section 6.4 (treating the SAR as if it were an Option) and thereafter shall terminate.
7.7 Transferability of SARs. During the lifetime of the Participant, an SAR shall be exercisable only by the Participant or the Participant’s guardian or legal representative. An SAR shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Award, a Tandem SAR related to a Nonstatutory Stock Option or a Freestanding SAR shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act.
8.RESTRICTED STOCK AWARDS.
Restricted Stock Awards shall be evidenced by Award Agreements specifying whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
8.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted in the form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of or satisfaction of Vesting Conditions applicable to a Restricted Stock Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).
8.2 Purchase Price. The purchase price for shares of Stock issuable under each Restricted Stock Purchase Right shall be established by the Committee in its discretion. No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving shares of Stock pursuant to a Restricted Stock Bonus, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its
 
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benefit having a value not less than the par value of the shares of Stock subject to a Restricted Stock Award.
8.3 Purchase Period. A Restricted Stock Purchase Right shall be exercisable within a period established by the Committee, which shall in no event exceed thirty (30) days from the effective date of the grant of the Restricted Stock Purchase Right.
8.4 Payment of Purchase Price. Except as otherwise provided below, payment of the purchase price for the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in cash, by check or in cash equivalent, (b) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (c) by any combination thereof.
8.5 Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Stock Award may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. During any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event or as provided in Section 8.8. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to such Restricted Stock Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then satisfaction of the Vesting Conditions automatically shall be determined on the next trading day on which the sale of such shares would not violate the Trading Compliance Policy. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
8.6 Voting Rights; Dividends and Distributions. Except as provided in this Section, Section 8.5 and any Award Agreement, during any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, the Participant shall have all of the rights of a stockholder of the Company holding shares of Stock, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares; provided, however, that unless otherwise determined by the Committee and provided by the Award Agreement, such dividends and distributions shall be subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid, and otherwise shall be paid no later than the end of the calendar year in which such dividends or distributions are paid to stockholders (or, if later, the 15th day of the third month following the date such dividends or distributions are paid to stockholders). In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.5, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant is entitled by reason of the
 
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Participant’s Restricted Stock Award shall be immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made.
8.7 Effect of Termination of Service. Unless otherwise provided by the Committee in the Award Agreement evidencing a Restricted Stock Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then (a) the Company shall have the option to repurchase for the purchase price paid by the Participant any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service and (b) the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to a Restricted Stock Bonus which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.
8.8 Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock pursuant to a Restricted Stock Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
9.RESTRICTED STOCK UNIT AWARDS.
Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of Restricted Stock Units subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Units may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
9.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of a Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).
9.2 Purchase Price. No monetary payment (other than applicable tax withholding, if any) shall be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Restricted Stock Unit Award.
 
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9.3 Vesting. Restricted Stock Unit Awards may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Unit Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to the Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then the satisfaction of the Vesting Conditions automatically shall be determined on the first to occur of (a) the next trading day on which the sale of such shares would not violate the Trading Compliance Policy or (b) the later of (i) last day of the calendar year in which the original vesting date occurred or (ii) the last day of the Company’s taxable year in which the original vesting date occurred.
9.4 Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid by crediting the Participant with a cash amount or with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Stock, as determined by the Committee. The number of additional Restricted Stock Units (rounded to the nearest whole number), if any, to be so credited shall be determined by dividing (a) the amount of cash dividends paid on such date with respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Such cash amounts and/or additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time as the Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.5, appropriate adjustments shall be made in the Participant’s Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions as are applicable to the Award.
9.5 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Restricted Stock Unit Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then the Participant shall forfeit to the Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service.
 
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9.6 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award vest or on such other date determined by the Committee, in its discretion, and set forth in the Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 9.4) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes, if any. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section, and such deferred issuance date(s) and amount(s) elected by the Participant shall be set forth in the Award Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may provide for settlement of any Restricted Stock Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section.
9.7 Nontransferability of Restricted Stock Unit Awards. The right to receive shares pursuant to a Restricted Stock Unit Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Restricted Stock Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
10.PERFORMANCE AWARDS.
Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements evidencing Performance Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
10.1 Types of Performance Awards Authorized. Performance Awards may be granted in the form of either Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall specify the number of Performance Shares or Performance Units subject thereto, the Performance Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the other terms, conditions and restrictions of the Award.
10.2 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by the Committee in granting a Performance Award, each Performance Share shall have an initial monetary value equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in Section 4.5, on the effective date of grant of the Performance Share, and each Performance Unit shall have an initial monetary value established by the Committee at the time of grant. The final value payable to the Participant in settlement of a Performance Award determined on the basis of the applicable Performance Award Formula will depend on the extent to which Performance Goals established by the Committee are attained within the applicable Performance Period established by the Committee.
 
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10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In granting each Performance Award, the Committee shall establish in writing the applicable Performance Period, Performance Award Formula and one or more Performance Goals which, when measured at the end of the Performance Period, shall determine on the basis of the Performance Award Formula the final value of the Performance Award to be paid to the Participant. Unless otherwise permitted in compliance with the requirements under Section 162(m) with respect to each Performance Award intended to result in the payment of Performance-Based Compensation, the Committee shall establish the Performance Goal(s) and Performance Award Formula applicable to each Performance Award no later than the earlier of (a) the date ninety (90) days after the commencement of the applicable Performance Period or (b) the date on which 25% of the Performance Period has elapsed, and, in any event, at a time when the outcome of the Performance Goals remains substantially uncertain. Once established, the Performance Goals and Performance Award Formula applicable to a Covered Employee shall not be changed during the Performance Period. The Company shall notify each Participant granted a Performance Award of the terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award Formula.
10.4 Measurement of Performance Goals. Performance Goals shall be established by the Committee on the basis of targets to be attained ( “ Performance Targets ” ) with respect to one or more measures of business or financial performance (each, a  “ Performance Measure ” ), subject to the following:
(a) Performance Measures. Performance Measures shall be calculated in accordance with the Company’s financial statements, or, if such terms are not used in the Company’s financial statements, they shall be calculated in accordance with generally accepted accounting principles, a method used generally in the Company’s industry, or in accordance with a methodology established by the Committee prior to the grant of the Performance Award. Performance Measures shall be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial reporting purposes or such division or other business unit as may be selected by the Committee. Unless otherwise determined by the Committee prior to the grant of the Performance Award, the Performance Measures applicable to the Performance Award shall be calculated prior to the accrual of expense for any Performance Award for the same Performance Period and excluding the effect (whether positive or negative) on the Performance Measures of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the Performance Goals applicable to the Performance Award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Participant’s rights with respect to a Performance Award. Performance Measures may be one or more of the following, as determined by the Committee:
(i) revenue;
(ii) sales;
(iii) expenses;
 
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(iv) operating income;
(v) gross margin;
(vi) operating margin;
(vii) earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization;
(viii) pre-tax profit;
(ix) net operating income;
(x) net income;
(xi) economic value added;
(xii) free cash flow;
(xiii) operating cash flow;
(xiv) balance of cash, cash equivalents and marketable securities;
(xv) stock price;
(xvi) earnings per share;
(xvii) return on stockholder equity;
(xviii) return on capital;
(xix) return on assets;
(xx) return on investment;
(xxi) total stockholder return;
(xxii) employee satisfaction;
(xxiii) employee retention;
(xxiv) market share;
(xxv) customer satisfaction;
(xxvi) product development;
(xxvii) research and development expenses;
(xxviii) completion of an identified special project; and
 
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(xxix) completion of a joint venture or other corporate transaction.
(b) Performance Targets. Performance Targets may include a minimum, maximum, target level and intermediate levels of performance, with the final value of a Performance Award determined under the applicable Performance Award Formula by the level attained during the applicable Performance Period. A Performance Target may be stated as an absolute value, an increase or decrease in a value, or as a value determined relative to an index, budget or other standard selected by the Committee.
10.5 Settlement of Performance Awards.
(a) Determination of Final Value. As soon as practicable following the completion of the Performance Period applicable to a Performance Award, the Committee shall certify in writing the extent to which the applicable Performance Goals have been attained and the resulting final value of the Award earned by the Participant and to be paid upon its settlement in accordance with the applicable Performance Award Formula.
(b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award granted to any Participant who is not a Covered Employee to reflect such Participant’s individual performance in his or her position with the Company or such other factors as the Committee may determine. If permitted under a Covered Employee’s Award Agreement, the Committee shall have the discretion, on the basis of such criteria as may be established by the Committee, to reduce some or all of the value of the Performance Award that would otherwise be paid to the Covered Employee upon its settlement notwithstanding the attainment of any Performance Goal and the resulting value of the Performance Award determined in accordance with the Performance Award Formula. No such reduction may result in an increase in the amount payable upon settlement of another Participant’s Performance Award that is intended to result in Performance-Based Compensation.
(c) Effect of Leaves of Absence. Unless otherwise required by law or a Participant’s Award Agreement, payment of the final value, if any, of a Performance Award held by a Participant who has taken in excess of thirty (30) days in unpaid leaves of absence during a Performance Period shall be prorated on the basis of the number of days of the Participant’s Service during the Performance Period during which the Participant was not on an unpaid leave of absence.
(d) Notice to Participants. As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), the Company shall notify each Participant of the determination of the Committee.
(e) Payment in Settlement of Performance Awards. As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), but in any event within the Short-Term Deferral Period described in Section 15.1 (except as otherwise provided below or consistent with the requirements of Section 409A), payment shall be made to each eligible Participant (or such Participant’s legal
 
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representative or other person who acquired the right to receive such payment by reason of the Participant’s death) of the final value of the Participant’s Performance Award. Payment of such amount shall be made in cash, shares of Stock, or a combination thereof as determined by the Committee. Unless otherwise provided in the Award Agreement evidencing a Performance Award, payment shall be made in a lump sum. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the payment to be made to the Participant pursuant to this Section, and such deferred payment date(s) elected by the Participant shall be set forth in the Award Agreement. If any payment is to be made on a deferred basis, the Committee may, but shall not be obligated to, provide for the payment during the deferral period of Dividend Equivalent Rights or interest.
(f) Provisions Applicable to Payment in Shares. If payment is to be made in shares of Stock, the number of such shares shall be determined by dividing the final value of the Performance Award by the Fair Market Value of a share of Stock determined by the method specified in the Award Agreement. Shares of Stock issued in payment of any Performance Award may be fully vested and freely transferable shares or may be shares of Stock subject to Vesting Conditions as provided in Section 8.5. Any shares subject to Vesting Conditions shall be evidenced by an appropriate Award Agreement and shall be subject to the provisions of Sections 8.5 through 8.8 above.
10.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Performance Share Awards until the date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Performance Share Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date the Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date on which the Performance Shares are settled or the date on which they are forfeited. Such Dividend Equivalent Rights, if any, shall be credited to the Participant either in cash or in the form of additional whole Performance Shares as of the date of payment of such cash dividends on Stock, as determined by the Committee. The number of additional Performance Shares (rounded to the nearest whole number), if any, to be so credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Performance Shares previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Dividend Equivalent Rights may be paid currently or may be accumulated and paid to the extent that Performance Shares become nonforfeitable, as determined by the Committee. Settlement of Dividend Equivalent Rights may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and may be paid on the same basis as settlement of the related Performance Share as provided in Section 10.5. Dividend Equivalent Rights shall not be paid with respect to Performance Units. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.5, appropriate adjustments shall be made in the Participant’s Performance Share Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled
 
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by reason of the shares of Stock issuable upon settlement of the Performance Share Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Performance Goals as are applicable to the Award.
10.7 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Performance Award, the effect of a Participant’s termination of Service on the Performance Award shall be as follows:
(a) Death or Disability. If the Participant’s Service terminates because of the death or Disability of the Participant before the completion of the Performance Period applicable to the Performance Award, the final value of the Participant’s Performance Award shall be determined by the extent to which the applicable Performance Goals have been attained with respect to the entire Performance Period and shall be prorated based on the number of months of the Participant’s Service during the Performance Period. Payment shall be made following the end of the Performance Period in any manner permitted by Section 10.5.
(b) Other Termination of Service. If the Participant’s Service terminates for any reason except death or Disability before the completion of the Performance Period applicable to the Performance Award, such Award shall be forfeited in its entirety; provided, however, that in the event of an involuntary termination of the Participant’s Service, the Committee, in its discretion, may waive the automatic forfeiture of all or any portion of any such Award and determine the final value of the Performance Award in the manner provided by Section 10.7(a). Payment of any amount pursuant to this Section shall be made following the end of the Performance Period in any manner permitted by Section 10.5.
10.8 Nontransferability of Performance Awards. Prior to settlement in accordance with the provisions of the Plan, no Performance Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Performance Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
11.CASH-BASED AWARDSAND OTHER STOCK-BASED AWARDS.
Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements evidencing Cash-Based Awards and Other Stock-Based Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
11.1 Grant of Cash-Based Awards. Subject to the provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms and conditions, including the achievement of performance criteria, as the Committee may determine.
 
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11.2 Grant of Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted securities, stock-equivalent units, stock appreciation units, securities or debentures convertible into common stock or other forms determined by the Committee) in such amounts and subject to such terms and conditions as the Committee shall determine. Other Stock-Based Awards may be made available as a form of payment in the settlement of other Awards or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may involve the transfer of actual shares of Stock to Participants, or payment in cash or otherwise of amounts based on the value of Stock and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
11.3 Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a monetary payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of shares of Stock or units based on such shares of Stock, as determined by the Committee. The Committee may require the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. If the Committee exercises its discretion to establish performance criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that will be paid to the Participant will depend on the extent to which the performance criteria are met. The establishment of performance criteria with respect to the grant or vesting of any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall follow procedures substantially equivalent to those applicable to Performance Awards set forth in Section 10.
11.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards. Payment or settlement, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash, shares of Stock or other securities or any combination thereof as the Committee determines. The determination and certification of the final value with respect to any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall comply with the requirements applicable to Performance Awards set forth in Section 10. To the extent applicable, payment or settlement with respect to each Cash-Based Award and Other Stock-Based Award shall be made in compliance with the requirements of Section 409A.
11.5 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Other Stock-Based Awards until the date of the issuance of such shares of Stock (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), if any, in settlement of such Award. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Other Stock-Based Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid in accordance
 
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with the provisions set forth in Section 9.4. Dividend Equivalent Rights shall not be granted with respect to Cash-Based Awards. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.5, appropriate adjustments shall be made in the Participant’s Other Stock-Based Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of such Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions and performance criteria, if any, as are applicable to the Award.
11.6 Effect of Termination of Service. Each Award Agreement evidencing a Cash-Based Award or Other Stock-Based Award shall set forth the extent to which the Participant shall have the right to retain such Award following termination of the Participant’s Service. Such provisions shall be determined in the discretion of the Committee, need not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination, subject to the requirements of Section 409A, if applicable.
11.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards. Prior to the payment or settlement of a Cash-Based Award or Other Stock-Based Award, the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. The Committee may impose such additional restrictions on any shares of Stock issued in settlement of Cash-Based Awards and Other Stock-Based Awards as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such shares of Stock are then listed and/or traded, or under any state securities laws or foreign law applicable to such shares of Stock.
12.STANDARD FORMSOF AWARD AGREEMENT.
12.1 Award Agreements. Each Award shall comply with and be subject to the terms and conditions set forth in the appropriate form of Award Agreement approved by the Committee and as amended from time to time. No Award or purported Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement, which execution may be evidenced by electronic means.
12.2 Authority to Vary Terms. The Committee shall have the authority from time to time to vary the terms of any standard form of Award Agreement either in connection with the grant or amendment of an individual Award or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Award Agreement are not inconsistent with the terms of the Plan.
 
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13.CHANGEIN CONTROL.
13.1 Effect of Change in Control on Awards. Subject to the requirements and limitations of Section 409A, if applicable, the Committee may provide for any one or more of the following:
(a) Accelerated Vesting. In its discretion, the Committee may provide in the grant of any Award or at any other time may take such action as it deems appropriate to provide for acceleration of the exercisability, vesting and/or settlement in connection with a Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Participant’s Service prior to, upon, or following such Change in Control, and to such extent as the Committee shall determine.
(b) Assumption, Continuation or Substitution. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the  “ Acquiror ” ), may, without the consent of any Participant, assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable. For purposes of this Section, if so determined by the Committee in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.
(c) Cash-Out of Outstanding Stock-Based Awards. The Committee may, in its discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award denominated in shares of Stock or portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced (but not below zero) by the exercise or purchase price
 
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per share, if any, under such Award. In the event such determination is made by the Committee, an Award having an exercise or purchase price per share equal to or greater than the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control may be canceled without payment of consideration to the holder thereof. Payment pursuant to this Section (reduced by applicable withholding taxes, if any) shall be made to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.
13.2 Effect of Change in Control on Nonemployee Director Awards. Subject to the requirements and limitations of Section 409A, if applicable, including as provided by Section 15.4(f), in the event of a Change in Control, each outstanding Nonemployee Director Award shall become immediately exercisable and vested in full and, except to the extent assumed, continued or substituted for pursuant to Section 13.1(b), shall be settled effective immediately prior to the time of consummation of the Change in Control.
13.3 Federal Excise Tax Under Section 4999 of the Code.
(a) Excess Parachute Payment. In the event that any acceleration of vesting pursuant to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of such acceleration of vesting, payment or benefit as an “excess parachute payment” under Section 280G of the Code, the Participant may elect to reduce the amount of any acceleration of vesting called for under the Award in order to avoid such characterization.
(b) Determination by Independent Accountants. To aid the Participant in making any election called for under Section 13.3(a), no later than the date of the occurrence of any event that might reasonably be anticipated to result in an “excess parachute payment” to the Participant as described in Section 13.3(a), the Company shall request a determination in writing by independent public accountants selected by the Company (the  “ Accountants ” ). As soon as practicable thereafter, the Accountants shall determine and report to the Company and the Participant the amount of such acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit to the Participant. For the purposes of such determination, the Accountants may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make their required determination. The Company shall bear all fees and expenses the Accountants charge in connection with their services contemplated by this Section.
14.COMPLIANCEWITH SECURITIES LAW.
The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities and the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Award may be exercised or shares
 
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issued pursuant to an Award unless (a) a registration statement under the Securities Act shall at the time of such exercise or issuance be in effect with respect to the shares issuable pursuant to the Award, or (b) in the opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to issuance of any Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
15.COMPLIANCEWITH SECTION 409A.
15.1 Awards Subject to Section 409A. The Company intends that Awards granted pursuant to the Plan shall either be exempt from or comply with Section 409A, and the Plan shall be so construed. The provisions of this Section 15 shall apply to any Award or portion thereof that constitutes or provides for payment of Section 409A Deferred Compensation. Such Awards may include, without limitation:
(a) A Nonstatutory Stock Option or SAR that includes any feature for the deferral of compensation other than the deferral of recognition of income until the later of (i) the exercise or disposition of the Award or (ii) the time the stock acquired pursuant to the exercise of the Award first becomes substantially vested.
(b) Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other Stock-Based Award that either (i) provides by its terms for settlement of all or any portion of the Award at a time or upon an event that will or may occur later than the end of the Short-Term Deferral Period (as defined below) or (ii) permits the Participant granted the Award to elect one or more dates or events upon which the Award will be settled after the end of the Short-Term Deferral Period.
Subject to the provisions of Section 409A, the term “Short-Term Deferral Period” means the 2 1/2 month period ending on the later of (i) the 15th day of the third month following the end of the Participant’s taxable year in which the right to payment under the applicable portion of the Award is no longer subject to a substantial risk of forfeiture or (ii) the 15th day of the third month following the end of the Company’s taxable year in which the right to payment under the applicable portion of the Award is no longer subject to a substantial risk of forfeiture. For this purpose, the term “substantial risk of forfeiture” shall have the meaning provided by Section 409A.
15.2 Deferral and/or Distribution Elections. Except as otherwise permitted or required by Section 409A, the following rules shall apply to any compensation deferral and/or payment elections (each, an “ Election ”) that may be permitted or required by the Committee pursuant to an Award providing Section 409A Deferred Compensation:
 
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(a) Elections must be in writing and specify the amount of the payment in settlement of an Award being deferred, as well as the time and form of payment as permitted by this Plan.
(b) Elections shall be made by the end of the Participant’s taxable year prior to the year in which services commence for which an Award may be granted to such Participant.
(c) Elections shall continue in effect until a written revocation or change in Election is received by the Company, except that a written revocation or change in Election must be received by the Company prior to the last day for making the Election determined in accordance with paragraph (b) above or as permitted by Section 15.3.
15.3 Subsequent Elections. Except as otherwise permitted or required by Section 409A, any Award providing Section 409A Deferred Compensation which permits a subsequent Election to delay the payment or change the form of payment in settlement of such Award shall comply with the following requirements:
(a) No subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made.
(b) Each subsequent Election related to a payment in settlement of an Award not described in Section 15.4(a)(ii), 15.4(a)(iii) or 15.4(a)(vi) must result in a delay of the payment for a period of not less than five (5) years from the date on which such payment would otherwise have been made.
(c) No subsequent Election related to a payment pursuant to Section 15.4(a)(iv) shall be made less than twelve (12) months before the date on which such payment would otherwise have been made.
(d) Subsequent Elections shall continue in effect until a written revocation or change in the subsequent Election is received by the Company, except that a written revocation or change in a subsequent Election must be received by the Company prior to the last day for making the subsequent Election determined in accordance the preceding paragraphs of this Section 15.3.
15.4 Payment of Section 409A Deferred Compensation.
(a) Permissible Payments. Except as otherwise permitted or required by Section 409A, an Award providing Section 409A Deferred Compensation must provide for payment in settlement of the Award only upon one or more of the following:
(i) The Participant’s “separation from service” (as defined by Section 409A);
(ii) The Participant’s becoming “disabled” (as defined by Section 409A);
 
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(iii) The Participant’s death;
(iv) A time or fixed schedule that is either (i) specified by the Committee upon the grant of an Award and set forth in the Award Agreement evidencing such Award or (ii) specified by the Participant in an Election complying with the requirements of Section 15.2 or 15.3, as applicable;
(v) A change in the ownership or effective control or the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 409A; or
(vi) The occurrence of an “unforeseeable emergency” (as defined by Section 409A).
(b) Installment Payments. It is the intent of this Plan that any right of a Participant to receive installment payments (within the meaning of Section 409A) shall, for all purposes of Section 409A, be treated as a right to a series of separate payments.
(c) Required Delay in Payment to Specified Employee Pursuant to Separation from Service. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, except as otherwise permitted by Section 409A, no payment pursuant to Section 15.4(a)(i) in settlement of an Award providing for Section 409A Deferred Compensation may be made to a Participant who is a “specified employee” (as defined by Section 409A) as of the date of the Participant’s separation from service before the date (the  “ Delayed Payment Date ” ) that is six (6) months after the date of such Participant’s separation from service, or, if earlier, the date of the Participant’s death. All such amounts that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.
(d) Payment Upon Disability. All distributions of Section 409A Deferred Compensation payable by reason of a Participant becoming disabled shall be paid in a lump sum or in periodic installments as established by the Participant’s Election. If the Participant has made no Election with respect to distributions of Section 409A Deferred Compensation upon becoming disabled, all such distributions shall be paid in a lump sum upon the determination that the Participant has become disabled.
(e) Payment Upon Death. If a Participant dies before complete distribution of amounts payable upon settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed to his or her beneficiary under the distribution method for death established by the Participant’s Election upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death. If the Participant has made no Election with respect to distributions of Section 409A Deferred Compensation upon death, all such distributions shall be paid in a lump sum upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death.
(f) Payment Upon Change in Control. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, to the extent that any amount constituting Section 409A Deferred Compensation would become payable under this Plan by
 
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reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A. Any Award which constitutes Section 409A Deferred Compensation and which would vest and otherwise become payable upon a Change in Control as a result of the failure of the Acquiror to assume, continue or substitute for such Award in accordance with Section 13.1(b) shall vest to the extent provided by such Award but shall be converted automatically at the effective time of such Change in Control into a right to receive, in cash on the date or dates such award would have been settled in accordance with its then existing settlement schedule (or as required by Section 15.4(c)), an amount or amounts equal in the aggregate to the intrinsic value of the Award at the time of the Change in Control.
(g) Payment Upon Unforeseeable Emergency. The Committee shall have the authority to provide in the Award Agreement evidencing any Award providing for Section 409A Deferred Compensation for payment in settlement of all or a portion of such Award in the event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an unforeseeable emergency. In such event, the amount(s) distributed with respect to such unforeseeable emergency cannot exceed the amounts reasonably necessary to satisfy the emergency need plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution(s), after taking into account the extent to which such emergency need is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of deferrals under the Award. All distributions with respect to an unforeseeable emergency shall be made in a lump sum upon the Committee’s determination that an unforeseeable emergency has occurred. The Committee’s decision with respect to whether an unforeseeable emergency has occurred and the manner in which, if at all, the payment in settlement of an Award shall be altered or modified, shall be final, conclusive, and not subject to approval or appeal.
(h) Prohibition of Acceleration of Payments. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, this Plan does not permit the acceleration of the time or schedule of any payment under an Award providing Section 409A Deferred Compensation, except as permitted by Section 409A.
(i) No Representation Regarding Section 409A Compliance. Notwithstanding any other provision of the Plan, the Company makes no representation that Awards shall be exempt from or comply with Section 409A. No Participating Company shall be liable for any tax, penalty or interest imposed on a Participant by Section 409A.
16.TAX WITHHOLDING.
16.1 Tax Withholding in General. The Company shall have the right to deduct from any and all payments made under the Plan, or to require the Participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes (including social insurance), if any, required by law to be withheld by any Participating Company with respect to an Award or the shares acquired pursuant thereto. The Company shall have no obligation to deliver shares of Stock, to release shares of Stock from
 
36

an escrow established pursuant to an Award Agreement, or to make any payment in cash under the Plan until the Participating Company Group’s tax withholding obligations have been satisfied by the Participant.
16.2 Withholding in or Directed Sale of Shares. The Committee shall have the right, but not the obligation, to cause the Company to deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Committee, equal to all or any part of the tax withholding obligations of any Participating Company (provided such shares of Stock are not pledged or otherwise serve as security and the withholding of which would not trigger adverse accounting treatment). The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates. The Committee may require a Participant to direct a broker, upon the vesting, exercise or settlement of an Award, to sell a portion of the shares subject to the Award determined by the Committee in its discretion to be sufficient to cover the tax withholding obligations of any Participating Company and to remit an amount equal to such tax withholding obligations to such Participating Company in cash.
17.AMENDMENT, SUSPENSIONOR TERMINATIONOF PLAN.
The Committee may amend, suspend or terminate the Plan at any time. However, without the approval of the Company’s stockholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.5), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s stockholders under any applicable law, regulation or rule, including the rules of any stock exchange or quotation system upon which the Stock may then be listed or quoted. No amendment, suspension or termination of the Plan shall affect any then outstanding Award unless expressly provided by the Committee. Except as provided by the next sentence, no amendment, suspension or termination of the Plan may have a materially adverse effect on any then outstanding Award without the consent of the Participant. Notwithstanding any other provision of the Plan to the contrary, the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A.
18.MISCELLANEOUS PROVISIONS.
18.1 Repurchase Rights. Shares issued under the Plan may be subject to one or more repurchase options, or other conditions and restrictions as determined by the Committee in its discretion at the time the Award is granted. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates
 
37

representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
18.2 Forfeiture Events.
(a) The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service.
(b) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, any Participant who knowingly or through gross negligence engaged in the misconduct, or who knowingly or through gross negligence failed to prevent the misconduct, and any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company for (i) the amount of any payment in settlement of an Award received by such Participant during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement, and (ii) any profits realized by such Participant from the sale of securities of the Company during such twelve- (12-) month period.
18.3 Provision of Information. Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s common stockholders.
18.4 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee, Consultant or Director or interfere with or limit in any way any right of a Participating Company to terminate the Participant’s Service at any time. To the extent that an Employee of a Participating Company other than the Company receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employee’s employer or that the Employee has an employment relationship with the Company.
18.5 Rights as a Stockholder. A Participant shall have no rights as a stockholder with respect to any shares covered by an Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.5 or another provision of the Plan.
 
38

18.6 Delivery of Title to Shares. Subject to any governing rules or regulations, the Company shall issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall deliver such shares to or for the benefit of the Participant by means of one or more of the following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form.
18.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any Award.
18.8 Retirement and Welfare Plans. Neither Awards made under this Plan nor shares of Stock or cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under any Participating Company’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit.
18.9 Beneficiary Designation. Subject to local laws and procedures, each Participant may file with the Company a written designation of a beneficiary who is to receive any benefit under the Plan to which the Participant is entitled in the event of such Participant’s death before he or she receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. If a married Participant designates a beneficiary other than the Participant’s spouse, the effectiveness of such designation may be subject to the consent of the Participant’s spouse. If a Participant dies without an effective designation of a beneficiary who is living at the time of the Participant’s death, the Company will pay any remaining unpaid benefits to the Participant’s legal representative.
18.10 Severability. If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired thereby.
18.11 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or another Participating Company’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or another Participating Company to take any action which such entity deems to be necessary or appropriate.
18.12 Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan shall be considered unfunded and unsecured obligations for all purposes, including, without
 
39

limitation, Title I of the Employee Retirement Income Security Act of 1974. No Participating Company shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Participating Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Participating Company. The Participants shall have no claim against any Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.
18.13 Choice of Law. Except to the extent governed by applicable federal law, the validity, interpretation, construction and performance of the Plan and each Award Agreement shall be governed by the laws of the State of California, without regard to its conflict of law rules.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets forth the MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan as duly adopted by the Board on [              ].2011.

 
John McFarland, Corporate Secretary	
 
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PLAN HISTORY AND NOTES TO COMPANY

 	 	 	
[            ], 2011	  	Board of Directors of MagnaChip Semiconductor LLC adopts Plan with a reserve of [        ] shares (subject to increases and other adjustments as provided by the Plan), subject to approval by the stockholders of MagnaChip Semiconductor Corporation and to be effective upon the Conversion.	
 	 	
[            ], 2011	  	Effective date of statutory conversion of MagnaChip Semiconductor LLC into the Company.	
 	 	
[            ], 2011	  	Plan approved by the stockholders of the Company.	
 	 	
[            ], 2011	  	Effective date of registration of Stock under Section 12 of the Exchange Act.	
 	 	
[            ], 2011	  	Effective date of initial Form S-8 under the Plan.	
 	 	
IMPORTANT NOTE: At first annual stockholders meeting following close of 3rd calendar year following the calendar year of IPO (unless plan is materially amended at an earlier date), obtain public company stockholder approval of amendment to plan to add Section 162(m) grant limits as described in sample Section 5.4 and to approve the material terms of the performance goals as required by Treas. Reg. 1.162-27(e)(4). See Treas. Reg. 1.162-27(f) (private to public company transition rule).	  	5.4(c) Section 162(m) Award Limits. Subject to adjustment as provided in Section 4.5, no Covered Employee shall be granted within any fiscal year of the Company one or more Awards intended to qualify for treatment as Performance-Based Compensation which in the aggregate are for more than [ — ] shares or, if applicable, which could result in such Covered Employee receiving more than $[ — ] for each full fiscal year of the Company contained in the Performance Period for such Award.	
 	 	
IMPORTANT NOTE: IRC 162(m) 5 year reapproval of performance goals	  	Because the Committee may change the targets under performance goals, Section 162(m) requires stockholder reapproval of the material terms of performance goals no later than the annual meeting in the 5th year following the year in which the public company stockholders initially approved such material terms. See Treas. Reg. 1.162-27(e)(4)(vi).	

Exhibit 10.26
MAGNACHIP SEMICONDUCTOR
CORPORATION
2011 EMPLOYEE STOCK PURCHASE PLAN

 	 	 	 	 	 	 	 	 	
 	  	TABLE OF CONTENTS	  	 	 	
 	  	 	  	 	  	Page	 	
 	 	 	
1.	  	Establishment, Purpose and Term of Plan	  	 	1	  	
 	 	 	 	
 	  	1.1	  	Establishment	  	 	1	  	
 	  	1.2	  	Purpose	  	 	1	  	
 	  	1.3	  	Term of Plan	  	 	1	  	
 	 	 	
2.	  	Definitions and Construction	  	 	1	  	
 	 	 	 	
 	  	2.1	  	Definitions	  	 	1	  	
 	  	2.2	  	Construction	  	 	5	  	
 	 	 	
3.	  	Administration	  	 	6	  	
 	 	 	 	
 	  	3.1	  	Administration by the Committee	  	 	6	  	
 	  	3.2	  	Authority of Officers	  	 	6	  	
 	  	3.3	  	Power to Adopt Sub-Plans or Varying Terms with Respect to Non-U.S. Employees	  	 	6	  	
 	  	3.4	  	Power to Establish Separate Offerings with Varying Terms	  	 	6	  	
 	  	3.5	  	Policies and Procedures Established by the Company	  	 	6	  	
 	  	3.6	  	Indemnification	  	 	7	  	
 	 	 	
4.	  	Shares Subject to Plan	  	 	7	  	
 	 	 	 	
 	  	4.1	  	Maximum Number of Shares Issuable	  	 	7	  	
 	  	4.2	  	Annual Increase in Maximum Number of Shares Issuable	  	 	8	  	
 	  	4.3	  	Adjustments for Changes in Capital Structure	  	 	8	  	
 	 	 	
5.	  	Eligibility	  	 	8	  	
 	 	 	 	
 	  	5.1	  	Employees Eligible to Participate	  	 	8	  	
 	  	5.2	  	Exclusion of Certain Stockholders	  	 	9	  	
 	  	5.3	  	Determination by Company	  	 	9	  	
 	 	 	
6.	  	Offerings	  	 	9	  	
 	 	 	
7.	  	Participation in the Plan	  	 	10	  	
 	 	 	 	
 	  	7.1	  	Initial Participation	  	 	10	  	
 	  	7.2	  	Continued Participation	  	 	10	  	
 	 	 	
8.	  	Right to Purchase Shares	  	 	11	  	
 	 	 	 	
 	  	8.1	  	Grant of Purchase Right	  	 	11	  	
 	  	8.2	  	Calendar Year Purchase Limitation	  	 	11	  	
 	 	 	
9.	  	Purchase Price	  	 	11	  	
 	 	 	
10.	  	Accumulation of Purchase Price through Payroll Deduction	  	 	12	  	
 	 	 	 	
 	  	10.1	  	Amount of Payroll Deductions	  	 	12	  	
 	  	10.2	  	Commencement of Payroll Deductions	  	 	12	  	
 	  	10.3	  	Election to Decrease or Stop Payroll Deductions	  	 	12	  	
 	  	10.4	  	Administrative Suspension of Payroll Deductions	  	 	12	  	
 
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 	  	TABLE OF CONTENTS
(continued)	  	 	 	
 	 	 	
 	  	 	  	Page	 	
 	 	 	 	
 	  	10.5	  	Participant Accounts	  	 	13	  	
 	  	10.6	  	No Interest Paid	  	 	13	  	
 	 	 	
11.	  	Purchase of Shares	  	 	13	  	
 	 	 	 	
 	  	11.1	  	Exercise of Purchase Right	  	 	13	  	
 	  	11.2	  	Pro Rata Allocation of Shares	  	 	14	  	
 	  	11.3	  	Delivery of Title to Shares	  	 	15	  	
 	  	11.4	  	Return of Plan Account Balance	  	 	15	  	
 	  	11.5	  	Tax Withholding	  	 	15	  	
 	  	11.6	  	Expiration of Purchase Right	  	 	15	  	
 	  	11.7	  	Provision of Reports and Stockholder Information to Participants	  	 	15	  	
 	 	 	
12.	  	Withdrawal from Plan	  	 	15	  	
 	 	 	 	
 	  	12.1	  	Voluntary Withdrawal from the Plan	  	 	15	  	
 	  	12.2	  	Return of Plan Account Balance	  	 	16	  	
 	 	 	
13.	  	Termination of Employment or Eligibility	  	 	16	  	
 	 	 	
14.	  	Effect of Change in Control on Purchase Rights	  	 	16	  	
 	 	 	
15.	  	Nontransferability of Purchase Rights	  	 	17	  	
 	 	 	
16.	  	Compliance with Securities Law	  	 	17	  	
 	 	 	
17.	  	Rights as a Stockholder and Employee	  	 	17	  	
 	 	 	
18.	  	Notification of Disposition of Shares	  	 	18	  	
 	 	 	
19.	  	Legends	  	 	18	  	
 	 	 	
20.	  	Designation of Beneficiary	  	 	18	  	
 	 	 	 	
 	  	20.1	  	Designation Procedure	  	 	18	  	
 	  	20.2	  	Absence of Beneficiary Designation	  	 	18	  	
 	 	 	
21.	  	Notices	  	 	19	  	
 	 	 	
22.	  	Amendment or Termination of the Plan	  	 	19	  	
 
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MagnaChip Semiconductor Corporation
2011 Employee Stock Purchase Plan
1. ESTABLISHMENT, PURPOSEAND TERMOF PLAN.
1.1 Establishment. The MagnaChip Semiconductor Corporation 2011 Employee Stock Purchase Plan (the “Plan”) is hereby established effective as of the effective date of the initial registration by the Company of its Stock under Section 12 of the Securities Exchange Act of 1934, as amended (the  “ Effective Date ” ).
1.2 Purpose. The purpose of the Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward Eligible Employees of the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan provides such Eligible Employees with an opportunity to acquire a proprietary interest in the Company through the purchase of Stock. The Company intends that the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments or replacements of such section), and the Plan shall be so construed.
1.3 Term of Plan. The Plan shall continue in effect until its termination by the Committee.
2. DEFINITIONSAND CONSTRUCTION.
2.1 Definitions. Any term not expressly defined in the Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. Whenever used herein, the following terms shall have their respective meanings set forth below:
(a) “Board” means the Board of Directors of the Company.
(b) “Cash Exercise Notice” means a written notice in such form as specified by the Company which states a Participant’s election to exercise, as of the next Purchase Date, a Purchase Right granted to such Participant with respect to a Pre-Registration Offering Period.
(c) “Change in Control” means the occurrence of any one or a combination of the following:
(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total Fair Market Value or total combined voting power of the Company’s then-outstanding securities entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall not be deemed to have occurred if such degree of beneficial ownership results from any of the following: (A) an acquisition by any person who on the Effective Date is the beneficial owner of more than fifty
 
1

percent (50%) of such voting power, (B) any acquisition directly from the Company, including, without limitation, pursuant to or in connection with a public offering of securities, (C) any acquisition by the Company, (D) any acquisition by a trustee or other fiduciary under an employee benefit plan of a Participating Company or (E) any acquisition by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or
(ii) an Ownership Change Event or series of related Ownership Change Events (collectively, a “Transaction”) in which the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities entitled to vote generally in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1(q)(iii), the entity to which the assets of the Company were transferred (the  “ Transferee ” ), as the case may be; or
(iii) approval by the stockholders of a plan of complete liquidation or dissolution of the Company;
provided, however, that a Change in Control shall be deemed not to include a transaction described in subsections (i) or (ii) of this Section 2.1(c) in which a majority of the members of the board of directors of the continuing, surviving or successor entity, or parent thereof, immediately after such transaction is comprised of Incumbent Directors.
For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Committee shall determine whether multiple acquisitions of the voting securities of the Company and/or multiple Ownership Change Events are related and to be treated in the aggregate as a single Change in Control, and its determination shall be final, binding and conclusive.
(d) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.
(e) “Committee” means the Compensation Committee and such other committee or subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. If, at any time, there is no committee of the Board then authorized or properly constituted to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.
(f) “Company” means MagnaChip Semiconductor Corporation, a Delaware corporation, or any successor corporation thereto.
(g) “Compensation” means, with respect to any Offering Period, base wages or salary, overtime, bonuses, commissions, shift differentials, payments for paid time off, payments in lieu of notice, and compensation deferred under any program or plan, including,
 
2

without limitation, pursuant to Section 401(k) or Section 125 of the Code. Compensation shall be limited to amounts actually payable in cash or deferred during the Offering Period. Compensation shall not include moving allowances, payments pursuant to a severance agreement, termination pay, relocation payments, sign-on bonuses, any amounts directly or indirectly paid pursuant to the Plan or any other stock purchase, stock option or other stock-based compensation plan, or any other compensation not included above.
(h) “Eligible Employee” means an Employee who meets the requirements set forth in Section 5 for eligibility to participate in the Plan.
(i) “Employee” means a person treated as an employee of a Participating Company for purposes of Section 423 of the Code. A Participant shall be deemed to have ceased to be an Employee either upon an actual termination of employment or upon the corporation employing the Participant ceasing to be a Participating Company. For purposes of the Plan, an individual shall not be deemed to have ceased to be an Employee while on any military leave, sick leave, or other bona fide leave of absence approved by the Company of ninety (90) days or less. If an individual’s leave of absence exceeds ninety (90) days, the individual shall be deemed to have ceased to be an Employee on the ninety-first (91st) day of such leave unless the individual’s right to reemployment with the Participating Company Group is guaranteed either by statute or by contract.
(j) “Fair Market Value” means, as of any date:
(i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed or quoted on a national or regional securities exchange or quotation system, the closing price of a share of Stock as quoted on the national or regional securities exchange or quotation system constituting the primary market for the Stock, as reported in  The Wall Street Journal  or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or quotation system, the date on which the Fair Market Value is established shall be the last day on which the Stock was so traded or quoted prior to the relevant date, or such other appropriate day as determined by the Committee, in its discretion.
(ii) If, on the relevant date, the Stock is not then listed on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be as determined in good faith by the Committee.
(iii) Notwithstanding the foregoing, if a Pre-Registration Offering Period commences on the Effective Date, then the Fair Market Value of a share of Stock on such date shall be deemed to be the public offering price set forth in the final prospectus filed with the Securities and Exchange Commission in connection with the Company’s initial public offering of the Stock.
(k) “Incumbent Director” means a director who either (i) is a member of the Board as of the Effective Date, or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such
 
3

election or nomination (but excluding a director who was elected or nominated in connection with an actual or threatened proxy contest relating to the election of directors of the Company).
(l) “Non-United States Offering” means a separate Offering covering Eligible Employees of one or more Participating Companies whose Eligible Employees are subject to a prohibition under applicable law on payroll deductions, as described in Section 11.1(c).
(m) “Offering” means an offering of Stock pursuant to the Plan, as provided in Section 6.
(n) “Offering Date” means, for any Offering Period, the first day of such Offering Period.
(o) “Offering Period” means a period, established by the Committee in accordance with Section 6, during which an Offering is outstanding.
(p) “Officer” means any person designated by the Board as an officer of the Company.
(q) “Ownership Change Event” means the occurrence of any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of securities of the Company representing more than fifty percent (50%) of the total combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of Directors; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).
(r) “Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.
(s) “Participant” means an Eligible Employee who has become a participant in an Offering Period in accordance with Section 7 and remains a participant in accordance with the Plan.
(t) “Participating Company” means the Company and any Parent Corporation or Subsidiary Corporation designated by the Committee as a corporation the Employees of which may, if Eligible Employees, participate in the Plan. The Committee shall have the discretion to determine from time to time which Parent Corporations or Subsidiary Corporations shall be Participating Companies.
(u) “Participating Company Group” means, at any point in time, the Company and all other corporations collectively which are then Participating Companies.
(v) “Pre-Registration Offering Period” means an Offering Period commencing prior to the Registration Date with respect to the shares of Stock issuable pursuant to such Offering Period.
 
4

(w) “Purchase Date” means, for any Offering Period, the last day of such Offering Period, or, if so determined by the Committee, the last day of each Purchase Period occurring within such Offering Period.
(x) “Purchase Period” means a period, established by the Committee in accordance with Section 6, included within an Offering Period and on the final date of which outstanding Purchase Rights are exercised.
(y) “Purchase Price” means the price at which a share of Stock may be purchased under the Plan, as determined in accordance with Section 9.
(z) “Purchase Right” means an option granted to a Participant pursuant to the Plan to purchase such shares of Stock as provided in Section 8, which the Participant may or may not exercise during the Offering Period in which such option is outstanding. Such option arises from the right of a Participant to withdraw any payroll deductions or other funds accumulated on behalf of the Participant and not previously applied to the purchase of Stock under the Plan, and to terminate participation in the Plan at any time during an Offering Period.
(aa) “Registration Date” means the effective date of the registration on Form S-8 of shares of Stock issuable pursuant to the Plan.
(bb) “Securities Act” means the Securities Act of 1933, as amended.
(cc) “Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.3.
(dd) “Subscription Agreement” means a written or electronic agreement, in such form as is specified by the Company, stating an Employee’s election to participate in the Plan and authorizing payroll deductions under the Plan from the Employee’s Compensation or other method of payment authorized by the Committee pursuant to Section 11.1(c).
(ee) “Subscription Date” means the last business day prior to the Offering Date of an Offering Period or such earlier date as the Company shall establish.
(ff) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.
2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
 
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3.ADMINISTRATION.
3.1 Administration by the Committee. The Plan shall be administered by the Committee. All questions of interpretation of the Plan, of any form of agreement or other document employed by the Company in the administration of the Plan, or of any Purchase Right shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or the Purchase Right, unless fraudulent or made in bad faith. Subject to the provisions of the Plan, the Committee shall determine all of the relevant terms and conditions of Purchase Rights; provided, however, that all Participants granted Purchase Rights pursuant to an Offering shall have the same rights and privileges within the meaning of Section 423(b)(5) of the Code. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or any agreement thereunder (other than determining questions of interpretation pursuant to the second sentence of this Section 3.1) shall be final, binding and conclusive upon all persons having an interest therein. All expenses reasonably incurred by the Company in the administration of the Plan shall be paid by the Company.
3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election that is the responsibility of or that is allocated to the Company herein, provided that the Officer has actual authority with respect to such matter, right, obligation, determination or election.
3.3 Power to Adopt Sub-Plans or Varying Terms with Respect to Non-U.S. Employees. The Committee shall have the power, in its discretion, to adopt one or more sub-plans of the Plan as the Committee deems necessary or desirable to comply with the laws or regulations, tax policy, accounting principles or custom of foreign jurisdictions applicable to employees of a subsidiary business entity of the Company, provided that any such sub-plan shall not be within the scope of an “employee stock purchase plan” within the meaning of Section 423 of the Code. Any of the provisions of any such sub-plan may supersede the provisions of this Plan, other than Section 4. Except as superseded by the provisions of a sub-plan, the provisions of this Plan shall govern such sub-plan. Alternatively and in order to comply with the laws of a foreign jurisdiction, the Committee shall have the power, in its discretion, to grant Purchase Rights in an Offering to citizens or residents of a non-U.S. jurisdiction (without regard to whether they are also citizens of the United States or resident aliens) that provide terms which are less favorable than the terms of Purchase Rights granted under the same Offering to Employees resident in the United States.
3.4 Power to Establish Separate Offerings with Varying Terms. The Committee shall have the power, in its discretion, to establish separate, simultaneous or overlapping Offerings having different terms and conditions and to designate the Participating Company or Companies that may participate in a particular Offering, provided that each Offering shall individually comply with the terms of the Plan and the requirements of Section 423(b)(5) of the Code that all Participants granted Purchase Rights pursuant to such Offering shall have the same rights and privileges within the meaning of such section.
3.5 Policies and Procedures Established by the Company. Without regard to whether any Participant’s Purchase Right may be considered adversely affected, the Company
 
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may, from time to time, consistent with the Plan and the requirements of Section 423 of the Code, establish, change or terminate such rules, guidelines, policies, procedures, limitations, or adjustments as deemed advisable by the Company, in its discretion, for the proper administration of the Plan, including, without limitation, (a) a minimum payroll deduction amount required for participation in an Offering, (b) a limitation on the frequency or number of changes permitted in the rate of payroll deduction during an Offering, (c) an exchange ratio applicable to amounts withheld or paid in a currency other than United States dollars, (d) a payroll deduction greater than or less than the amount designated by a Participant in order to adjust for the Company’s delay or mistake in processing a Subscription Agreement or in otherwise effecting a Participant’s election under the Plan or as advisable to comply with the requirements of Section 423 of the Code, and (e) determination of the date and manner by which the Fair Market Value of a share of Stock is determined for purposes of administration of the Plan. All such actions by the Company shall be taken consistent with the requirements under Section 423(b)(5) of the Code that all Participants granted Purchase Rights pursuant to an Offering shall have the same rights and privileges within the meaning of such section, except as otherwise permitted by Section 3.3 and the regulations under Section 423 of the Code.
3.6 Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, to the extent permitted by applicable law, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.
4.SHARES SUBJECTTO PLAN.
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Sections 4.2 and 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be [              ] 1  and shall consist of authorized but unissued or reacquired shares of Stock, or any combination thereof. If an outstanding Purchase Right for any reason expires or is terminated or canceled, the shares of Stock allocable to the unexercised portion of that Purchase Right shall again be available for issuance under the Plan.

1	Amount to equal 2% of the number of shares of common stock estimated to be outstanding immediately after completion of the IPO. Number to be determined and inserted prior to approval of plan by Company stockholders.	
 
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4.2 Annual Increase in Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan as set forth in Section 4.1 shall be cumulatively increased automatically on January 1, 2012 and on each subsequent January 1, through and including January 1, 2021, by a number of shares (the  “ Annual Increase ” ) equal to the smallest of (a) one percent (1.0%) of the number of shares of Stock issued and outstanding on the immediately preceding December 31, (b) [              ] 2 shares, or (c) an amount determined by the Board.
4.3 Adjustments for Changes in Capital Structure. Subject to any required action by the stockholders of the Company and the requirements of Section 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting regular, periodic cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares subject to the Plan, the Annual Increase, the limit on the shares which may be purchased by any Participant during an Offering (as described in Sections 8.1 and 8.2) and each Purchase Right, and in the Purchase Price in order to prevent dilution or enlargement of Participants’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” If a majority of the shares which are of the same class as the shares that are subject to outstanding Purchase Rights are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the  “ New Shares ” ), the Committee may unilaterally amend the outstanding Purchase Rights to provide that such Purchase Rights are for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Purchase Rights shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number, and in no event may the Purchase Price be decreased to an amount less than the par value, if any, of the stock subject to the Purchase Right. The adjustments determined by the Committee pursuant to this Section 4.3 shall be final, binding and conclusive.
5.ELIGIBILITY.
5.1 Employees Eligible to Participate. Each Employee of a Participating Company is eligible to participate in the Plan and shall be deemed an Eligible Employee, except the following:

2	Amount to equal 2% of the number of shares of common stock estimated to be outstanding immediately after completion of the IPO. Number to be determined and inserted prior to approval of plan by Company stockholders.	
 
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(a) Any Employee who is customarily employed by the Participating Company Group for twenty (20) hours or less per week; or
(b) Any Employee who is customarily employed by the Participating Company Group for not more than five (5) months in any calendar year.
5.2 Exclusion of Certain Stockholders. Notwithstanding any provision of the Plan to the contrary, no Employee shall be treated as an Eligible Employee and granted a Purchase Right under the Plan if, immediately after such grant, the Employee would own, or hold options to purchase, stock of the Company or of any Parent Corporation or Subsidiary Corporation possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of such corporation, as determined in accordance with Section 423(b)(3) of the Code. For purposes of this Section 5.2, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of such Employee.
5.3 Determination by Company. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee or an Eligible Employee and the effective date of such individual’s attainment or termination of such status, as the case may be. For purposes of an individual’s participation in or other rights, if any, under the Plan as of the time of the Company’s determination of whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individual’s status as an Employee.
6.OFFERINGS.
The Plan shall be implemented by sequential Offerings of approximately three (3) months duration or such other duration as the Committee shall determine. Offering Periods shall commence on or about the first trading days of February, May, August and November of each year and end on or about the last trading days of the next April, July, October and January, respectively, occurring thereafter. However, if so determined by the Committee, a Pre-Registration Offering Period shall commence on the Effective Date and end on such date as determined by the Committee. Notwithstanding the foregoing, the Committee may establish additional or alternative concurrent, sequential or overlapping Offering Periods, a different duration for one or more Offering Periods or different commencing or ending dates for such Offering Periods; provided, however, that no Offering Period may have a duration exceeding twenty-seven (27) months. If the Committee shall so determine in its discretion, each Offering Period may consist of two (2) or more consecutive Purchase Periods having such duration as the Committee shall specify, and the last day of each such Purchase Period shall be a Purchase Date. If the first or last day of an Offering Period or a Purchase Period is not a day on which the principal stock exchange or quotation system on which the Stock is then listed is open for trading, the Company shall specify the trading day that will be deemed the first or last day, as the case may be, of the Offering Period or Purchase Period.
 
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7. PARTICIPATIONINTHE PLAN.
7.1 Initial Participation.
(a) Generally. Except as provided in Section 7.1(b), an Eligible Employee may become a Participant in an Offering Period by delivering a properly completed written or electronic Subscription Agreement to the Company office or representative designated by the Company (including a third-party administrator designated by the Company) not later than the close of business on the Subscription Date established by the Company for that Offering Period. An Eligible Employee who does not deliver a properly completed Subscription Agreement in the manner permitted or required on or before the Subscription Date for an Offering Period shall not participate in the Plan for that Offering Period or for any subsequent Offering Period unless the Eligible Employee subsequently delivers a properly completed Subscription Agreement to the appropriate Company office or representative on or before the Subscription Date for such subsequent Offering Period. An Employee who becomes an Eligible Employee after the Offering Date of an Offering Period shall not be eligible to participate in that Offering Period but may participate in any subsequent Offering Period provided the Employee is still an Eligible Employee as of the Offering Date of such subsequent Offering Period.
(b) Automatic Participation in Pre-Registration Offering Period. Notwithstanding Section 7.1(a), each Employee who is an Eligible Employee as of the Offering Date of a Pre-Registration Offering Period shall automatically become a Participant in the Pre-Registration Offering Period and shall be granted automatically a Purchase Right consisting of an option to purchase the lesser of (i) a number of whole shares of Stock determined in accordance with Section 8, or (ii) a number of whole shares of Stock determined by dividing twenty percent (20%) of such Participant’s Compensation paid during the Pre-Registration Offering Period by the Purchase Price applicable to the Pre-Registration Offering Period. The Company shall not require or permit any Participant to deliver a Subscription Agreement for participation in the Pre-Registration Offering Period; provided, however, that following the applicable Registration Date a Participant may deliver a Subscription Agreement to the office or representative designated by the Company if the Participant wishes to change the terms of the Participant’s participation in the Pre-Registration Offering Period. Such changes may include, for example, an election to commence payroll deductions in accordance with Section 10.
7.2 Continued Participation.
(a) Generally. Except as provided in Section 7.2(b), a Participant shall automatically participate in the next Offering Period commencing immediately after the final Purchase Date of each Offering Period in which the Participant participates provided that the Participant remains an Eligible Employee on the Offering Date of the new Offering Period and has not either (a) withdrawn from the Plan pursuant to Section 12.1, or (b) terminated employment or otherwise ceased to be an Eligible Employee as provided in Section 13. A Participant who may automatically participate in a subsequent Offering Period, as provided in this Section, is not required to deliver any additional Subscription Agreement for the subsequent Offering Period in order to continue participation in the Plan. However, a Participant may deliver a new Subscription Agreement for a subsequent Offering Period in accordance with the
 
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procedures set forth in Section 7.1(a) if the Participant desires to change any of the elections contained in the Participant’s then effective Subscription Agreement.
(b) Participation Following Pre-Registration Offering Period. Notwithstanding Section 7.1(a), an Eligible Employee who was automatically enrolled in a Pre-Registration Offering Period and who wishes to participate in an Offering Period which begins after the Pre-Registration Offering Period shall deliver a Subscription Agreement in accordance with Section 7.1(a) no earlier than the applicable Registration Date and no later than the Subscription Date for such Offering Period, unless the Employee delivered a Subscription Agreement with respect to the Pre-Registration Offering Period as provided in Section 7.1(b).
8.RIGHTTO PURCHASE SHARES.
8.1 Grant of Purchase Right. Except as provided in Section 7.1(b) with respect to a Pre-Registration Offering Period or as otherwise provided below, on the Offering Date of each Offering Period, each Participant in such Offering Period shall be granted automatically a Purchase Right consisting of an option to purchase the lesser of (a) that number of whole shares of Stock determined by dividing the Dollar Limit (determined as provided below) by the Fair Market Value of a share of Stock on such Offering Date or (b) the Share Limit (determined as provided below). The Committee may, in its discretion and prior to the Offering Date of any Offering Period, (i) change the method of, or any of the foregoing factors in, determining the number of shares of Stock subject to Purchase Rights to be granted on such Offering Date, or (ii) specify a maximum aggregate number of shares that may be purchased by all Participants in an Offering or on any Purchase Date within an Offering Period. No Purchase Right shall be granted on an Offering Date to any person who is not, on such Offering Date, an Eligible Employee. For the purposes of this Section, the  “ Dollar Limit ”  shall be determined by multiplying $2,083.33 by the number of months (rounded to the nearest whole month) in the Offering Period and rounding to the nearest whole dollar, and the  “ Share Limit ”  shall be determined by multiplying four hundred (400) shares by the number of months (rounded to the nearest whole month) in the Offering Period and rounding to the nearest whole share.
8.2 Calendar Year Purchase Limitation. Notwithstanding any provision of the Plan to the contrary, no Participant shall be granted a Purchase Right which permits his or her right to purchase shares of Stock under the Plan to accrue at a rate which, when aggregated with such Participant’s rights to purchase shares under all other employee stock purchase plans of a Participating Company intended to meet the requirements of Section 423 of the Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or such other limit, if any, as may be imposed by the Code) for each calendar year in which such Purchase Right is outstanding at any time. For purposes of the preceding sentence, the Fair Market Value of shares purchased during a given Offering Period shall be determined as of the Offering Date for such Offering Period. The limitation described in this Section shall be applied in conformance with Section 423(b)(8) of the Code and the regulations thereunder.
9.PURCHASE PRICE.
The Purchase Price at which each share of Stock may be acquired in an Offering Period upon the exercise of all or any portion of a Purchase Right shall be established by the
 
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Committee; provided, however, that the Purchase Price on each Purchase Date shall not be less than eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period or (b) the Fair Market Value of a share of Stock on the Purchase Date. Subject to adjustment as provided by the Plan and unless otherwise provided by the Committee, the Purchase Price for each Offering Period shall be ninety-five percent (95%) of the Fair Market Value of a share of Stock on the Purchase Date.
10.ACCUMULATIONOF PURCHASE PRICETHROUGH PAYROLL DEDUCTION.
Except as provided in Section 11.1(b) with respect to a Pre-Registration Offering Period and in Section 11.1(c) with respect to a Non-United States Offering, shares of Stock acquired pursuant to the exercise of all or any portion of a Purchase Right may be paid for only by means of payroll deductions from the Participant’s Compensation accumulated during the Offering Period for which such Purchase Right was granted, subject to the following:
10.1 Amount of Payroll Deductions. Except as otherwise provided herein, the amount to be deducted under the Plan from a Participant’s Compensation on each pay day during an Offering Period shall be determined by the Participant’s Subscription Agreement. The Subscription Agreement shall set forth the percentage of the Participant’s Compensation to be deducted on each pay day during an Offering Period in whole percentages of not less than one percent (1%) (except as a result of an election pursuant to Section 10.3 to stop payroll deductions effective following the first pay day during an Offering) or more than twenty percent (20%). The Committee may change the foregoing limits on payroll deductions effective as of any Offering Date.
10.2 Commencement of Payroll Deductions. Payroll deductions shall commence on the first pay day following the Offering Date and shall continue to the end of the Offering Period unless sooner altered or terminated as provided herein; provided, however, that with respect to a Pre-Registration Offering Period, payroll deductions shall commence as soon as practicable following the Company’s receipt of the Participant’s Subscription Agreement (delivered no earlier than the applicable Registration Date), if any.
10.3 Election to Decrease or Stop Payroll Deductions. During an Offering Period, a Participant may elect to decrease the rate of or to stop deductions from his or her Compensation by delivering to the Company office or representative designated by the Company (including a third-party administrator designated by the Company) an amended Subscription Agreement authorizing such change on or before the “Change Notice Date.” The  “ Change Notice Date ”  shall be a date prior to the beginning of the first pay period for which such election is to be effective as established by the Company from time to time and announced to the Participants. A Participant who elects, effective following the first pay day of an Offering Period, to decrease the rate of his or her payroll deductions to zero percent (0%) shall nevertheless remain a Participant in such Offering Period unless the Participant withdraws from the Plan as provided in Section 12.1.
10.4 Administrative Suspension of Payroll Deductions. The Company may, in its discretion, suspend a Participant’s payroll deductions under the Plan as the Company deems advisable to avoid accumulating payroll deductions in excess of the amount that could
 
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reasonably be anticipated to purchase the maximum number of shares of Stock permitted (a) under the Participant’s Purchase Right, or (b) during a calendar year under the limit set forth in Section 8.2. Unless the Participant has either withdrawn from the Plan as provided in Section 12.1 or has ceased to be an Eligible Employee, suspended payroll deductions shall be resumed at the rate specified in the Participant’s then effective Subscription Agreement either (i) at the beginning of the next Offering Period if the reason for suspension was clause (a) in the preceding sentence, or (ii) at the beginning of the next Offering Period having a first Purchase Date that falls within the subsequent calendar year if the reason for suspension was clause (b) in the preceding sentence.
10.5 Participant Accounts. Individual bookkeeping accounts shall be maintained for each Participant. All payroll deductions from a Participant’s Compensation (and other amounts received from the Participant in a Pre-Registration Offering Period pursuant to Section 11.1(b) or a non-United States Participant pursuant to Section 11.1(c)) shall be credited to such Participant’s Plan account and shall be deposited with the general funds of the Company. All such amounts received or held by the Company may be used by the Company for any corporate purpose.
10.6 No Interest Paid. Interest shall not be paid on sums deducted from a Participant’s Compensation pursuant to the Plan or otherwise credited to the Participant’s Plan account.
11.PURCHASEOF SHARES.
11.1 Exercise of Purchase Right.
(a) Generally. Except as provided in Section 11.1(b) and Section 11.1(c), on each Purchase Date of an Offering Period, each Participant who has not withdrawn from the Plan and whose participation in the Offering has not otherwise terminated before such Purchase Date shall automatically acquire pursuant to the exercise of the Participant’s Purchase Right the number of whole shares of Stock determined by dividing (a) the total amount of the Participant’s payroll deductions accumulated in the Participant’s Plan account during the Offering Period and not previously applied toward the purchase of Stock by (b) the Purchase Price. However, in no event shall the number of shares purchased by the Participant during an Offering Period exceed the number of shares subject to the Participant’s Purchase Right. No shares of Stock shall be purchased on a Purchase Date on behalf of a Participant whose participation in the Offering or the Plan has terminated before such Purchase Date.
(b) Purchase in Pre-Registration Period. Notwithstanding Section 11.1(a), on the Purchase Date of a Pre-Registration Offering Period, each Participant who has not withdrawn from the Plan and whose participation in such Offering Period has not otherwise terminated before such Purchase Date shall automatically acquire pursuant to the exercise of the Participant’s Purchase Right (i) a number of whole shares of Stock determined in accordance with Section 11.1(a) to the extent of the total amount of the Participant’s payroll deductions accumulated in the Participant’s Plan account during the Pre-Registration Offering Period, if any, and not previously applied toward the purchase of Stock, and (ii) such additional
 
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shares of Stock (not exceeding in the aggregate the Participant’s Purchase Right) as determined in accordance with a Cash Exercise Notice delivered to the Company office or representative designated by the Company (including a third-party administrator designated by the Company) no earlier than the applicable Registration Date and not later than the close of business on the business day immediately preceding the Purchase Date or such earlier date as the Company shall establish, accompanied by payment of the Purchase Price for such additional shares in cash or by check. However, in no event shall the aggregate number of shares purchased by a Participant during the Pre-Registration Offering Period exceed the number of shares subject to the Participant’s Purchase Right. In addition, if a Participant delivers a Subscription Agreement to the Company after the applicable Registration Date, the Participant may not elect to exercise a Purchase Right pursuant to a Cash Exercise Notice in an amount which, when aggregated with payroll deductions pursuant to such Subscription Agreement, exceeds twenty percent (20%) of the Participant’s Compensation during the Pre-Registration Offering Period. The Company shall refund to the Participant in accordance with Section 11.4 any excess Purchase Price payment received from the Participant.
(c) Purchase by Non-United States Participants for Whom Payroll Deductions Are Prohibited by Applicable Law. Notwithstanding Section 11.1(a), where payroll deductions on behalf of Participants who are citizens or residents of countries other than the United States (without regard to whether they are also citizens of the United States or resident aliens) are prohibited by applicable law, the Committee may establish a separate Offering (a  “ Non-United States Offering ” ) covering all Eligible Employees of one or more Participating Companies subject to such prohibition on payroll deductions. The Non-United States Offering shall provide another method for payment of the Purchase Price with such terms and conditions as shall be administratively convenient and comply with applicable law. On each Purchase Date of the Offering Period applicable to a Non-United States Offering, each Participant who has not withdrawn from the Plan and whose participation in such Offering Period has not otherwise terminated before such Purchase Date shall automatically acquire pursuant to the exercise of the Participant’s Purchase Right a number of whole shares of Stock determined in accordance with Section 11.1(a) to the extent of the total amount of the Participant’s Plan account balance accumulated during the Offering Period in accordance with the method established by the Committee and not previously applied toward the purchase of Stock. However, in no event shall the number of shares purchased by a Participant during such Offering Period exceed the number of shares subject to the Participant’s Purchase Right. The Company shall refund to a Participant in a Non-United States Offering in accordance with Section 11.4 any excess Purchase Price payment received from such Participant.
11.2 Pro Rata Allocation of Shares. If the number of shares of Stock which might be purchased by all Participants on a Purchase Date exceeds the number of shares of Stock available in the Plan as provided in Section 4.1 or the maximum aggregate number of shares of Stock that may be purchased on such Purchase Date pursuant to a limit established by the Committee pursuant to Section 8.1, the Company shall make a pro rata allocation of the shares available in as uniform a manner as practicable and as the Company determines to be equitable. Any fractional share resulting from such pro rata allocation to any Participant shall be disregarded.
 
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11.3 Delivery of Title to Shares. Subject to any governing rules or regulations, as soon as practicable after each Purchase Date, the Company shall issue or cause to be issued to or for the benefit of each Participant the shares of Stock acquired by the Participant on such Purchase Date by means of one or more of the following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form.
11.4 Return of Plan Account Balance. Any cash balance remaining in a Participant’s Plan account following any Purchase Date shall be refunded to the Participant as soon as practicable after such Purchase Date. However, if the cash balance to be returned to a Participant pursuant to the preceding sentence is less than the amount that would have been necessary to purchase an additional whole share of Stock on such Purchase Date, the Company may retain the cash balance in the Participant’s Plan account to be applied toward the purchase of shares of Stock in the subsequent Purchase Period or Offering Period.
11.5 Tax Withholding. At the time a Participant’s Purchase Right is exercised, in whole or in part, or at the time a Participant disposes of some or all of the shares of Stock he or she acquires under the Plan, the Participant shall make adequate provision for the federal, state, local and foreign taxes (including social insurance), if any, required to be withheld by any Participating Company upon exercise of the Purchase Right or upon such disposition of shares, respectively. A Participating Company may, but shall not be obligated to, withhold from the Participant’s compensation the amount necessary to meet such withholding obligations.
11.6 Expiration of Purchase Right. Any portion of a Participant’s Purchase Right remaining unexercised after the end of the Offering Period to which the Purchase Right relates shall expire immediately upon the end of the Offering Period.
11.7 Provision of Reports and Stockholder Information to Participants. Each Participant who has exercised all or part of his or her Purchase Right shall receive, as soon as practicable after the Purchase Date, a report of such Participant’s Plan account setting forth the total amount credited to his or her Plan account prior to such exercise, the number of shares of Stock purchased, the Purchase Price for such shares, the date of purchase and the cash balance, if any, remaining immediately after such purchase that is to be refunded or retained in the Participant’s Plan account pursuant to Section 11.4. The report required by this Section may be delivered in such form and by such means, including by electronic transmission, as the Company may determine. In addition, each Participant shall be provided information concerning the Company equivalent to that information provided generally to the Company’s common stockholders.
12.WITHDRAWALFROM PLAN.
12.1 Voluntary Withdrawal from the Plan. A Participant may withdraw from the Plan by signing and delivering to the Company office or representative designated by the Company (including a third-party administrator designated by the Company) a written or electronic notice of withdrawal on a form provided by the Company for this purpose. Such
 
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withdrawal may be elected at any time prior to the end of an Offering Period; provided, however, that if a Participant withdraws from the Plan after a Purchase Date, the withdrawal shall not affect shares of Stock acquired by the Participant on such Purchase Date. A Participant who voluntarily withdraws from the Plan is prohibited from resuming participation in the Plan in the same Offering from which he or she withdrew, but may participate in any subsequent Offering by again satisfying the requirements of Sections 5 and 7.1. The Company may impose, from time to time, a requirement that the notice of withdrawal from the Plan be on file with the Company office or representative designated by the Company for a reasonable period prior to the effectiveness of the Participant’s withdrawal.
12.2 Return of Plan Account Balance. Upon a Participant’s voluntary withdrawal from the Plan pursuant to Section 12.1, the Participant’s accumulated Plan account balance which has not been applied toward the purchase of shares of Stock shall be refunded to the Participant as soon as practicable after the withdrawal, without the payment of any interest, and the Participant’s interest in the Plan and the Offering shall terminate. Such amounts to be refunded in accordance with this Section may not be applied to any other Offering under the Plan.
13.TERMINATIONOF EMPLOYMENTOR ELIGIBILITY.
Upon a Participant’s ceasing, prior to a Purchase Date, to be an Employee of the Participating Company Group for any reason, including retirement, disability or death, or upon the failure of a Participant to remain an Eligible Employee, the Participant’s participation in the Plan shall terminate immediately. In such event, the Participant’s Plan account balance which has not been applied toward the purchase of shares of Stock shall, as soon as practicable, be returned to the Participant or, in the case of the Participant’s death, to the Participant’s beneficiary designated in accordance with Section 20, if any, or legal representative, and all of the Participant’s rights under the Plan shall terminate. Interest shall not be paid on sums returned pursuant to this Section 13. A Participant whose participation has been so terminated may again become eligible to participate in the Plan by satisfying the requirements of Sections 5 and 7.1.
14.EFFECTOF CHANGEIN CONTROLON PURCHASE RIGHTS.
In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or parent thereof, as the case may be (the “ Acquiring Corporation ” ), may, without the consent of any Participant, assume or continue the Company’s rights and obligations under outstanding Purchase Rights or substitute substantially equivalent purchase rights for the Acquiring Corporation’s stock. If the Acquiring Corporation elects not to assume, continue or substitute for the outstanding Purchase Rights, the Purchase Date of the then current Offering Period shall be accelerated to a date before the date of the Change in Control specified by the Committee, but the number of shares of Stock subject to outstanding Purchase Rights shall not be adjusted. All Purchase Rights which are neither assumed or continued by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control.
 
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15.NONTRANSFERABILITYOF PURCHASE RIGHTS.
Neither payroll deductions or other amounts credited to a Participant’s Plan account nor a Participant’s Purchase Right may be assigned, transferred, pledged or otherwise disposed of in any manner other than as provided by the Plan or by will or the laws of descent and distribution. (A beneficiary designation pursuant to Section 20 shall not be treated as a disposition for this purpose.) Any such attempted assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw from the Plan as provided in Section 12.1. A Purchase Right shall be exercisable during the lifetime of the Participant only by the Participant.
16.COMPLIANCEWITH SECURITIES LAW.
The issuance of shares under the Plan shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. A Purchase Right may not be exercised if the issuance of shares upon such exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any securities exchange or market system upon which the Stock may then be listed. In addition, no Purchase Right may be exercised unless (a) a registration statement under the Securities Act shall at the time of exercise of the Purchase Right be in effect with respect to the shares issuable upon exercise of the Purchase Right, or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Purchase Right may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of a Purchase Right, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation, and to make any representation or warranty with respect thereto as may be requested by the Company.
17.RIGHTSASA STOCKHOLDERAND EMPLOYEE.
A Participant shall have no rights as a stockholder by virtue of the Participant’s participation in the Plan until the date of the issuance of the shares of Stock purchased pursuant to the exercise of the Participant’s Purchase Right (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.3. Nothing herein shall confer upon a Participant any right to continue in the employ of the Participating Company Group or interfere in any way with any right of the Participating Company Group to terminate the Participant’s employment at any time.
 
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18.NOTIFICATIONOF DISPOSITIONOF SHARES.
The Company may require the Participant to give the Company prompt notice of any disposition of shares of Stock acquired by exercise of a Purchase Right. The Company may require that until such time as a Participant disposes of shares of Stock acquired upon exercise of a Purchase Right, the Participant shall hold all such shares in the Participant’s name until the later of two years after the date of grant of such Purchase Right or one year after the date of exercise of such Purchase Right. The Company may direct that the certificates evidencing shares of Stock acquired by exercise of a Purchase Right refer to such requirement to give prompt notice of disposition.
19.LEGENDS.
The Company may at any time place legends or other identifying symbols referencing any applicable federal, state or foreign securities law restrictions or any provision convenient in the administration of the Plan on some or all of the certificates representing shares of Stock issued under the Plan. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to a Purchase Right in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include but shall not be limited to the following:
“THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER HEREOF. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE).”
20.DESIGNATIONOF BENEFICIARY.
20.1 Designation Procedure. Subject to local laws and procedures, a Participant may file a written designation of a beneficiary who is to receive (a) shares and cash, if any, from the Participant’s Plan account if the Participant dies subsequent to a Purchase Date but prior to delivery to the Participant of such shares and cash, or (b) cash, if any, from the Participant’s Plan account if the Participant dies prior to the exercise of the Participant’s Purchase Right. If a married Participant designates a beneficiary other than the Participant’s spouse, the effectiveness of such designation may be subject to the consent of the Participant’s spouse. A Participant may change his or her beneficiary designation at any time by written notice to the Company.
20.2 Absence of Beneficiary Designation. If a Participant dies without an effective designation pursuant to Section 20.1 of a beneficiary who is living at the time of the
 
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Participant’s death, the Company shall deliver any shares or cash credited to the Participant’s Plan account to the Participant’s legal representative or as otherwise required by applicable law.
21.NOTICES.
All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
22.AMENDMENTOR TERMINATIONOFTHE PLAN.
The Committee may at any time amend, suspend or terminate the Plan, except that (a) no such amendment, suspension or termination shall affect Purchase Rights previously granted under the Plan unless expressly provided by the Committee, and (b) no such amendment, suspension or termination may adversely affect a Purchase Right previously granted under the Plan without the consent of the Participant, except to the extent permitted by the Plan or as may be necessary to qualify the Plan as an employee stock purchase plan pursuant to Section 423 of the Code or to comply with any applicable law, regulation or rule. In addition, an amendment to the Plan must be approved by the stockholders of the Company within twelve (12) months of the adoption of such amendment if such amendment would authorize the sale of more shares than are then authorized for issuance under the Plan or would change the definition of the corporations that may be designated by the Committee as Participating Companies. Notwithstanding the foregoing, in the event that the Committee determines that continuation of the Plan or an Offering would result in unfavorable financial accounting consequences to the Company, the Committee may, in its discretion and without the consent of any Participant, including with respect to an Offering Period then in progress: (i) terminate the Plan or any Offering Period, (ii) accelerate the Purchase Date of any Offering Period, (iii) reduce the discount or the method of determining the Purchase Price in any Offering Period (e.g., by determining the Purchase Price solely on the basis of the Fair Market Value on the Purchase Date), (iv) reduce the maximum number of shares of Stock that may be purchased in any Offering Period, or (v) take any combination of the foregoing actions.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets forth the MagnaChip Semiconductor Corporation 2011 Employee Stock Purchase Plan as duly adopted by the Board on [              ], 2011.

 	
John McFarland, Corporate Secretary	
 
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PLAN HISTORY

[            ], 2011	  	Board of Directors of MagnaChip Semiconductor LLC adopts Plan with a reserve of [            ] shares (subject to increases and other adjustments as provided by the Plan), subject to approval by the stockholders of MagnaChip Semiconductor Corporation following the Conversion and to be effective upon the registration of the Company’s common stock under Section 12 of the Exchange Act.	
 	 	
[            ], 2011	  	Effective date of statutory conversion of MagnaChip Semiconductor LLC into the Company.	
[            ], 2011	  	Plan approved by the stockholders of MagnaChip Semiconductor Corporation.	
 	 	
[            ], 2011	  	Effective date of registration of Stock under Section 12 of the Exchange Act.	
[            ], 2011	  	Registration Date (date on which initial Form S-8 registration is effective).	

APPENDIX A
Participating Companies
1. The following Participating Companies are designated as participating in the US Offering:
 
 	•	 	MagnaChip Semiconductor Corporation	
 
 	•	 	MagnaChip Semiconductor, Inc. California	
 
 	•	 	MagnaChip Semiconductor SA Holdings LLC Delaware	
 
 	•	 	MagnaChip Semiconductor Finance Company Delaware	
2. The following Participating Companies are designated as participating in the Non-US Offering:
 
 	•	 	MagnaChip Semiconductor, Ltd. Korea	
 
 	•	 	MagnaChip Semiconductor Limited Taiwan	
 
 	•	 	MagnaChip Semiconductor Inc. Japan	
 
 	•	 	MagnaChip Semiconductor Holding Company Limited British Virgin Islands	
 
 	•	 	MagnaChip Semiconductor (Shanghai) Company Limited China	
3. The following Participating Companies are designated as participating in the Non-US Offering (EU):
 
 	•	 	MagnaChip Semiconductor S.A. Luxembourg	
 
 	•	 	MagnaChip Semiconductor B.V. The Netherlands	
 
 	•	 	MagnaChip Semiconductor Limited United Kingdom	
The following provision shall apply to those entities located in the European Union and European Economic Area which are participating in the Non-US Offering (EU) and such provision shall be considered a sub-plan to the Plan:
Section 5.1 of the Plan, which defines “Employees Eligible to Participate” in the Plan shall include Employees who are customarily employed for less than 20 hours per week and not more than five (5) months per year to accommodate local law requirements.
4. The following Participating Company is designated as participanting in the Non-US Offering (Hong Kong):
 
 	•	 	MagnaChip Semiconductor Limited Hong Kong	
The following provision shall apply to the entity located in Hong Kong which is participating in the Non-U.S. Offering (Hong Kong):

Pursuant to Section 11.1(c) of the Plan, Eligible Employees of the Participating Company in the Non-U.S. Offering (Hong Kong) shall participant in the Plan via check, automatic debit and/or other non payroll deduction method pursuant in accordance with procedures designated by the Committee.

APPENDIX B
FORMS OF
ENROLLMENT/CHANGE NOTICE/WITHDRAWAL FORM
AND
SUBSCRIPTION AGREEMENT

Exhibit 10.55
MAGNACHIP SEMICONDUCTOR CORPORATION
FORM OF STOCK OPTION AGREEMENT
(For US Participant)
MagnaChip Semiconductor Corporation (the “Company”) has granted to the Participant named in the Notice of Grant of Stock Option (the “ Grant Notice ”) to which this Stock Option Agreement (the “ Option Agreement ”) is attached an option (the “ Option ”) to purchase certain shares of Stock upon the terms and conditions set forth in the Grant Notice and this Option Agreement. The Option has been granted pursuant to and shall in all respects be subject to the terms and conditions of the MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan (the “ Plan ”), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of, and represents that the Participant has read and is familiar with, the Grant Notice, this Option Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of shares issuable pursuant to the Option (the “ Plan Prospectus ”), (b) accepts the Option subject to all of the terms and conditions of the Grant Notice, this Option Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Option Agreement or the Plan.
 
 	1.	DEFINITIONSAND CONSTRUCTION.	
1.1        Definitions.  Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
1.2        Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Option Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
 
 	2.	TAX CONSEQUENCES.	
2.1        Tax Status of Option.  This Option is intended to have the tax status designated in the Grant Notice.
(a)    Incentive Stock Option.  If the Grant Notice so designates, this Option is intended to be an Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not represent or warrant that this Option qualifies as such. The Participant should consult with the Participant’s own tax advisor regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. (NOTE TO PARTICIPANT: If the Option is exercised more than three (3) months after the date on which you cease to be an Employee (other than by reason of your death or permanent and total disability as defined in Section 22(e)(3) of the Code), the Option will be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required by Section 422 of the Code.)

(b)    Nonstatutory Stock Option.  If the Grant Notice so designates, this Option is intended to be a Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning of Section 422(b) of the Code.
2.2        ISO Fair Market Value Limitation.  If the Grant Notice designates this Option as an Incentive Stock Option, then to the extent that the Option (together with all Incentive Stock Options granted to the Participant under all stock option plans of the Participating Company Group, including the Plan) becomes exercisable for the first time during any calendar year for shares having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this Section 2.2, options designated as Incentive Stock Options are taken into account in the order in which they were granted, and the Fair Market Value of stock is determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 2.2, such different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment to the Code. If the Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 2.2, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. (NOTE TO PARTICIPANT: If the aggregate Exercise Price of the Option (that is, the Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan or any other stock option plan of the Participating Company Group) is greater than $100,000, you should contact the Chief Financial Officer of the Company to ascertain whether the entire Option qualifies as an Incentive Stock Option.)
 
 	3.	ADMINISTRATION.	
All questions of interpretation concerning the Grant Notice, this Option Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Option shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Option, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Option or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Option. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
 
 	4.	EXERCISEOFTHE OPTION.	
4.1        Right to Exercise.  Except as otherwise provided herein, the Option shall be exercisable on and after the Initial Vesting Date and prior to the termination of the Option (as

provided in Section 5) in an amount not to exceed the number of Vested Shares less the number of shares previously acquired upon exercise of the Option. In no event shall the Option be exercisable for more shares than the Number of Option Shares, as adjusted pursuant to Section 9.
4.2        Method of Exercise.  Exercise of the Option shall be by means of electronic or written notice (the “ Exercise Notice ”) in a form authorized by the Company. An electronic Exercise Notice must be digitally signed or authenticated by the Participant in such manner as required by the notice and transmitted to the Company or an authorized representative of the Company (including a third-party administrator designated by the Company). In the event that the Participant is not authorized or is unable to provide an electronic Exercise Notice, the Option shall be exercised by a written Exercise Notice addressed to the Company, which shall be signed by the Participant and delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Company, or an authorized representative of the Company (including a third-party administrator designated by the Company). Each Exercise Notice, whether electronic or written, must state the Participant’s election to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Participant’s investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement. Further, each Exercise Notice must be received by the Company prior to the termination of the Option as set forth in Section 5 and must be accompanied by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased. The Option shall be deemed to be exercised upon receipt by the Company of such electronic or written Exercise Notice and the aggregate Exercise Price.
 
 	4.3	Payment of Exercise Price.	
(a)    Forms of Consideration Authorized. Except as otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check or in cash equivalent; (ii) if permitted by the Company and subject to the limitations contained in Section 4.3(b), by means of (1) a Cashless Exercise, (2) a Net-Exercise, or (3) a Stock Tender Exercise; or (iii) by any combination of the foregoing.
(b)    Limitations on Forms of Consideration. The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedure providing for payment of the Exercise Price through any of the means described below, including with respect to the Participant notwithstanding that such program or procedures may be available to others.
(i)        Cashless Exercise.  A “Cashless Exercise” means the delivery of a properly executed Exercise Notice together with irrevocable instructions to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with respect to shares of Stock acquired upon the exercise of the Option in an amount not less than the aggregate Exercise Price for such shares (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System).

(ii)    Net-Exercise.  A “Net-Exercise” means the delivery of a properly executed Exercise Notice electing a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to the Participant upon the exercise of the Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate Exercise Price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate Exercise Price not satisfied by such reduction in the number of whole shares to be issued. Following a Net-Exercise, the number of shares remaining subject to the Option, if any, shall be reduced by the sum of (1) the net number of shares issued to the Participant upon such exercise, and (2) the number of shares deducted by the Company for payment of the aggregate Exercise Price.
(iii)    Stock Tender Exercise.  A “Stock Tender Exercise” means the delivery of a properly executed Exercise Notice accompanied by (1) the Participant’s tender to the Company, or attestation to the ownership, in a form acceptable to the Company of whole shares of Stock having a Fair Market Value that does not exceed the aggregate Exercise Price for the shares with respect to which the Option is exercised, and (2) the Participant’s payment to the Company in cash of the remaining balance of such aggregate Exercise Price not satisfied by such shares’ Fair Market Value. A Stock Tender Exercise shall not be permitted if it would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. If required by the Company, the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.
 
 	4.4	Tax Withholding.	
(a)    In General.  At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by a Participating Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company Group, if any, which arise in connection with the Option. The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company Group have been satisfied by the Participant.
(b)    Withholding in Shares.  The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Company’s tax withholding obligations upon exercise of the Option by deducting from the shares of Stock otherwise issuable to the Participant upon such exercise a number of whole shares having a fair market value, as determined by the Company as of the date of exercise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates.
4.5        Beneficial Ownership of Shares; Certificate Registration.  The Participant hereby authorizes the Company, in its sole discretion, to deposit for the benefit of the Participant

with any broker with which the Participant has an account relationship of which the Company has notice any or all shares acquired by the Participant pursuant to the exercise of the Option. Except as provided by the preceding sentence, a certificate for the shares as to which the Option is exercised shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
4.6        Restrictions on Grant of the Option and Issuance of Shares.  The grant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
4.7        Fractional Shares.  The Company shall not be required to issue fractional shares upon the exercise of the Option.
 
 	5.	NONTRANSFERABILITYOFTHE OPTION.	
During the lifetime of the Participant, the Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. The Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Following the death of the Participant, the Option, to the extent provided in Section 7, may be exercised by the Participant’s legal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.
 
 	6.	TERMINATIONOFTHE OPTION.	
The Option shall terminate and may no longer be exercised after the first to occur of (a) the close of business on the Option Expiration Date, (b) the close of business on the last date for

exercising the Option following termination of the Participant’s Service as described in Section 7, or (c) a Change in Control to the extent provided in Section 8.
 
 	7.	EFFECTOF TERMINATIONOF SERVICE.	
7.1        Option Exercisability.  The Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period as determined below and thereafter shall terminate.
(a)  Disability.  If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
(b)  Death.  If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participant’s termination of Service.
(c)  Termination for Cause.  Notwithstanding any other provision of this Option Agreement to the contrary, if the Participant’s Service is terminated for Cause or if, following the Participant’s termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.
(d)  Other Termination of Service.  If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for Vested Shares by the Participant on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
7.2        Extension if Exercise Prevented by Law.  Notwithstanding the foregoing, other than termination of the Participant’s Service for Cause, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until the later of (a) thirty (30) days after the date such exercise first would no longer be prevented by such provisions, or (b) the end of the applicable time period under Section 7.1, but in any event no later than the Option Expiration Date.

 	8.	EFFECTOF CHANGEIN CONTROL.	
In the event of a Change in Control, except to the extent that the Committee determines to cash out the Option in accordance with Section 13.1(c) of the Plan, the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be (the  “Acquiror” ), may, subject to the applicable requirements and limitations of Section 409A and without the consent of the Participant, assume or continue in full force and effect the Company’s rights and obligations under all or any portion of the Option or substitute for all or any portion of the Option a substantially equivalent option for the Acquiror’s stock. For purposes of this Section, the Option or any portion thereof shall be deemed assumed if, following the Change in Control, the Option confers the right to receive, subject to the terms and conditions of the Plan and this Option Agreement, for each share of Stock subject to such portion of the Option immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise of the Option, for each share of Stock subject to the Option, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. The Option shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control to the extent that the Option is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised as of the time of the Change in Control.
 
 	9.	ADJUSTMENTSFOR CHANGESIN CAPITAL STRUCTURE.	
Subject to any required action by the stockholders of the Company and the requirements of Sections 409A and 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number, Exercise Price and kind of shares subject to the Option, in order to prevent dilution or enlargement of the Participant’s rights under the Option. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number and the Exercise Price shall be rounded up to the nearest whole cent. In no event may the Exercise Price be decreased to an amount less than the par value, if any, of the stock subject to the Option. Such adjustments shall be determined by the Committee, and its determination shall be final, binding and conclusive.

 	10.	RIGHTSASA STOCKHOLDER, DIRECTOR, EMPLOYEEOR CONSULTANT.	
The Participant shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 9. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term. Nothing in this Option Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service as a Director, an Employee or Consultant, as the case may be, at any time.
 
 	11.	NOTICEOF SALES UPON DISQUALIFYING DISPOSITION.	
The Participant shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, if the Grant Notice designates this Option as an Incentive Stock Option, the Participant shall (a) promptly notify the Chief Financial Officer of the Company if the Participant disposes of any of the shares acquired pursuant to the Option within one (1) year after the date the Participant exercises all or part of the Option or within two (2) years after the Date of Grant and (b) provide the Company with a description of the circumstances of such disposition. Until such time as the Participant disposes of such shares in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Participant shall hold all shares acquired pursuant to the Option in the Participant’s name (and not in the name of any nominee) for the one-year period immediately after the exercise of the Option and the two-year period immediately after Date of Grant. At any time during the one-year or two-year periods set forth above, the Company may place a legend on any certificate representing shares acquired pursuant to the Option requesting the transfer agent for the Company’s stock to notify the Company of any such transfers. The obligation of the Participant to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence.
 
 	12.	LEGENDS.	
The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:
“THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE

STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT DISQUALIFYING DISPOSITION DATE HERE]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”
 
 	13.	MISCELLANEOUS PROVISIONS.	
13.3        Termination or Amendment.  The Committee may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Participant unless such termination or amendment is necessary to comply with any applicable law or government regulation. No amendment or addition to this Option Agreement shall be effective unless in writing.
13.4        Further Instruments.  The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Option Agreement.
13.5        Binding Effect.  This Option Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
13.6        Delivery of Documents and Notices.  Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a)  Description of Electronic Delivery.  The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Option Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice and Exercise Notice called for by Section 4.2 to the Company or to such third party involved in administering the Plan as

the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.
(b)  Consent to Electronic Delivery. The Participant acknowledges that the Participant has read Section 13.4(a) of this Option Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice and Exercise Notice, as described in Section 13.4(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 13.4(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 13.4(a).
13.7        Integrated Agreement. The Grant Notice, this Option Agreement and the Plan shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein, the provisions of the Grant Notice, the Option Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and effect.
13.8        Applicable Law. This Option Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.
13.9        Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Exhibit 10.56
MAGNACHIP SEMICONDUCTOR CORPORATION
FORM OF STOCK OPTION AGREEMENT
(For Non-US Participant)
MagnaChip Semiconductor Corporation (the “Company”) has granted to the Participant named in the Notice of Grant of Stock Option (the “ Grant Notice ”) to which this Stock Option Agreement (the “ Option Agreement ”) is attached an option (the “ Option ”) to purchase certain shares of Stock upon the terms and conditions set forth in the Grant Notice and this Option Agreement. The Option has been granted pursuant to and shall in all respects be subject to the terms and conditions of the MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan (the “ Plan ”), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of, and represents that the Participant has read and is familiar with, the Grant Notice, this Option Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of shares issuable pursuant to the Option (the “ Plan Prospectus ”), (b) accepts the Option subject to all of the terms and conditions of the Grant Notice, this Option Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Option Agreement or the Plan.
 
 	1.	DEFINITIONSAND CONSTRUCTION.	
1.1  Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
1.2  Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Option Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
 
 	2.	CERTAIN CONDITIONSOFTHE OPTION.	
2.1  Compliance with Local Law. The Participant agrees that the Participant will not acquire shares pursuant to the Option, or transfer, assign, sell or otherwise deal in such shares, except in compliance with Local Law.
2.2  Employment Conditions. By accepting the Option, the Participant acknowledges and agrees that:
(a)  Any notice period mandated under Local Law shall not be treated as Service for the purpose of determining the vesting of the Option; and the Participant’s right to exercise the Option after termination of Service, if any, will be measured by the date of termination of the Participant’s active Service and will not be extended by any notice period mandated under Local Law. Subject to the foregoing and the provisions of the Plan, the Company, in its sole discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination.

(b) The vesting of the Option shall cease upon, and no shares shall become Vested Shares following, the Participant’s termination of Service for any reason except as may be explicitly provided by the Plan or this Option Agreement.
(c) The Plan is established voluntarily by the Company. It is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan or this Option Agreement.
(d) The grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options, even if Options have been granted repeatedly in the past.
(e) All decisions with respect to future Option grants, if any, will be at the sole discretion of the Company.
(f) The Participant’s participation in the Plan shall not create a right to further Service with any Participating Company and shall not interfere with the ability of any Participating Company to terminate the Participant’s Service at any time, with or without cause, insofar as permitted under Local Law.
(g) The Participant is voluntarily participating in the Plan.
(h) The Option and resulting shares, if any, are an extraordinary item that does not constitute compensation of any kind for Service of any kind rendered to any Participating Company, and which is outside the scope of the Participant’s employment contract, if any.
(i) The Option is not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
(j) In the event that the Participant is not an employee of the Company, the Option grant will not be interpreted to form an employment contract or relationship with the Company; and furthermore the Option grant will not be interpreted to form an employment contract with any other Participating Company.
(k) The future value of the underlying shares is unknown and cannot be predicted with certainty. If the underlying shares do not increase in value, the Option will have no value. If the Participant exercises the Option and obtains shares, the value of those shares acquired upon exercise may increase or decrease in value, even below the Exercise Price.
(l) In consideration of the grant of an Option, no claim or entitlement to compensation or damages arises from termination of the Option or diminution in value of the Option or shares purchased through exercise of the Option resulting from termination of the Participant’s Service (for any reason whether or not in breach of Local Law) and the Participant irrevocably releases the Company and each other Participating Company from any such claim that may arise. If, notwithstanding the foregoing, any such claim is found by a court of

competent jurisdiction to have arisen then, by signing this Option Agreement, the Participant shall be deemed irrevocably to have waived the Participant’s entitlement to pursue such a claim.
 
 	2.3	Data Privacy Consent.	
(a)  THE PARTICIPANTHEREBYEXPLICITLYANDUNAMBIGUOUSLYCONSENTSTOTHE COLLECTION ,  USE AND TRANSFER ,  IN ELECTRONIC OR OTHER FORM ,  OF THE  P ARTICIPANT ’ S PERSONAL DATA AS DESCRIBED IN THIS DOCUMENT BY AND AMONG THE MEMBERS OF THE P ARTICIPATING  C OMPANY  G ROUP FOR THE EXCLUSIVE PURPOSE OF IMPLEMENTING , ADMINISTERING AND MANAGING THE  P ARTICIPANT ’ S PARTICIPATION IN THE  P LAN .
(b)  THE PARTICIPANTUNDERSTANDSTHATTHE PARTICIPATING COMPANY GROUP HOLDS CERTAIN PERSONAL INFORMATION ABOUT THE  P ARTICIPANT ,  INCLUDING ,  BUT NOT LIMITED TO ,  THE  P ARTICIPANT ’ S NAME ,  HOME ADDRESS AND TELEPHONE NUMBER ,  DATE OF BIRTH , SOCIAL INSURANCE NUMBER OR OTHER IDENTIFICATION NUMBER ,  SALARY ,  NATIONALITY ,  JOB TITLE ,  ANY SHARES OR DIRECTORSHIPS HELD IN THE  C OMPANY ,  DETAILS OF ALL  O PTIONS OR ANY OTHER ENTITLEMENT TO SHARES AWARDED ,  CANCELED ,  EXERCISED ,  VESTED ,  UNVESTED OR OUTSTANDING IN THE  P ARTICIPANT ’ S FAVOR ,  FOR THE PURPOSE OF IMPLEMENTING , ADMINISTERING AND MANAGING THE  P LAN  (“D ATA ”). T HE  P ARTICIPANT UNDERSTANDS THAT  D ATA MAY BE TRANSFERRED TO ANY THIRD PARTIES ASSISTING IN THE IMPLEMENTATION , ADMINISTRATION AND MANAGEMENT OF THE  P LAN ,  THAT THESE RECIPIENTS MAY BE LOCATED IN THE  P ARTICIPANT ’ S COUNTRY OR ELSEWHERE ,  WHICH MAY INCLUDE AREAS OUTSIDE THE E UROPEAN  E CONOMIC AREA ,  AND THAT THE RECIPIENT ’ S COUNTRY MAY HAVE DIFFERENT DATA PRIVACY LAWS AND PROTECTIONS THAN THE  P ARTICIPANT ’ S COUNTRY . T HE P ARTICIPANT UNDERSTANDS THAT HE OR SHE MAY REQUEST A LIST WITH THE NAMES AND ADDRESSES OF ANY POTENTIAL RECIPIENTS OF THE  D ATA BY CONTACTING THE P ARTICIPANT ’ S LOCAL HUMAN RESOURCES REPRESENTATIVE . T HE  P ARTICIPANT AUTHORIZES THE RECIPIENTS TO RECEIVE ,  POSSESS ,  USE ,  RETAIN AND TRANSFER THE  D ATA ,  IN ELECTRONIC OR OTHER FORM ,  FOR THE PURPOSES OF IMPLEMENTING ,  ADMINISTERING AND MANAGING THE P ARTICIPANT ’ S PARTICIPATION IN THE  P LAN ,  INCLUDING ANY REQUISITE TRANSFER OF SUCH D ATA AS MAY BE REQUIRED TO A BROKER OR OTHER THIRD PARTY WITH WHOM THE  P ARTICIPANT MAY ELECT TO DEPOSIT ANY SHARES ACQUIRED UPON EXERCISE OF THE  O PTION . T HE P ARTICIPANT UNDERSTANDS THAT  D ATA WILL BE HELD ONLY AS LONG AS IS NECESSARY TO IMPLEMENT ,  ADMINISTER AND MANAGE THE  P ARTICIPANT ’ S PARTICIPATION IN THE  P LAN . T HE  P ARTICIPANT UNDERSTANDS THAT HE OR SHE MAY ,  AT ANY TIME ,  VIEW  D ATA ,  REQUEST ADDITIONAL INFORMATION ABOUT THE STORAGE AND PROCESSING OF  D ATA ,  REQUIRE ANY NECESSARY AMENDMENTS TO  D ATA OR REFUSE OR WITHDRAW THE CONSENTS HEREIN ,  IN ANY CASE WITHOUT COST ,  BY CONTACTING IN WRITING THE  P ARTICIPANT ’ S LOCAL HUMAN RESOURCES REPRESENTATIVE . T HE  P ARTICIPANT UNDERSTANDS ,  HOWEVER ,  THAT REFUSING OR WITHDRAWING THE  P ARTICIPANT ’ S CONSENT MAY AFFECT THE  P ARTICIPANT ’ S ABILITY TO PARTICIPATE IN THE  P LAN . F OR MORE INFORMATION ON THE CONSEQUENCES OF THE P ARTICIPANT ’ S REFUSAL TO CONSENT OR WITHDRAWAL OF CONSENT ,  THE  P ARTICIPANT UNDERSTANDS THAT HE OR SHE MAY CONTACT THE  P ARTICIPANT ’ S LOCAL HUMAN RESOURCES REPRESENTATIVE .

 	3.	ADMINISTRATION.	
All questions of interpretation concerning the Grant Notice, this Option Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Option shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Option, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Option or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Option. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
 
 	4.	EXERCISEOFTHE OPTION.	
4.1  Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable on and after the Initial Vesting Date and prior to the termination of the Option (as provided in Section 5) in an amount not to exceed the number of Vested Shares less the number of shares previously acquired upon exercise of the Option. In no event shall the Option be exercisable for more shares than the Number of Option Shares, as adjusted pursuant to Section 9.
4.2  Method of Exercise. Exercise of the Option shall be by means of electronic or written notice (the “Exercise Notice” ) in a form authorized by the Company. An electronic Exercise Notice must be digitally signed or authenticated by the Participant in such manner as required by the notice and transmitted to the Company or an authorized representative of the Company (including a third-party administrator designated by the Company). In the event that the Participant is not authorized or is unable to provide an electronic Exercise Notice, the Option shall be exercised by a written Exercise Notice addressed to the Company, which shall be signed by the Participant and delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Company, or an authorized representative of the Company (including a third-party administrator designated by the Company). Each Exercise Notice, whether electronic or written, must state the Participant’s election to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Participant’s investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement. Further, each Exercise Notice must be received by the Company prior to the termination of the Option as set forth in Section 5 and must be accompanied by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased. The Option shall be deemed to be exercised upon receipt by the Company of such electronic or written Exercise Notice and the aggregate Exercise Price.

 	4.3	Payment of Exercise Price.	
(a)  Forms of Consideration Authorized. Except as otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check or in cash equivalent; (ii) if permitted by the Company and subject to the limitations contained in Section 4.3(b), by means of (1) a Cashless Exercise, or (2) a Net-Exercise; or (iii) by any combination of the foregoing.
(b)  Limitations on Forms of Consideration. The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedure providing for payment of the Exercise Price through any of the means described below, including with respect to the Participant notwithstanding that such program or procedures may be available to others.
(i)  Cashless Exercise. A “Cashless Exercise” means the delivery of a properly executed Exercise Notice together with irrevocable instructions to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with respect to shares of Stock acquired upon the exercise of the Option in an amount not less than the aggregate Exercise Price for such shares (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System).
(ii)  Net-Exercise. A “Net-Exercise” means the delivery of a properly executed Exercise Notice electing a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to the Participant upon the exercise of the Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate Exercise Price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate Exercise Price not satisfied by such reduction in the number of whole shares to be issued. Following a Net-Exercise, the number of shares remaining subject to the Option, if any, shall be reduced by the sum of (1) the net number of shares issued to the Participant upon such exercise, and (2) the number of shares deducted by the Company for payment of the aggregate Exercise Price.
 
 	4.4	Tax Withholding.	
Regardless of any action the Company or the Participant’s employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“ Tax-Related Items ”), the Participant acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by the Participant is and remains the Participant’s responsibility and that the Company and or the Employer (a) make no representations nor undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this grant of Options, including the grant, vesting and exercise of Options, delivery of Shares and/or cash related to such Options or the subsequent sale of any Shares acquired pursuant to such Options and (b) do not commit to structure the terms or any aspect of this grant of Options to reduce or eliminate the Participant’s liability for Tax-Related Items. The Participant shall pay the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of the Participant’s

participation in the Plan or the Participant’s receipt of Options that cannot be satisfied by the means described below. Further, if the Participant is subject to tax in more than one jurisdiction, the Participant acknowledges that the Company and/or Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. The Company may refuse to deliver the shares if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items.
Prior to the taxable or tax withholding event, as applicable, the Participant shall pay, or make adequate arrangements satisfactory to the Company or to the Employer (in their sole discretion) to satisfy all Tax-Related Items. In this regard, the Participant authorizes the Company or Employer to withhold all applicable Tax-Related Items legally payable by the Participant by (1) withholding a number of shares otherwise deliverable equal to the Retained Share Amount (as defined below), (2) withholding from the Participant’s wages or other cash compensation paid by the Company and/or Employer; and/or (3) withholding from proceeds of the sale of shares acquired upon settlement of the Options (e.g. through cashless exercise), either through a voluntary sale or through a sale arranged by the Company (on the Participant’s behalf pursuant to this authorization), to the extent permitted by the Administrator. The “Retained Share Amount” shall mean a number of shares equal to the quotient of the minimum statutory tax withholding obligation of the Company triggered by the Options on the relevant date, divided by the Fair Market Value of one share on the relevant date or as otherwise provided in the Plan. If the obligation for Tax-Related Items is satisfied by withholding a number of shares as described herein, the Participant understands that he or she will be deemed to have been issued the full number of applicable shares, notwithstanding that a number of shares are held back solely for the purpose of paying the Tax-Related Items.
Participant acknowledges and understands that Participant should consult a tax adviser regarding Participant’s tax obligations.
4.5  Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company, in its sole discretion, to deposit for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice any or all shares acquired by the Participant pursuant to the exercise of the Option. Except as provided by the preceding sentence, a certificate for the shares as to which the Option is exercised shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
4.6  Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of United States federal, state and Local Law with respect to such securities. The Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable United States federal, state or non-U.S. securities laws, or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration

requirements of the Securities Act. THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, or the impracticality of doing so, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
4.7  Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of the Option.
 
 	5.	NONTRANSFERABILITYOFTHE OPTION.	
During the lifetime of the Participant, the Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. The Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Following the death of the Participant, the Option, to the extent provided in Section 7, may be exercised by the Participant’s legal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.
 
 	6.	TERMINATIONOFTHE OPTION.	
The Option shall terminate and may no longer be exercised after the first to occur of (a) the close of business on the Option Expiration Date, (b) the close of business on the last date for exercising the Option following termination of the Participant’s Service as described in Section 7, or (c) a Change in Control to the extent provided in Section 8.
 
 	7.	EFFECTOF TERMINATIONOF SERVICE.	
7.1  Option Exercisability. The Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period as determined below and thereafter shall terminate.
(a)  Disability. If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.

(b)  Death. If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participant’s termination of Service.
(c)  Termination for Cause. Notwithstanding any other provision of this Option Agreement to the contrary, if the Participant’s Service is terminated for Cause or if, following the Participant’s termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.
(d)  Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for Vested Shares by the Participant on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
7.2  Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than termination of the Participant’s Service for Cause, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until the later of (a) thirty (30) days after the date such exercise first would no longer be prevented by such provisions, or (b) the end of the applicable time period under Section 7.1, but in any event no later than the Option Expiration Date.
 
 	8.	EFFECTOF CHANGEIN CONTROL.	
In the event of a Change in Control, except to the extent that the Committee determines to cash out the Option in accordance with Section 13.1(c) of the Plan, the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be (the “ Acquiror ”), may, without the consent of the Participant, assume or continue in full force and effect the Company’s rights and obligations under all or any portion of the Option or substitute for all or any portion of the Option a substantially equivalent option for the Acquiror’s stock. For purposes of this Section, the Option or any portion thereof shall be deemed assumed if, following the Change in Control, the Option confers the right to receive, subject to the terms and conditions of the Plan and this Option Agreement, for each share of Stock subject to such portion of the Option immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to

be received upon the exercise of the Option, for each share of Stock subject to the Option, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. The Option shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control to the extent that the Option is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised as of the time of the Change in Control.
 
 	9.	ADJUSTMENTSFOR CHANGESIN CAPITAL STRUCTURE.	
Subject to any required action by the stockholders of the Company, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number, Exercise Price and kind of shares subject to the Option, in order to prevent dilution or enlargement of the Participant’s rights under the Option. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number and the Exercise Price shall be rounded up to the nearest whole cent. In no event may the Exercise Price be decreased to an amount less than the par value, if any, of the stock subject to the Option. Such adjustments shall be determined by the Committee, and its determination shall be final, binding and conclusive.
 
 	10.	RIGHTSASA STOCKHOLDER, DIRECTOR, EMPLOYEEOR CONSULTANT.	
The Participant shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 9. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term unless otherwise required under applicable law. Nothing in this Option Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service as a Director, an Employee or Consultant, as the case may be, at any time.
 
 	11.	LEGENDS.	
The Company may at any time place legends referencing any applicable United States federal, state or non-U.S. securities law, including Local Law, restrictions on all

certificates representing shares of stock subject to the provisions of this Option Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Participant in order to carry out the provisions of this Section.
 
 	12.	MISCELLANEOUS PROVISIONS.	
12.1  Termination or Amendment. The Committee may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Participant unless such termination or amendment is necessary to comply with any applicable law or government regulation. No amendment or addition to this Option Agreement shall be effective unless in writing.
12.2  Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Option Agreement.
12.3  Binding Effect. This Option Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
12.4  Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or non-U.S. postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a)  Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Option Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice and Exercise Notice called for by Section 4.2 to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.
(b)  Consent to Electronic Delivery. The Participant acknowledges that the Participant has read Section 12.4(a) of this Option Agreement and consents to the electronic

delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice and Exercise Notice, as described in Section 12.4(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 12.4(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 12.4(a).
12.5 Integrated Agreement. The Grant Notice, this Option Agreement and the Plan shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein, the provisions of the Grant Notice, the Option Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and effect.
12.6 Country-Specific Terms and Conditions. Notwithstanding any other provision of this Option Agreement to the contrary, the Option shall be subject to the specific terms and conditions, if any, set forth in the Appendix to this Option Agreement which are applicable to the Participant’s country of residence, the provisions of which are incorporated in and constitute part of this Option Agreement. Moreover, if the Participant relocates to one of the countries included in the Appendix, the specific terms and conditions applicable to such country will apply to the Option to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan or this Option Agreement.
12.7 Applicable Law. Except as provided pursuant to Section 12.6, this Option Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties as evidenced by this Option Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of the County of Santa Clara, California, or the federal courts of the United States for the Northern District of California, and no other courts, where this Option Agreement is made and/or performed.
12.8 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

APPENDIX
ADDITIONAL TERMS AND CONDITIONS OF
MAGNACHIP SEMICONDUCTOR CORPORATION
STOCK OPTION AGREEMENT
FOR NON-US PARTICIPANTS
TERMS AND CONDITIONS
This Appendix, which is part of the Agreement, includes additional terms and conditions of the Agreement that will apply to Participant if Participant is resident in the countries listed below. Capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan and the Agreement.
NOTIFICATIONS
This Appendix also includes information regarding exchange control and certain other issues of which Participant should be aware with respect to participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of January 2011. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the information in this Appendix as the only source of information relating to the consequences of participation in the Plan because such information may be out-of-date when Participant’s Options vest and/or Participant sells any shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to Participant’s particular situation. As a result, the Company is not in a position to assure Participant of any particular result. Participant is therefore advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation.
Finally, if Participant is a citizen or resident of a country other than that in which Participant is currently working, the information contained herein may not apply to Participant.
COUNTRY-SPECIFIC LANGUAGE
Below please find country specific language that applies to Hong Kong, Korea, Japan, Taiwan, and the UK.
HONG KONG
Terms and Conditions
Securities Law Notice: The Options and any shares issued pursuant to the Options do not constitute a public offering of securities under Hong Kong law and are available only to employees of the Company and Participating Companies. The Agreement, including this Appendix, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of

securities under the applicable securities legislation in Hong Kong, nor have the documents been reviewed by any regulatory authority in Hong Kong. The Options and any related documentation are intended only for the personal use of each eligible employee of the Company and Participating Companies and may not be distributed to any other person. If Participant has any doubt about any of the contents of the Agreement, including this Appendix, or the Plan, Participant should obtain independent professional advice.
Notifications
There are no country-specific provisions.
JAPAN
Terms and Conditions
There are no country-specific provisions.
Notifications
Exchange Control Information. If Participant acquires shares valued at more than ¥100,000 in a single transaction, Participant must file a Securities Acquisition Report with the Ministry of Finance through the Bank of Japan within 20 days of the acquisition of the shares. In addition, if Participant pays more than ¥30,000,000 in a single transaction for the purchase of shares at exercise of the Options, Participant must file a Payment Report with the Ministry of Finance through the Bank of Japan by the 20th day of the month following the month in which the payment was made. The precise reporting requirements vary depending on whether the relevant payment is made through a bank in Japan. A Payment Report is required independently of a Securities Acquisition Report. Therefore, if the total amount that Participant pays in a one-time transaction to exercise the Options and purchases shares exceeding ¥100,000,000, Participant must file both a Securities Acquisition Report and a Payment Report.
SOUTH KOREA
Terms and Conditions
There are no country-specific provisions.
Notifications
Exchange Control Information. To remit funds out of South Korea to exercise the Options by means of a cash exercise method, Participant must obtain confirmation of the remittance by a foreign exchange bank in South Korea. This is an automatic procedure (i.e., the bank does not need to approve the remittance) and the process should not take more than a single day. Participant likely will need to present to the bank processing the truncation supporting documentation evidencing the nature of the remittance. If Participant receives US$500,000 or more from the sale of shares, Korean exchange control laws require Participant to repatriate the proceeds to South Korea within 18 months of sale.

TAIWAN
Terms and Conditions
There are no country-specific provisions.
Notifications
Exchange Control Information. Taiwan’s foreign exchange control regulations may have an impact on the granting and exercise of Participant’s Options as well as the repatriation of capital gains realized from holding or the sale of shares. Under current foreign exchange regulations, a Taiwanese resident can remit up to US $5 million (or equivalent amount of other foreign currencies) per year into or out of Taiwan without prior approval from the Taiwan Central Bank.
If the transaction amount is TWD500,000 or more in a single transaction, Participant must submit a Foreign Exchange Transaction Form. If the transaction amount is US$500,000 or more in a single transaction, Participant must also provide supporting documentation to the satisfaction of the remitting bank.
UNITED KINGDOM
Terms and Conditions
UK Sub-Plan. The “UK Sub-Plan” contains additional terms and conditions that govern the Option. Participants should review that document carefully.
[Joint Election for Pass-Through of Employer National Insurance Contributions. The Participant acknowledges and agrees that participation in the Plan and the exercise of the Option is subject to the Participant’s prompt execution of the Inland Revenue approved joint election in the form provided by the Company or its subsidiary, transferring all or a portion of the Company’s (or its subsidiary’s) National Insurance Contribution liability to the Participant.]
Notifications
There are no country-specific provisions.

Exhibit 10.57
MAGNACHIP SEMICONDUCTOR CORPORATION
FORM OF RESTRICTED STOCK UNITS AGREEMENT
(For US Participant)
MagnaChip Semiconductor Corporation (the “Company”) has granted to the Participant named in the Notice of Grant of Restricted Stock Units (the  “Grant Notice” ) to which this Restricted Stock Units Agreement (the “Agreement” ) is attached an Award consisting of Restricted Stock Units subject to the terms and conditions set forth in the Grant Notice and this Agreement. The Participant shall be entitled to Dividend Equivalent Rights with respect to the Award.
The Award has been granted pursuant to and shall in all respects be subject to the terms conditions of the MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan (the  “Plan” ), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of and represents that the Participant has read and is familiar with the Grant Notice, this Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the shares issuable pursuant to the Award (the  “Plan Prospectus” ), (b) accepts the Award subject to all of the terms and conditions of the Grant Notice, this Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Agreement or the Plan.
 
 	1.	DEFINITIONSAND CONSTRUCTION.	
1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
(a) “Dividend Equivalent Units” mean additional Restricted Stock Units credited pursuant to Section 3.3.
(b) “Units” mean the Restricted Stock Units originally granted pursuant to the Award and the Dividend Equivalent Units credited pursuant to the Award, as both shall be adjusted from time to time pursuant to Section 9.
1.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
 
 	2.	ADMINISTRATION.	
All questions of interpretation concerning the Grant Notice, this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the

Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
 
 	3.	THE AWARD.	
3.1  Grant of Units. On the Date of Grant, the Participant shall acquire, subject to the provisions of this Agreement, the Total Number of Restricted Stock Units set forth in the Grant Notice, subject to adjustment as provided in Section 3.3 and Section 9. Each Unit represents a right to receive on a date determined in accordance with the Grant Notice and this Agreement one (1) share of Stock.
3.2  No Monetary Payment Required. The Participant is not required to make any monetary payment (other than applicable tax withholding, if any) as a condition to receiving the Units or shares of Stock issued upon settlement of the Units, the consideration for which shall be past services actually rendered or future services to be rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Units.
3.3  Dividend Equivalent Units. On the date that the Company pays a cash dividend to holders of Stock generally, the Participant shall be credited with a number of additional whole Dividend Equivalent Units determined by dividing (a) the product of (i) the dollar amount of the cash dividend paid per share of Stock on such date and (ii) the total number of Restricted Stock Units and Dividend Equivalent Units previously credited to the Participant pursuant to the Award and which have not been settled or forfeited pursuant to the Company Reacquisition Right (as defined below) as of such date, by (b) the Fair Market Value per share of Stock on such date. Any resulting fractional Dividend Equivalent Unit shall be rounded to the nearest whole number. Such additional Dividend Equivalent Units shall be subject to the same terms and conditions and shall be settled or forfeited in the same manner and at the same time as the Restricted Stock Units originally subject to the Award with respect to which they have been credited.
 
 	4.	VESTINGOF UNITS.	
Units acquired pursuant to this Agreement shall become Vested Units as provided in the Grant Notice. Dividend Equivalent Units shall become Vested Units at the same time as the Restricted Stock Units originally subject to the Award with respect to which they have been credited. For purposes of determining the number of Vested Units following an Ownership Change Event, credited Service shall include all Service with any corporation which is a

Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after the Ownership Change Event.
 
 	5.	COMPANY REACQUISITION RIGHT.	
5.1  Grant of Company Reacquisition Right. Except to the extent expressly provided otherwise in an agreement betweeen the Participant and the Company, in the event that the Participant’s Service terminates for any reason or no reason, with or without cause, the Participant shall forfeit and the Company shall automatically reacquire all Units which are not, as of the time of such termination, Vested Units ( “Unvested Units” ), and the Participant shall not be entitled to any payment therefor (the  “Company Reacquisition Right” ).
5.2  Ownership Change Event, Dividends, Distributions and Adjustments. Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property, or any other adjustment upon a change in the capital structure of the Company as described in Section 9, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy, which shall be treated in accordance with Section 3.3) to which the Participant is entitled by reason of the Participant’s ownership of Unvested Units shall be immediately subject to the Company Reacquisition Right and included in the terms “Units” and “Unvested Units” for all purposes of the Company Reacquisition Right with the same force and effect as the Unvested Units immediately prior to the Ownership Change Event, dividend, distribution or adjustment, as the case may be. For purposes of determining the number of Vested Units following an Ownership Change Event, dividend, distribution or adjustment, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after any such event.
 
 	6.	SETTLEMENTOFTHE AWARD.	
6.1  Issuance of Shares of Stock. Subject to the provisions of Section 6.3 below, on or as soon as administratively practicable following the date upon which Units vest (such date, the “ Settlement Date ”), the Company shall issue to the Participant with respect to each such Vested Unit one (1) share of Stock. Shares of Stock issued in settlement of Units shall not be subject to any restriction on transfer other than any such restriction as may be required pursuant to Section 6.3, Section 7 or the Company’s Trading Compliance Policy.
6.2  Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company, in its sole discretion, to deposit any or all shares acquired by the Participant pursuant to the settlement of the Award with the Company’s transfer agent, including any successor transfer agent, to be held in book entry form, or to deposit such shares for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice. Except as provided by the foregoing, a certificate for the shares acquired by the Participant shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.

6.3  Restrictions on Grant of the Award and Issuance of Shares. The grant of the Award and issuance of shares of Stock upon settlement of the Award shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. No shares of Stock may be issued hereunder if the issuance of such shares would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any shares subject to the Award shall relieve the Company of any liability in respect of the failure to issue such shares as to which such requisite authority shall not have been obtained. As a condition to the settlement of the Award, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
6.4  Fractional Shares. The Company shall not be required to issue fractional shares upon the settlement of the Award.
 
 	7.	TAX WITHHOLDING.	
7.1  In General. At the time the Grant Notice is executed, or at any time thereafter as requested by a Participating Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company, if any, which arise in connection with the Award, the vesting of Units or the issuance of shares of Stock in settlement thereof. The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company have been satisfied by the Participant.
7.2  Assignment of Sale Proceeds. Subject to compliance with applicable law and the Company’s Trading Compliance Policy, if permitted by the Company, the Participant may satisfy the Participating Company’s tax withholding obligations in accordance with procedures established by the Company providing for delivery by the Participant to the Company or a broker approved by the Company of properly executed instructions, in a form approved by the Company, providing for the assignment to the Company of the proceeds of a sale with respect to some or all of the shares being acquired upon settlement of Units.
7.3  Withholding in Shares. The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Company’s tax withholding obligations by deducting from the shares of Stock otherwise deliverable to the Participant in settlement of the Award a number of whole shares having a fair market value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates.

 	8.	EFFECTOF CHANGEIN CONTROL.	
In the event of a Change in Control, except to the extent that the Committee determines to cash out the Award in accordance with Section 13.1(c) of the Plan, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the  “Acquiror” ), may, subject to the applicable requirements and limitations of Section 409A and without the consent of the Participant, assume or continue in full force and effect the Company’s rights and obligations with respect to all or any portion of the outstanding Units or substitute for all or any portion of the outstanding Units substantially equivalent rights with respect to the Acquiror’s stock. For purposes of this Section, a Unit shall be deemed assumed if, following the Change in Control, the Unit confers the right to receive, subject to the terms and conditions of the Plan and this Agreement, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled; provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon settlement of the Unit to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. The Award shall terminate and cease to be outstanding effective as of the time of consummation or the Change in Control to the extent that the Award is neither assumed or continued by the Acquiror in connection with the Change in Control nor settled as of the time of the Change in Control.
 
 	9.	ADJUSTMENTSFOR CHANGESIN CAPITAL STRUCTURE.	
Subject to any required action by the stockholders of the Company and the requirements of Section 409A of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number of Units subject to the Award and/or the number and kind of shares or other property to be issued in settlement of the Award, in order to prevent dilution or enlargement of the Participant’s rights under the Award. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” Any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy, which shall be treated in accordance with Section 3.3) to which Participant is entitled by reason of ownership of Units acquired pursuant to this Award will be immediately subject to the provisions of this Award on the same basis as all Units originally acquired hereunder. Any fractional Unit or share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number. Such adjustments shall be determined by the Committee, and its determination shall be final, binding and conclusive.

 	10.	RIGHTSASA STOCKHOLDER, DIRECTOR, EMPLOYEEOR CONSULTANT.	
The Participant shall have no rights as a stockholder with respect to any shares which may be issued in settlement of this Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 3.3 and Section 9. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term. Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service at any time.
 
 	11.	LEGENDS.	
The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to this Award in the possession of the Participant in order to carry out the provisions of this Section.
 
 	12.	COMPLIANCEWITH SECTION 409A.	
It is intended that any election, payment or benefit which is made or provided pursuant to or in connection with this Award that may result in Section 409A Deferred Compensation shall comply in all respects with the applicable requirements of Section 409A (including applicable regulations or other administrative guidance thereunder, as determined by the Committee in good faith) to avoid the unfavorable tax consequences provided therein for non-compliance. In connection with effecting such compliance with Section 409A, the following shall apply:
12.1  Separation from Service; Required Delay in Payment to Specified Employee. Notwithstanding anything set forth herein to the contrary, no amount payable pursuant to this Agreement on account of the Participant’s termination of Service which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the  “Section 409A Regulations” ) shall be paid unless and until the Participant has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that the Participant is a “specified employee” within the meaning of the Section 409A Regulations as of the date of the Participant’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of the Participant’s separation from service shall paid to the Participant before the date (the  “Delayed Payment Date” ) which is first day of the seventh month after the date of the Participant’s separation from service or, if earlier, the date of the Participant’s death following such separation from service. All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.

12.2  Other Delays in Payment. Neither the Participant nor the Company shall take any action to accelerate or delay the payment of any benefits under this Agreement in any manner which would not be in compliance with the Section 409A Regulations.
12.3  Amendments to Comply with Section 409A; Indemnification. Notwithstanding any other provision of this Agreement to the contrary, the Company is authorized to amend this Agreement, to void or amend any election made by the Participant under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by the Company, in its discretion, to be necessary or appropriate to comply with the Section 409A Regulations without prior notice to or consent of the Participant. The Participant hereby releases and holds harmless the Company, its directors, officers and stockholders from any and all claims that may arise from or relate to any tax liability, penalties, interest, costs, fees or other liability incurred by the Participant in connection with the Award, including as a result of the application of Section 409A.
12.4  Advice of Independent Tax Advisor. The Company has not obtained a tax ruling or other confirmation from the Internal Revenue Service with regard to the application of Section 409A to the Award, and the Company does not represent or warrant that this Agreement will avoid adverse tax consequences to the Participant, including as a result of the application of Section 409A to the Award. The Participant hereby acknowledges that he or she has been advised to seek the advice of his or her own independent tax advisor prior to entering into this Agreement and is not relying upon any representations of the Company or any of its agents as to the effect of or the advisability of entering into this Agreement.
 
 	13.	MISCELLANEOUS PROVISIONS.	
13.1  Termination or Amendment. The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may adversely affect the Participant’s rights under this Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation, including, but not limited to, Section 409A. No amendment or addition to this Agreement shall be effective unless in writing.
13.2  Nontransferability of the Award. Prior to the issuance of shares of Stock on the applicable Settlement Date, neither this Award nor any Units subject to this Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.
13.3  Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

13.4  Binding Effect. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
13.5  Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a)  Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.
(b)  Consent to Electronic Delivery. The Participant acknowledges that the Participant has read Section 13.5(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice, as described in Section 13.5(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 13.5(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 13.5(a).
13.6  Integrated Agreement. The Grant Notice, this Agreement and the Plan shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the

Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, this Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.
13.7  Applicable Law. This Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.
13.8  Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Exhibit 10.58
MAGNACHIP SEMICONDUCTOR CORPORATION
FORM OF RESTRICTED STOCK UNITS AGREEMENT
(For Non-US Participant)
MagnaChip Semiconductor Corporation (the “Company”) has granted to the Participant named in the Notice of Grant of Restricted Stock Units (the  “Grant Notice” ) to which this Restricted Stock Units Agreement (the  “Agreement” ) is attached an Award consisting of Restricted Stock Units subject to the terms and conditions set forth in the Grant Notice and this Agreement. The Participant shall be entitled to Dividend Equivalent Rights with respect to the Award.
The Award has been granted pursuant to and shall in all respects be subject to the terms conditions of the MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan (the  “Plan” ), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of and represents that the Participant has read and is familiar with the Grant Notice, this Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the shares issuable pursuant to the Award (the  “Plan Prospectus” ), (b) accepts the Award subject to all of the terms and conditions of the Grant Notice, this Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Agreement or the Plan.
 
 	1.	DEFINITIONSAND CONSTRUCTION.	
1.1   Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
(a)   “Dividend Equivalent Units” mean additional Restricted Stock Units credited pursuant to Section 4.3.
(b)   “Units” mean the Restricted Stock Units originally granted pursuant to the Award and the Dividend Equivalent Units credited pursuant to the Award, as both shall be adjusted from time to time pursuant to Section 10.
1.2   Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
 
 	2.	CERTAIN CONDITIONSOFTHE AWARD.	
2.1   Compliance with Local Law. The Participant agrees that the Participant will not acquire shares pursuant to the Award, or transfer, assign, sell or otherwise deal in such shares except in compliance with Local Law.

2.2  Employment Conditions. By accepting the Award, the Participant acknowledges and agrees that:
(a)  Any notice period mandated under Local Law shall not be treated as Service for the purpose of determining the vesting of the Award; and the Participant’s right to receive shares in settlement of the Award after termination of Service, if any, will be measured by the date of termination of the Participant’s active Service and will not be extended by any notice period mandated under Local Law. Subject to the foregoing and the provisions of the Plan, the Company, in its sole discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination.
(b)  The vesting of the Award shall cease upon, and no Units shall vest following the Participant’s termination of Service for any reason except as may be explicitly provided by the Plan or this Agreement.
(c)  The Plan is established voluntarily by the Company. It is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Agreement.
(d)  The grant of the Award is voluntary and occasional and does not create any contractual or other right to receive future grants of Awards, or benefits in lieu of Awards, even if Awards have been granted repeatedly in the past.
(e)  All decisions with respect to future Award grants, if any, will be at the sole discretion of the Company.
(f)  The Participant’s participation in the Plan shall not create a right to further Service with any Participating Company and shall not interfere with the ability of any Participating Company to terminate the Participant’s Service at any time, with or without cause, insofar as permitted under Local Law.
(g)  The Participant is voluntarily participating in the Plan.
(h)  The Award and resulting shares, if any, are an extraordinary item that does not constitute compensation of any kind for Service of any kind rendered to any Participating Company, and which is outside the scope of the Participant’s employment contract, if any.
(i)  The Award is not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
(j)  In the event that the Participant is not an employee of the Company, the Award grant will not be interpreted to form an employment contract or relationship with the Company; and furthermore the Award grant will not be interpreted to form an employment contract with any other Participating Company.

(k) The future value of the underlying shares is unknown and cannot be predicted with certainty. If the Participant obtains shares upon settlement of the Award, the value of those shares may increase or decrease.
(l) In consideration of the grant of an Award, no claim or entitlement to compensation or damages arises from termination of the Award or diminution in value of the Award or shares acquired upon settlement of the Award resulting from termination of the Participant’s Service (for any reason whether or not in breach of Local Law) and the Participant irrevocably releases the Company and each other Participating Company from any such claim that may arise. If, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen then, by signing this Agreement, the Participant shall be deemed irrevocably to have waived the Participant’s entitlement to pursue such a claim.
 
 	2.3	Data Privacy Consent.	
(a) THE PARTICIPANT HEREBY EXPLICITLY AND UNAMBIGUOUSLY CONSENTS TO THE C OLLECTION , U SE  A ND  T RANSFER , I N  E LECTRONIC  O R  O THER  F ORM , O F  T HE  P ARTICIPANT ’ S P ERSONAL  D ATA  A S  D ESCRIBED  I N  T HIS  D OCUMENT  B Y  A ND  A MONG  T HE  M EMBERS  O F  T HE P ARTICIPATING  C OMPANY  G ROUP  F OR  T HE  E XCLUSIVE  P URPOSE  O F  I MPLEMENTING , A DMINISTERING  A ND  M ANAGING  T HE  P ARTICIPANT ’ S  P ARTICIPATION  I N  T HE  P LAN .
(b) THE PARTICIPANT UNDERSTANDS THAT THE PARTICIPATING COMPANY GROUP H OLDS  C ERTAIN  P ERSONAL  I NFORMATION  A BOUT  T HE  P ARTICIPANT , I NCLUDING , B UT  N OT  L IMITED T O , T HE  P ARTICIPANT ’ S  N AME , H OME  A DDRESS  A ND  T ELEPHONE  N UMBER , D ATE  O F  B IRTH , S OCIAL  I NSURANCE  N UMBER  O R  O THER  I DENTIFICATION  N UMBER , S ALARY , N ATIONALITY , J OB T ITLE , A NY  S HARES  O R  D IRECTORSHIPS  H ELD  I N  T HE  C OMPANY , D ETAILS  O F  A LL  A WARDS  O R  A NY O THER  E NTITLEMENT  T O  S HARES  A WARDED , C ANCELED , E XERCISED , V ESTED , U NVESTED  O R O UTSTANDING  I N  T HE  P ARTICIPANT ’ S  F AVOR , F OR  T HE  P URPOSE  O F  I MPLEMENTING , A DMINISTERING  A ND  M ANAGING  T HE  P LAN  (“ DATA ”). T HE  P ARTICIPANT  U NDERSTANDS T HAT  D ATA  M AY  B E  T RANSFERRED  T O  A NY  T HIRD  P ARTIES  A SSISTING  I N  T HE  I MPLEMENTATION , A DMINISTRATION  A ND  M ANAGEMENT  O F  T HE  P LAN , T HAT  T HESE  R ECIPIENTS  M AY  B E  L OCATED  I N T HE  P ARTICIPANT ’ S  C OUNTRY  O R  E LSEWHERE , W HICH  M AY  I NCLUDE  A REAS  O UTSIDE  T HE E UROPEAN  E CONOMIC  A REA  A ND  T HAT  T HE  R ECIPIENT ’ S  C OUNTRY  M AY  H AVE  D IFFERENT D ATA  P RIVACY  L AWS  A ND  P ROTECTIONS  T HAN  T HE  P ARTICIPANT ’ S  C OUNTRY . T HE P ARTICIPANT  U NDERSTANDS  T HAT  H E  O R  S HE  M AY  R EQUEST  A L IST  W ITH  T HE  N AMES  A ND A DDRESSES  O F  A NY  P OTENTIAL  R ECIPIENTS  O F  T HE  D ATA  B Y  C ONTACTING  T HE P ARTICIPANT ’ S  L OCAL  H UMAN  R ESOURCES  R EPRESENTATIVE . T HE  P ARTICIPANT  A UTHORIZES T HE  R ECIPIENTS  T O  R ECEIVE , P OSSESS , U SE , R ETAIN  A ND  T RANSFER  T HE  D ATA , I N  E LECTRONIC  O R O THER  F ORM , F OR  T HE  P URPOSES  O F  I MPLEMENTING , A DMINISTERING  A ND  M ANAGING  T HE P ARTICIPANT ’ S  P ARTICIPATION  I N  T HE  P LAN , I NCLUDING  A NY  R EQUISITE  T RANSFER  O F  S UCH D ATA  A S  M AY  B E  R EQUIRED  T O  A B ROKER  O R  O THER  T HIRD  P ARTY  W ITH  W HOM  T HE  P ARTICIPANT M AY  E LECT  T O  D EPOSIT  A NY  S HARES  A CQUIRED  U PON  S ETTLEMENT  O F  T HE  A WARD . T HE P ARTICIPANT  U NDERSTANDS  T HAT  D ATA  W ILL  B E  H ELD  O NLY  A S  L ONG  A S  I S  N ECESSARY  T O I MPLEMENT , A DMINISTER  A ND  M ANAGE  T HE  P ARTICIPANT ’ S  P ARTICIPATION  I N  T HE  P LAN . T HE  P ARTICIPANT  U NDERSTANDS  T HAT  H E  O R  S HE  M AY , A T  A NY  T IME , V IEW  D ATA , R EQUEST A DDITIONAL  I NFORMATION  A BOUT  T HE

STORAGEANDPROCESSINGOF DATA, REQUIREANYNECESSARYAMENDMENTSTO DATAORREFUSE OR WITHDRAW THE CONSENTS HEREIN ,  IN ANY CASE WITHOUT COST ,  BY CONTACTING IN WRITING THE  P ARTICIPANT ’ S LOCAL HUMAN RESOURCES REPRESENTATIVE . T HE  P ARTICIPANT UNDERSTANDS ,  HOWEVER ,  THAT REFUSING OR WITHDRAWING THE  P ARTICIPANT ’ S CONSENT MAY AFFECT THE  P ARTICIPANT ’ S ABILITY TO PARTICIPATE IN THE  P LAN . F OR MORE INFORMATION ON THE CONSEQUENCES OF THE  P ARTICIPANT ’ S REFUSAL TO CONSENT OR WITHDRAWAL OF CONSENT ,  THE  P ARTICIPANT UNDERSTANDS THAT HE OR SHE MAY CONTACT THE P ARTICIPANT ’ S LOCAL HUMAN RESOURCES REPRESENTATIVE .
 
 	3.	ADMINISTRATION.	
All questions of interpretation concerning the Grant Notice, this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
 
 	4.	THE AWARD.	
4.1   Grant of Units. On the Date of Grant, the Participant shall acquire, subject to the provisions of this Agreement, the Total Number of Restricted Stock Units set forth in the Grant Notice, subject to adjustment as provided in Section 4.3 and Section 10. Each Unit represents a right to receive on a date determined in accordance with the Grant Notice and this Agreement one (1) share of Stock.
4.2   No Monetary Payment Required. The Participant is not required to make any monetary payment (other than applicable tax withholding, if any) as a condition to receiving the Units or shares of Stock issued upon settlement of the Units, the consideration for which shall be future services to be rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Units.
4.3   Dividend Equivalent Units. On the date that the Company pays a cash dividend to holders of Stock generally, the Participant shall be credited with a number of additional whole Dividend Equivalent Units determined by dividing (a) the product of (i) the dollar amount of the cash dividend paid per share of Stock on such date and (ii) the total number of Restricted Stock Units and Dividend Equivalent Units previously credited to the Participant pursuant to the Award and which have not been settled or forfeited pursuant to the Company Reacquisition Right (as defined below) as of such date, by (b) the Fair Market Value per share of Stock on such

date. Any resulting fractional Dividend Equivalent Unit shall be rounded to the nearest whole number. Such additional Dividend Equivalent Units shall be subject to the same terms and conditions and shall be settled or forfeited in the same manner and at the same time as the Restricted Stock Units originally subject to the Award with respect to which they have been credited.
 
 	5.	VESTINGOF UNITS.	
Units acquired pursuant to this Agreement shall become Vested Units as provided in the Grant Notice. Dividend Equivalent Units shall become Vested Units at the same time as the Restricted Stock Units originally subject to the Award with respect to which they have been credited. For purposes of determining the number of Vested Units following an Ownership Change Event, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after the Ownership Change Event.
 
 	6.	COMPANY REACQUISITION RIGHT.	
6.1  Grant of Company Reacquisition Right. In the event that the Participant’s Service terminates for any reason or no reason, with or without cause, insofar as permitted under Local Law the Participant shall forfeit and the Company shall automatically reacquire all Units which are not, as of the time of such termination, Vested Units  (“Unvested Units” ), and the Participant shall not be entitled to any payment therefor (the  “Company Reacquisition Right” ).
6.2  Ownership Change Event, Dividends, Distributions and Adjustments. Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property, or any other adjustment upon a change in the capital structure of the Company as described in Section 10, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy, which shall be treated in accordance with Section 4.3) to which the Participant is entitled by reason of the Participant’s ownership of Unvested Units shall be immediately subject to the Company Reacquisition Right and included in the terms “Units” and “Unvested Units” for all purposes of the Company Reacquisition Right with the same force and effect as the Unvested Units immediately prior to the Ownership Change Event, dividend, distribution or adjustment, as the case may be. For purposes of determining the number of Vested Units following an Ownership Change Event, dividend, distribution or adjustment, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after any such event.
 
 	7.	SETTLEMENTOFTHE AWARD.	
7.1  Issuance of Shares of Stock. Subject to the provisions of Section 7.3 below, on or as soon as administratively practicable following the date upon which Units vest (such date, the “ Settlement Date ”), the Company shall issue to the Participant with respect to each such Vested Unit one (1) share of Stock. Shares of Stock issued in settlement of Units shall not be

subject to any restriction on transfer other than any such restriction as may be required pursuant to Section 7.3, Section 7 or the Company’s Trading Compliance Policy.
7.2  Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company, in its sole discretion, to deposit any or all shares acquired by the Participant pursuant to the settlement of the Award with the Company’s transfer agent, including any successor transfer agent, to be held in book entry form, or to deposit such shares for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice. Except as provided by the foregoing, a certificate for the shares acquired by the Participant shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
7.3  Restrictions on Grant of the Award and Issuance of Shares. The grant of the Award and issuance of shares of Stock upon settlement of the Award shall be subject to compliance with all applicable requirements of United States federal, state law and Local Law with respect to such securities. No shares of Stock may be issued hereunder if the issuance of such shares would constitute a violation of any applicable United States federal, state, or Local Law, or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, or the impracticality of doing so, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any shares subject to the Award shall relieve the Company of any liability in respect of the failure to issue such shares as to which such requisite authority shall not have been obtained. As a condition to the settlement of the Award, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
7.4  Fractional Shares. The Company shall not be required to issue fractional shares upon the settlement of the Award.
 
 	8.	TAX WITHHOLDING.	
Regardless of any action the Company or the Participant’s employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“ Tax-Related Items ”), the Participant acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by the Participant is and remains the Participant’s responsibility and that the Company and or the Employer (i) make no representations nor undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this grant of Units, including the grant and vesting of Units, subsequent delivery of shares and/or cash related to such Units or the subsequent sale of any shares acquired pursuant to such Units and receipt of any dividend equivalent payments (if any) and (ii) do not commit to structure the terms or any aspect of this grant of Units to reduce or eliminate the Participant’s liability for Tax-Related Items. The Participant shall pay the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of the Participant’s participation in the Plan or the Participant’s receipt of Units that cannot be satisfied by the means described below. Further, if the Participant is subject

to tax in more than one jurisdiction, the Participant acknowledges that the Company and/or Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. The Company may refuse to deliver the shares if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items.
Prior to the taxable or tax withholding event, as applicable, the Participant shall pay, or make adequate arrangements satisfactory to the Company or to the Employer (in their sole discretion) to satisfy all Tax-Related Items. In this regard, the Participant authorizes the Company or Employer to withhold all applicable Tax-Related Items legally payable by the Participant by (1) withholding a number of Shares otherwise deliverable equal to the Retained Share Amount (as defined below), (2) withholding from the Participant’s wages or other cash compensation paid by the Company and/or Employer; and/or (3) withholding from proceeds of the sale of shares acquired upon settlement of the Units, either through a voluntary sale or through a sale arranged by the Company (on the Participant’s behalf pursuant to this authorization), to the extent permitted by the Administrator. The “Retained Share Amount” shall mean a number of shares equal to the quotient of the minimum statutory tax withholding obligation of the Company triggered by the Units on the relevant date, divided by the Fair Market Value of one share on the relevant date or as otherwise provided in the Plan. If the obligation for Tax-Related Items is satisfied by withholding a number of shares as described herein, the Participant understands that he or she will be deemed to have been issued the full number of shares subject to the settled Units, notwithstanding that a number of shares are held back solely for the purpose of paying the Tax-Related Items due as a result of the settlement of the Units.
Participant acknowledges and understands that Participant should consult a tax adviser regarding Participant’s tax obligations prior to such settlement or disposition.
 
 	9.	EFFECTOF CHANGEIN CONTROL.	
In the event of a Change in Control, except to the extent that the Committee determines to cash out the Award in accordance with Section 13.1(c) of the Plan, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the  “Acquiror” ), may, without the consent of the Participant, assume or continue in full force and effect the Company’s rights and obligations with respect to all or any portion of the outstanding Units or substitute for all or any portion of the outstanding Units substantially equivalent rights with respect to the Acquiror’s stock. For purposes of this Section, a Unit shall be deemed assumed if, following the Change in Control, the Unit confers the right to receive, subject to the terms and conditions of the Plan and this Agreement, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled; provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon settlement of the Unit to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. The Award shall terminate and cease to be outstanding effective as of the time of consummation or the Change in

Control to the extent that the Award is neither assumed or continued by the Acquiror in connection with the Change in Control nor settled as of the time of the Change in Control.
 
 	10.	ADJUSTMENTSFOR CHANGESIN CAPITAL STRUCTURE.	
Subject to any required action by the stockholders of the Company, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number of Units subject to the Award and/or the number and kind of shares or other property to be issued in settlement of the Award, in order to prevent dilution or enlargement of the Participant’s rights under the Award. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” Any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy, which shall be treated in accordance with Section 4.3) to which the Participant is entitled by reason of ownership of Units acquired pursuant to this Award will be immediately subject to the provisions of this Award on the same basis as all Units originally acquired hereunder. Any fractional Unit or share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number. Such adjustments shall be determined by the Committee, and its determination shall be final, binding and conclusive.
 
 	11.	RIGHTSASA STOCKHOLDER, DIRECTOR, EMPLOYEEOR CONSULTANT.	
The Participant shall have no rights as a stockholder with respect to any shares which may be issued in settlement of this Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 4.3 and Section 10. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term unless otherwise required under applicable law. Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service at any time.
 
 	12.	LEGENDS.	
The Company may at any time place legends referencing any applicable United States federal, state or non-U.S. securities law, including Local Law, restrictions on all certificates representing shares of stock issued pursuant to this Agreement. The Participant shall, at the

request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to this Award in the possession of the Participant in order to carry out the provisions of this Section.
 
 	13.	MISCELLANEOUS PROVISIONS.	
13.1  Termination or Amendment. The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may adversely affect the Participant’s rights under this Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation. No amendment or addition to this Agreement shall be effective unless in writing.
13.2  Nontransferability of the Award. Prior to the issuance of shares of Stock on the applicable Settlement Date, neither this Award nor any Units subject to this Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.
13.3  Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
13.4  Binding Effect. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
13.5  Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or non-U.S. postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a)  Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to

a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.
(b)   Consent to Electronic Delivery. The Participant acknowledges that the Participant has read Section 13.5(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice, as described in Section 13.5(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 13.5(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 13.5(a).
13.6   Integrated Agreement. The Grant Notice, this Agreement and the Plan shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, this Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.
13.7   Country-Specific Terms and Conditions. Notwithstanding any other provision of this Agreement to the contrary, the Award shall be subject to the specific terms and conditions, if any, set forth in the Appendix to this Agreement which are applicable to the Participant’s country of residence, the provisions of which are incorporated in and constitute part of this Agreement. Moreover, if the Participant relocates to one of the countries included in the Appendix, the specific terms and conditions applicable to such country will apply to the Award to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan or this Agreement.
13.8   Applicable Law. This Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties as evidenced by this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of the County of Santa Clara, California, or the federal courts of the United States for the Northern District of California, and no other courts, where this Agreement is made and/or performed.

13.9  Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

APPENDIX
ADDITIONAL TERMS AND CONDITIONS OF
MAGNACHIP SEMICONDUCTOR CORPORATION
RESTRICTED STOCK UNITS AGREEMENT
FOR NON-US PARTICIPANTS
TERMS AND CONDITIONS
This Appendix, which is part of the Agreement, includes additional terms and conditions of the Agreement that will apply to Participant if Participant is resident in the countries listed below. Capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan and the Agreement.
NOTIFICATIONS
This Appendix also includes information regarding exchange control and certain other issues of which Participant should be aware with respect to Participant’s participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of January 2011. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information in this Appendix as the only source of information relating to the consequences of Participant’s participation in the Plan because such information may be out-of-date when Participant’s Units vest and/or Participant sells any shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to Participant’s particular situation. As a result, the Company is not in a position to assure Participant of any particular result. Participant is therefore advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation.
Finally, if you are a citizen or resident of a country other than that in which Participant is currently working, the information contained herein may not apply to Participant.
COUNTRY-SPECIFIC LANGUAGE
Below please find country specific language that applies to Hong Kong, Korea, Japan, Taiwan and the UK.
HONG KONG
Terms and Conditions
Securities Law Notice. The Units and any shares issued pursuant to the Units do not constitute a public offering of securities under Hong Kong law and are available only to employees of the Company and Participating Companies. The Agreement, including this Appendix, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong, nor have the documents been reviewed by any regulatory

authority in Hong Kong. The Units and any related documentation are intended only for the personal use of each eligible employee of the Company and Participating Companies and may not be distributed to any other person. If Participant has any doubt about any of the contents of the Agreement, including this Appendix, or the Plan, the Participant should obtain independent professional advice.
Vesting of Awards and Sale of Shares. In the event that the Award vests and shares of Stock are issued to the Participant within six months after the Date of Grant, the Participant agrees that he or she will not dispose of any of such shares prior to the date six months following the Date of Grant.
Notifications
There are no country-specific provisions.
JAPAN
Terms and Conditions
There are no country-specific provisions.
Notifications
Exchange Control Information. If Participant acquires shares valued at more than ¥100,000 in a single transaction, Participant must file a Securities Acquisition Report with the Ministry of Finance through the Bank of Japan within 20 days of the acquisition of the shares.
SOUTH KOREA
Terms and Conditions
There are no country-specific provisions.
Notifications
Exchange Control Information. If Participant receive US$500,000 or more from the sale of shares, Korean exchange control laws require Participant to repatriate the proceeds to South Korea within 18 months of sale.
TAIWAN
Terms and Conditions
There are no country-specific provisions.
Notifications
Exchange Control Information. If the transaction amount is TWD500,000 or more in a single transaction, Participant must submit a Foreign Exchange Transaction Form. If the transaction

amount is US$500,000 or more in a single transaction, you must also provide supporting documentation to the satisfaction of the applicable bank.
UNITED KINGDOM
Terms and Conditions
UK Sub-Plan. The “UK Sub-plan” contains additional terms and conditions that govern the Units. Participants should review that document carefully.
[Joint Election for Pass-Through of Employer National Insurance Contributions. The Participant acknowledges and agrees that participation in the Plan and the vesting of the Award is subject to the Participant’s prompt execution of the Inland Revenue approved joint election in the form provided by the Company or its subsidiary, transferring all or a portion of the Company’s (or its subsidiary’s) National Insurance Contribution liability to the Participant.]
Notifications
There are no country-specific provisions.

Exhibit 10.59
MAGNACHIP SEMICONDUCTOR CORPORATION
FORM OF RESTRICTED STOCK AGREEMENT
(For US Participant)
MagnaChip Semiconductor Corporation (the “Company”) has granted to the Participant named in the Notice of Grant of Restricted Stock (the “ Grant Notice ”) to which this Restricted Stock Agreement (the “ Agreement ”) is attached a Restricted Stock Bonus consisting of the shares of Stock identified in the Grant Notice (the “ Shares ”) subject to the terms and conditions set forth in the Grant Notice and this Agreement. The Award has been granted pursuant to and shall in all respects be subject to the terms and conditions of the MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan (the “ Plan ”), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of and represents that the Participant has read and is familiar with the Grant Notice, this Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the Shares (the “ Plan Prospectus ”), (b) accepts the Award subject to all of the terms and conditions of the Grant Notice, this Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Agreement or the Plan.
 
 	1.	DEFINITIONSAND CONSTRUCTION.	
1.1  Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
1.2  Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
 
 	2.	ADMINISTRATION.	
All questions of interpretation concerning the Grant Notice, this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.

 	3.	THE AWARD.	
3.1  Grant and Issuance of Shares. On the Date of Grant, the Participant shall acquire and the Company shall issue, subject to the provisions of this Agreement, a number of Shares equal to the Total Number of Shares. As a condition to the issuance of the Shares, the Participant shall execute and deliver the Grant Notice to the Company, and, if required by the Company, an Assignment Separate from Certificate duly endorsed (with date and number of shares blank) in the form provided by the Company.
3.2  No Monetary Payment Required. The Participant is not required to make any monetary payment (other than to satisfy applicable tax withholding, if any, with respect to the issuance or vesting of the Shares) as a condition to receiving the Shares, the consideration for which shall be past services actually rendered or future services to be rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the Shares issued pursuant to the Award.
3.3  Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company, in its sole discretion, to deposit the Shares with the Company’s transfer agent, including any successor transfer agent, to be held in book entry form during the term of the Escrow pursuant to Section 6. Furthermore, the Participant hereby authorizes the Company, in its sole discretion, to deposit, following the term of such Escrow, for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice any or all Shares which are no longer subject to such Escrow. Except as provided by the foregoing, a certificate for the Shares shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
3.4  Issuance of Shares in Compliance with Law. The issuance of the Shares shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. No Shares shall be issued hereunder if their issuance would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any Shares shall relieve the Company of any liability in respect of the failure to issue such Shares as to which such requisite authority shall not have been obtained. As a condition to the issuance of the Shares, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
 
 	4.	VESTINGOF SHARES.	
Shares acquired pursuant to this Agreement shall become Vested Shares as provided in the Grant Notice. For purposes of determining the number of Vested Shares following an Ownership Change Event, credited Service shall include all Service with any corporation which

is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after the Ownership Change Event.
 
 	5.	COMPANY REACQUISITION RIGHT.	
5.1  Grant of Company Reacquisition Right. Except to the extent expressly provided otherwise in an agreement between the Participant and the Company, in the event that (a) the Participant’s Service terminates for any reason or no reason, with or without cause, or (b) the Participant, the Participant’s legal representative, or other holder of the Shares, attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other than pursuant to an Ownership Change Event), including, without limitation, any transfer to a nominee or agent of the Participant, any Shares which are not Vested Shares (“Unvested Shares” ), the Participant shall forfeit and the Company shall automatically reacquire the Unvested Shares, and the Participant shall not be entitled to any payment therefor (the  “Company Reacquisition Right” ).
5.2  Ownership Change Event, Non-Cash Dividends, Distributions and Adjustments. Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property, or any other adjustment upon a change in the capital structure of the Company as described in Section 9, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy) to which the Participant is entitled by reason of the Participant’s ownership of Unvested Shares shall be immediately subject to the Company Reacquisition Right and included in the terms “Shares,” “Stock” and “Unvested Shares” for all purposes of the Company Reacquisition Right with the same force and effect as the Unvested Shares immediately prior to the Ownership Change Event, dividend, distribution or adjustment, as the case may be. For purposes of determining the number of Vested Shares following an Ownership Change Event, dividend, distribution or adjustment, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after any such event.
5.3  Obligation to Repay Certain Cash Dividends and Distributions. The Participant shall, at the discretion of the Company, be obligated to promptly repay to the Company upon termination of the Participant’s Service any dividends and other distributions paid to the Participant in cash with respect to Unvested Shares reacquired by the Company pursuant to the Company Reacquisition Right.
 
 	6.	ESCROW.	
6.1  Appointment of Agent. To ensure that Shares subject to the Company Reacquisition Right will be available for reacquisition, the Participant and the Company hereby appoint the Secretary of the Company, or any other person designated by the Company, as their agent and as attorney-in-fact for the Participant (the “ Agent ”) to hold any and all Unvested Shares and to sell, assign and transfer to the Company any such Unvested Shares reacquired by the Company pursuant to the Company Reacquisition Right. The Participant understands that appointment of the Agent is a material inducement to make this Agreement and that such appointment is coupled with an interest and is irrevocable. The Agent shall not be personally

liable for any act the Agent may do or omit to do hereunder as escrow agent, agent for the Company, or attorney in fact for the Participant while acting in good faith and in the exercise of the Agent’s own good judgment, and any act done or omitted by the Agent pursuant to the advice of the Agent’s own attorneys shall be conclusive evidence of such good faith. The Agent may rely upon any letter, notice or other document executed by any signature purporting to be genuine and may resign at any time.
6.2  Establishment of Escrow. The Participant authorizes the Company to deposit the Unvested Shares with the Company’s transfer agent to be held in book entry form, as provided in Section 3.3, and the Participant agrees to deliver to and deposit with the Agent each certificate, if any, evidencing the Shares and, if required by the Company, an Assignment Separate from Certificate with respect to such book entry shares and each such certificate duly endorsed (with date and number of Shares blank) in the form attached to this Agreement, to be held by the Agent under the terms and conditions of this Section 6 (the  “Escrow” ). Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property (other than regular, periodic dividends paid on Stock pursuant to the Company’s dividend policy) or any other adjustment upon a change in the capital structure of the Company, as described in Section 9, any and all new, substituted or additional securities or other property to which the Participant is entitled by reason of his or her ownership of the Shares that remain, following such Ownership Change Event, dividend, distribution or change described in Section 9, subject to the Company Reacquisition Right shall be immediately subject to the Escrow to the same extent as the Shares immediately before such event. The Company shall bear the expenses of the Escrow.
6.3  Delivery of Shares to Participant. The Escrow shall continue with respect to any Shares for so long as such Shares remain subject to the Company Reacquisition Right. Upon termination of the Company Reacquisition Right with respect to Shares, the Company shall so notify the Agent and direct the Agent to deliver such number of Shares to the Participant. As soon as practicable after receipt of such notice, the Agent shall cause the Shares specified by such notice to be delivered to the Participant, and the Escrow shall terminate with respect to such Shares.
 
 	7.	TAX MATTERS.	
 
 	7.1	Tax Withholding.	
(a)  In General. At the time the Grant Notice is executed, or at any time thereafter as requested by a Participating Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company, if any, which arise in connection with the Award, including, without limitation, obligations arising upon (a) the transfer of Shares to the Participant, (b) the lapsing of any restriction with respect to any Shares, (c) the filing of an election to recognize tax liability, or (d) the transfer by the Participant of any Shares. The Company shall have no obligation to deliver the Shares or to release any Shares from the Escrow established pursuant to Section 6 until the tax withholding obligations of the Participating Company have been satisfied by the Participant.

(b)  Assignment of Sale Proceeds. Subject to compliance with applicable law and the Company’s Trading Compliance Policy, if permitted by the Company, the Participant may satisfy the Participating Company’s tax withholding obligations in accordance with procedures established by the Company providing for delivery by the Participant to the Company or a broker approved by the Company of properly executed instructions, in a form approved by the Company, providing for the assignment to the Company of the proceeds of a sale with respect to some or all of the shares becoming Vested Shares on a Vesting Date as provided in the Grant Notice.
(c)  Withholding in Shares. The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Company’s tax withholding obligations by withholding a number of whole, Vested Shares otherwise deliverable to the Participant or by the Participant’s tender to the Company of a number of whole, Vested Shares or vested shares acquired otherwise than pursuant to the Award having, in any such case, a fair market value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates.
 
 	7.2	Election Under Section 83(b) of the Code.	
(a) The Participant understands that Section 83 of the Code taxes as ordinary income the difference between the amount paid for the Shares, if anything, and the fair market value of the Shares as of the date on which the Shares are “substantially vested,” within the meaning of Section 83. In this context, “substantially vested” means that the right of the Company to reacquire the Shares pursuant to the Company Reacquisition Right has lapsed. The Participant understands that he or she may elect to have his or her taxable income determined at the time he or she acquires the Shares rather than when and as the Company Reacquisition Right lapses by filing an election under Section 83(b) of the Code with the Internal Revenue Service no later than thirty (30) days after the date of acquisition of the Shares. The Participant understands that failure to make a timely filing under Section 83(b) will result in his or her recognition of ordinary income, as the Company Reacquisition Right lapses, on the difference between the purchase price, if anything, and the fair market value of the Shares at the time such restrictions lapse. The Participant further understands, however, that if Shares with respect to which an election under Section 83(b) has been made are forfeited to the Company pursuant to its Company Reacquisition Right, such forfeiture will be treated as a sale on which there is realized a loss equal to the excess (if any) of the amount paid (if any) by the Participant for the forfeited Shares over the amount realized (if any) upon their forfeiture. If the Participant has paid nothing for the forfeited Shares and has received no payment upon their forfeiture, the Participant understands that he or she will be unable to recognize any loss on the forfeiture of the Shares even though the Participant incurred a tax liability by making an election under Section 83(b).
(b) The Participant understands that he or she should consult with his or her tax advisor regarding the advisability of filing with the Internal Revenue Service an election under Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date of the acquisition of the Shares pursuant to this Agreement. Failure to file an election under Section 83(b), if appropriate, may result in adverse tax consequences to the Participant. The Participant acknowledges that he or she has been advised to consult with a tax advisor

regarding the tax consequences to the Participant of the acquisition of Shares hereunder. ANY ELECTION UNDER SECTION 83(b) THE PARTICIPANT WISHES TO MAKE MUST BE FILED NO LATER THAN 30 DAYS AFTER THE DATE ON WHICH THE PARTICIPANT ACQUIRES THE SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE PARTICIPANT ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE PARTICIPANT’S SOLE RESPONSIBILITY, EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
(c) The Participant will notify the Company in writing if the Participant files an election pursuant to Section 83(b) of the Code. The Company intends, in the event it does not receive from the Participant evidence of such filing, to claim a tax deduction for any amount which would otherwise be taxable to the Participant in the absence of such an election.
 
 	8.	EFFECTOF CHANGEIN CONTROL.	
In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “ Acquiror ”), may, subject to the applicable requirements and limitations of Section 409A and without the consent of the Participant, assume or continue in full force and effect the Company’s rights and obligations under the Award or substitute for the Award a substantially equivalent award for the Acquiror’s stock. For purposes of this Section, the Award shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and this Agreement, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled. Notwithstanding the foregoing, Shares acquired pursuant to the Award prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of this Agreement except as otherwise provided herein.
 
 	9.	ADJUSTMENTSFOR CHANGESIN CAPITAL STRUCTURE.	
Subject to any required action by the stockholders of the Company, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares of stock or other property subject to the Award, in order to prevent dilution or enlargement of the Participant’s rights under the Award. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” Any and all new, substituted or additional securities or other

property (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy, subject to Section 5.3) to which Participant is entitled by reason of ownership of shares acquired pursuant to this Award will be immediately subject to the provisions of this Award on the same basis as all shares originally acquired hereunder. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number. Such adjustments shall be determined by the Committee, and its determination shall be final, binding and conclusive.
 
 	10.	RIGHTSASA STOCKHOLDER, DIRECTOR, EMPLOYEEOR CONSULTANT.	
The Participant shall have no rights as a stockholder with respect to any Shares subject to the Award until the date of the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the Shares are issued, except as provided in Section 9. Subject to the provisions of this Agreement, the Participant shall exercise all rights and privileges of a stockholder of the Company with respect to Shares deposited in the Escrow pursuant to Section 6, including the right to vote such Shares and to receive all dividends and other distributions paid with respect to such Shares, subject to Section 5.3. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term. Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service at any time.
 
 	11.	LEGENDS.	
The Company may at any time place legends referencing the Company Reacquisition Right and any applicable federal, state or foreign securities law restrictions on all certificates representing the Shares. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing the Shares in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET FORTH IN AN AGREEMENT BETWEEN THIS CORPORATION AND THE REGISTERED HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”
 
 	12.	TRANSFERSIN VIOLATIONOF AGREEMENT.	
No Shares may be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner which violates any of the provisions of this Agreement and, except pursuant to an Ownership Change Event, until the date on which such shares become Vested Shares, and any such attempted disposition shall be void. The Company shall not be required (a) to transfer on its books any Shares which will have been

transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such Shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such Shares will have been so transferred. In order to enforce its rights under this Section, the Company shall be authorized to give a stop transfer instruction with respect to the Shares to the Company’s transfer agent.
 
 	13.	MISCELLANEOUS PROVISIONS.	
13.1  Termination or Amendment. The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that no such termination or amendment may adversely affect the Participant’s rights under this Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation. No amendment or addition to this Agreement shall be effective unless in writing.
13.2  Nontransferability of the Award. The right to acquire Shares pursuant to the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.
13.3  Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
13.4  Binding Effect. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
13.5  Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a)  Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the parties may deliver electronically any notices called for in connection with the Escrow and the Participant may deliver electronically the Grant Notice to the Company or to such third party

involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.
(b)  Consent to Electronic Delivery. The Participant acknowledges that the Participant has read Section 13.5(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice and notices in connection with the Escrow, as described in Section 13.5(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 13.5(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 13.5(a).
13.6  Integrated Agreement. The Grant Notice, this Agreement and the Plan shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, this Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.
13.7  Applicable Law. This Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.
13.8  Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED the undersigned does hereby sell, assign and transfer unto                                                                                                       ( ) shares of the Capital Stock of MAGNACHIP SEMICONDUCTOR CORPORATION standing in the undersigned’s name on the books of said corporation represented by Certificate No. herewith and does hereby irrevocably constitute and appoint                                            Attorney to transfer the said stock on the books of said corporation with full power of substitution in the premises.
Dated:                                         

 	
 
Signature	

Print Name	
Instructions: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its Company Reacquisition Right set forth in the Restricted Stock Agreement without requiring additional signatures on the part of the Participant.

SAMPLE
Internal Revenue Service
[IRS Service Center
where Form 1040 is Filed]
Re: Section 83(b) Election
Dear Sir or Madam:
The following information is submitted pursuant to section 1.83-2 of the Treasury Regulations in connection with this election by the undersigned under section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”).
1.  The name, address and taxpayer identification number of the taxpayer are:

Name:	 	__________________________________________	
 	 	
Address:	 	__________________________________________	
 	 	
Social Security Number:	 	__________________________________________	
2.  The following is a description of each item of property with respect to which the election is made:
                 shares of common stock of MagnaChip Semiconductor Corporation (the “Shares”), acquired from MagnaChip Semiconductor Corporation (the “Company”) pursuant to a restricted stock grant.
3.  The property was transferred to the undersigned on:
Restricted stock grant date:                             
The taxable year for which the election is made is:
Calendar Year:                             
4.  The nature of the restriction to which the property is subject:
The Shares are subject to automatic forfeiture to the Company upon the occurrence of certain events. This forfeiture provision lapses with regard to a portion of the Shares based upon the continued performance of services by the taxpayer over time.
5.  The following is the fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) of the property with respect to which the election is made:
$                             (       Shares at $       per Share)

The property was transferred to the taxpayer pursuant to the grant of an award of restricted stock.
6.  The following is the amount paid for the property:
No monetary consideration was provided in exchange for the Shares.
7.  A copy of this election has been furnished to the Company, the corporation for which the services were performed by the undersigned.
Please acknowledge receipt of this election by date or received-stamping the enclosed copy of this letter and returning it to the undersigned. A self-addressed stamped envelope is provided for your convenience.

Very truly yours,	
 	 	 	
 	  	Date:	  	 	
 	 	 	
Enclosures	  	 	  	 	
cc: MagnaChip Semiconductor Corporation

Exhibit 10.60
MAGNACHIP SEMICONDUCTOR CORPORATION
FORM OF RESTRICTED STOCK AGREEMENT
(For Non-US Participant)
MagnaChip Semiconductor Corporation (the “Company”) has granted to the Participant named in the Notice of Grant of Restricted Stock (the “ Grant Notice ”) to which this Restricted Stock Agreement (the “ Agreement ”) is attached a Restricted Stock Bonus consisting of the shares of Stock identified in the Grant Notice (the “ Shares ”) subject to the terms and conditions set forth in the Grant Notice and this Agreement. The Award has been granted pursuant to and shall in all respects be subject to the terms and conditions of the MagnaChip Semiconductor Corporation 2011 Equity Incentive Plan (the “ Plan ”), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of and represents that the Participant has read and is familiar with the Grant Notice, this Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the Shares (the “ Plan Prospectus ”), (b) accepts the Award subject to all of the terms and conditions of the Grant Notice, this Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Agreement or the Plan.
 
 	1.	DEFINITIONSAND CONSTRUCTION.	
1.1  Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
1.2  Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
 
 	2.	CERTAIN CONDITIONSOFTHE AWARD.	
2.1  Compliance with Local Law. The Participant agrees that the Participant will not transfer, assign, sell or otherwise deal in the Shares except in compliance with Local Law.
2.2  Employment Conditions. By accepting the Award, the Participant acknowledges and agrees that:
(a) Any notice period mandated under Local Law shall not be treated as Service for the purpose of determining the vesting of the Award; and the Participant’s right to vest in Shares after termination of Service, if any, will be measured by the date of termination of the Participant’s active Service and will not be extended by any notice period mandated under Local Law. Subject to the foregoing and the provisions of the Plan, the Company, in its sole discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination.

(b)  The vesting of the Award shall cease upon, and no Shares shall vest following the Participant’s termination of Service for any reason except as may be explicitly provided by the Plan or this Agreement.
(c)  The Plan is established voluntarily by the Company. It is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Agreement.
(d)  The grant of the Award is voluntary and occasional and does not create any contractual or other right to receive future grants of Awards, or benefits in lieu of Awards, even if Awards have been granted repeatedly in the past.
(e)  All decisions with respect to future Award grants, if any, will be at the sole discretion of the Company.
(f)  The Participant’s participation in the Plan shall not create a right to further Service with any Participating Company and shall not interfere with the ability of any Participating Company to terminate the Participant’s Service at any time, with or without cause, insofar as permitted under Local Law.
(g)  The Participant is voluntarily participating in the Plan.
(h)  The Award and the Shares are an extraordinary item that does not constitute compensation of any kind for Service of any kind rendered to any Participating Company, and which is outside the scope of the Participant’s employment contract, if any.
(i)  The Award is not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.
(j)  In the event that the Participant is not an employee of the Company, the Award grant will not be interpreted to form an employment contract or relationship with the Company; and furthermore the Award grant will not be interpreted to form an employment contract with any other Participating Company.
(k)  The future value of the Shares is unknown and cannot be predicted with certainty. The value of those Shares may increase or decrease.
(l)  In consideration of the grant of an Award, no claim or entitlement to compensation or damages arises from termination of the Award or diminution in value of the Shares resulting from termination of the Participant’s Service (for any reason whether or not in breach of Local Law) and the Participant irrevocably releases the Company and each other Participating Company from any such claim that may arise. If, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen then, by signing this Agreement, the Participant shall be deemed irrevocably to have waived the Participant’s entitlement to pursue such a claim.

 	2.3	Data Privacy Consent.	
(a) THE PARTICIPANTHEREBYEXPLICITLYANDUNAMBIGUOUSLYCONSENTSTOTHE COLLECTION ,  USE AND TRANSFER ,  IN ELECTRONIC OR OTHER FORM ,  OF THE  P ARTICIPANT ’ S PERSONAL DATA AS DESCRIBED IN THIS DOCUMENT BY AND AMONG THE MEMBERS OF THE P ARTICIPATING  C OMPANY  G ROUP FOR THE EXCLUSIVE PURPOSE OF IMPLEMENTING , ADMINISTERING AND MANAGING THE  P ARTICIPANT ’ S PARTICIPATION IN THE  P LAN .
(b) THE PARTICIPANTUNDERSTANDSTHATTHE PARTICIPATING COMPANY GROUP HOLDS CERTAIN PERSONAL INFORMATION ABOUT THE  P ARTICIPANT ,  INCLUDING ,  BUT NOT LIMITED TO ,  THE  P ARTICIPANT ’ S NAME ,  HOME ADDRESS AND TELEPHONE NUMBER ,  DATE OF BIRTH , SOCIAL INSURANCE NUMBER OR OTHER IDENTIFICATION NUMBER ,  SALARY ,  NATIONALITY ,  JOB TITLE ,  ANY SHARES OR DIRECTORSHIPS HELD IN THE  C OMPANY ,  DETAILS OF ALL  A WARDS OR ANY OTHER ENTITLEMENT TO SHARES AWARDED ,  CANCELED ,  EXERCISED ,  VESTED ,  UNVESTED OR OUTSTANDING IN THE  P ARTICIPANT ’ S FAVOR ,  FOR THE PURPOSE OF IMPLEMENTING , ADMINISTERING AND MANAGING THE  P LAN  (“D ATA ”). T HE  P ARTICIPANT UNDERSTANDS THAT  D ATA MAY BE TRANSFERRED TO ANY THIRD PARTIES ASSISTING IN THE IMPLEMENTATION , ADMINISTRATION AND MANAGEMENT OF THE  P LAN ,  THAT THESE RECIPIENTS MAY BE LOCATED IN THE  P ARTICIPANT ’ S COUNTRY OR ELSEWHERE ,  WHICH MAY INCLUDE AREAS OUTSIDE THE E UROPEAN  E CONOMIC AREA AND THAT THE RECIPIENT ’ S COUNTRY MAY HAVE DIFFERENT DATA PRIVACY LAWS AND PROTECTIONS THAN THE  P ARTICIPANT ’ S COUNTRY . T HE P ARTICIPANT UNDERSTANDS THAT HE OR SHE MAY REQUEST A LIST WITH THE NAMES AND ADDRESSES OF ANY POTENTIAL RECIPIENTS OF THE  D ATA BY CONTACTING THE P ARTICIPANT ’ S LOCAL HUMAN RESOURCES REPRESENTATIVE . T HE  P ARTICIPANT AUTHORIZES THE RECIPIENTS TO RECEIVE ,  POSSESS ,  USE ,  RETAIN AND TRANSFER THE  D ATA ,  IN ELECTRONIC OR OTHER FORM ,  FOR THE PURPOSES OF IMPLEMENTING ,  ADMINISTERING AND MANAGING THE P ARTICIPANT ’ S PARTICIPATION IN THE  P LAN ,  INCLUDING ANY REQUISITE TRANSFER OF SUCH D ATA AS MAY BE REQUIRED TO A BROKER OR OTHER THIRD PARTY WITH WHOM THE  P ARTICIPANT MAY ELECT TO DEPOSIT ANY SHARES ACQUIRED . T HE  P ARTICIPANT UNDERSTANDS THAT  D ATA WILL BE HELD ONLY AS LONG AS IS NECESSARY TO IMPLEMENT ,  ADMINISTER AND MANAGE THE P ARTICIPANT ’ S PARTICIPATION IN THE  P LAN . T HE  P ARTICIPANT UNDERSTANDS THAT HE OR SHE MAY ,  AT ANY TIME ,  VIEW  D ATA ,  REQUEST ADDITIONAL INFORMATION ABOUT THE STORAGE AND PROCESSING OF  D ATA ,  REQUIRE ANY NECESSARY AMENDMENTS TO  D ATA OR REFUSE OR WITHDRAW THE CONSENTS HEREIN ,  IN ANY CASE WITHOUT COST ,  BY CONTACTING IN WRITING THE  P ARTICIPANT ’ S LOCAL HUMAN RESOURCES REPRESENTATIVE . T HE  P ARTICIPANT UNDERSTANDS ,  HOWEVER ,  THAT REFUSING OR WITHDRAWING THE  P ARTICIPANT ’ S CONSENT MAY AFFECT THE  P ARTICIPANT ’ S ABILITY TO PARTICIPATE IN THE  P LAN . F OR MORE INFORMATION ON THE CONSEQUENCES OF THE  P ARTICIPANT ’ S REFUSAL TO CONSENT OR WITHDRAWAL OF CONSENT ,  THE  P ARTICIPANT UNDERSTANDS THAT HE OR SHE MAY CONTACT THE P ARTICIPANT ’ S LOCAL HUMAN RESOURCES REPRESENTATIVE .
 
 	3.	ADMINISTRATION.	
All questions of interpretation concerning the Grant Notice, this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration

of the Plan or the Award shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
 
 	4.	THE AWARD.	
4.1  Grant and Issuance of Shares. On the Date of Grant, the Participant shall acquire and the Company shall issue, subject to the provisions of this Agreement, a number of Shares equal to the Total Number of Shares. As a condition to the issuance of the Shares, the Participant shall execute and deliver the Grant Notice to the Company, and, if required by the Company, an Assignment Separate from Certificate duly endorsed (with date and number of shares blank) in the form provided by the Company.
4.2  No Monetary Payment Required. The Participant is not required to make any monetary payment (other than to satisfy applicable tax withholding, if any, with respect to the issuance or vesting of the Shares) as a condition to receiving the Shares, the consideration for which shall be future services to be rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable law, the Participant shall furnish consideration in the form of cash rendered to a Participating Company or for its benefit having a value not less than the par value of the Shares issued pursuant to the Award.
4.3  Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company, in its sole discretion, to deposit the Shares with the Company’s transfer agent, including any successor transfer agent, to be held in book entry form during the term of the Escrow pursuant to Section 7. Furthermore, the Participant hereby authorizes the Company, in its sole discretion, to deposit, following the term of such Escrow, for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice any or all Shares which are no longer subject to such Escrow. Except as provided by the foregoing, a certificate for the Shares shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
4.4  Issuance of Shares in Compliance with Law. The issuance of the Shares shall be subject to compliance with all applicable requirements of United States federal, state and Local Law with respect to such securities. No Shares shall be issued or vested hereunder if their issuance/vesting would constitute a violation of any applicable United States federal, state and Local Law or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, or the impracticability of doing so, deemed by the Company’s legal counsel to be necessary to the lawful issuance or vesting of any Shares (or the removal of any applicable restrictions) shall relieve the Company of any liability

in respect of the failure to issue such Shares (or remove the applicable restrictions) as to which such requisite authority shall not have been obtained. As a condition to the issuance/vesting of the Shares, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
 
 	5.	VESTINGOF SHARES.	
Shares acquired pursuant to this Agreement shall become Vested Shares as provided in the Grant Notice. For purposes of determining the number of Vested Shares following an Ownership Change Event, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after the Ownership Change Event.
 
 	6.	COMPANY REACQUISITION RIGHT.	
6.1  Grant of Company Reacquisition Right. In the event that (a) the Participant’s Service terminates for any reason or no reason, with or without cause, or (b) the Participant, the Participant’s legal representative, or other holder of the Shares, attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other than pursuant to an Ownership Change Event), including, without limitation, any transfer to a nominee or agent of the Participant, any Shares which are not Vested Shares  ( “Unvested Shares” ), the Participant shall forfeit and the Company shall automatically reacquire the Unvested Shares, and the Participant shall not be entitled to any payment therefor (the  “Company Reacquisition Right” ).
6.2  Ownership Change Event, Non-Cash Dividends, Distributions and Adjustments. Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property, or any other adjustment upon a change in the capital structure of the Company as described in Section 10, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy) to which the Participant is entitled by reason of the Participant’s ownership of Unvested Shares shall be immediately subject to the Company Reacquisition Right and included in the terms “Shares,” “Stock” and “Unvested Shares” for all purposes of the Company Reacquisition Right with the same force and effect as the Unvested Shares immediately prior to the Ownership Change Event, dividend, distribution or adjustment, as the case may be. For purposes of determining the number of Vested Shares following an Ownership Change Event, dividend, distribution or adjustment, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after any such event.
6.3  Obligation to Repay Certain Cash Dividends and Distributions. The Participant shall, at the discretion of the Company, be obligated to promptly repay to the Company upon termination of the Participant’s Service any dividends and other distributions paid to the Participant in cash with respect to Unvested Shares reacquired by the Company pursuant to the Company Reacquisition Right.

 	7.	ESCROW.	
7.1  Appointment of Agent. To ensure that Shares subject to the Company Reacquisition Right will be available for reacquisition, the Participant and the Company hereby appoint the Secretary of the Company, or any other person designated by the Company, as their agent and as attorney-in-fact for the Participant (the “ Agent ”) to hold any and all Unvested Shares and to sell, assign and transfer to the Company any such Unvested Shares reacquired by the Company pursuant to the Company Reacquisition Right. The Participant understands that appointment of the Agent is a material inducement to make this Agreement and that such appointment is coupled with an interest and is irrevocable. The Agent shall not be personally liable for any act the Agent may do or omit to do hereunder as escrow agent, agent for the Company, or attorney in fact for the Participant while acting in good faith and in the exercise of the Agent’s own good judgment, and any act done or omitted by the Agent pursuant to the advice of the Agent’s own attorneys shall be conclusive evidence of such good faith. The Agent may rely upon any letter, notice or other document executed by any signature purporting to be genuine and may resign at any time.
7.2  Establishment of Escrow. The Participant authorizes the Company to deposit the Unvested Shares with the Company’s transfer agent to be held in book entry form, as provided in Section 4.3, and the Participant agrees to deliver to and deposit with the Agent each certificate, if any, evidencing the Shares and, if required by the Company, an Assignment Separate from Certificate with respect to such book entry shares and each such certificate duly endorsed (with date and number of Shares blank) in the form attached to this Agreement, to be held by the Agent under the terms and conditions of this Section 7 (the  “Escrow” ). Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property (other than regular, periodic dividends paid on Stock pursuant to the Company’s dividend policy) or any other adjustment upon a change in the capital structure of the Company, as described in Section 10, any and all new, substituted or additional securities or other property to which the Participant is entitled by reason of his or her ownership of the Shares that remain, following such Ownership Change Event, dividend, distribution or change described in Section 10, subject to the Company Reacquisition Right shall be immediately subject to the Escrow to the same extent as the Shares immediately before such event. The Company shall bear the expenses of the Escrow.
7.3  Delivery of Shares to Participant. The Escrow shall continue with respect to any Shares for so long as such Shares remain subject to the Company Reacquisition Right. Upon termination of the Company Reacquisition Right with respect to Shares, the Company shall so notify the Agent and direct the Agent to deliver such number of Shares to the Participant. As soon as practicable after receipt of such notice, the Agent shall cause the Shares specified by such notice to be delivered to the Participant, and the Escrow shall terminate with respect to such Shares.
 
 	8.	TAX WITHHOLDING.	
Regardless of any action the Company or the Participant’s employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“ Tax-Related Items ”), the

Participant acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by the Participant is and remains the Participant’s responsibility and that the Company and or the Employer (i) make no representations nor undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this grant of Shares, including the grant and vesting of Shares, or the subsequent sale of any Shares and receipt of any dividend equivalent payments (if any) and (ii) do not commit to structure the terms or any aspect of this grant of Shares to reduce or eliminate the Participant’s liability for Tax-Related Items. The Participant shall pay the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of the Participant’s participation in the Plan or the Participant’s receipt of Shares that cannot be satisfied by the means described below. Further, if the Participant is subject to tax in more than one jurisdiction, the Participant acknowledges that the Company and/or Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. The Company may refuse to deliver the Shares if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items.
Prior to the taxable or tax withholding event, as applicable, the Participant shall pay, or make adequate arrangements satisfactory to the Company or to the Employer (in their sole discretion) to satisfy all Tax-Related Items. In this regard, the Participant authorizes the Company or Employer to withhold all applicable Tax-Related Items legally payable by the Participant by (1) withholding a number of Shares equal to the Retained Share Amount (as defined below), (2) withholding from the Participant’s wages or other cash compensation paid by the Company and/or Employer; and/or (3) withholding from proceeds of the sale of Shares, either through a voluntary sale or through a sale arranged by the Company (on the Participant’s behalf pursuant to this authorization), to the extent permitted by the Administrator. The “Retained Share Amount” shall mean a number of Shares equal to the quotient of the minimum statutory tax withholding obligation of the Company triggered by the Shares on the relevant date, divided by the Fair Market Value of one share on the relevant date or as otherwise provided in the Plan. If the obligation for Tax-Related Items is satisfied by withholding a number of Shares as described herein, the Participant understands that he or she will be deemed to have been issued the full number of Shares, notwithstanding that a number of Shares are held back solely for the purpose of paying the Tax-Related Items.
Participant acknowledges and understands that Participant should consult a tax adviser regarding Participant’s tax obligations prior to such settlement or disposition.
 
 	9.	EFFECTOF CHANGEIN CONTROL.	
In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “ Acquiror ”), may, without the consent of the Participant, assume or continue in full force and effect the Company’s rights and obligations under the Award or substitute for the Award a substantially equivalent award for the Acquiror’s stock. For purposes of this Section, the Award shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and this Agreement, for each Share subject to the Award

immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled. Notwithstanding the foregoing, Shares acquired pursuant to the Award prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of this Agreement except as otherwise provided herein.
 
 	10.	ADJUSTMENTSFOR CHANGESIN CAPITAL STRUCTURE.	
Subject to any required action by the stockholders of the Company, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares of stock or other property subject to the Award, in order to prevent dilution or enlargement of the Participant’s rights under the Award. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” Any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy, subject to Section 6.3) to which Participant is entitled by reason of ownership of shares acquired pursuant to this Award will be immediately subject to the provisions of this Award on the same basis as all shares originally acquired hereunder. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number. Such adjustments shall be determined by the Committee, and its determination shall be final, binding and conclusive.
 
 	11.	RIGHTSASA STOCKHOLDER, DIRECTOR, EMPLOYEEOR CONSULTANT.	
The Participant shall have no rights as a stockholder with respect to any Shares subject to the Award until the date of the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the Shares are issued, except as provided in Section 10. Subject to the provisions of this Agreement, the Participant shall exercise all rights and privileges of a stockholder of the Company with respect to Shares deposited in the Escrow pursuant to Section 7, including the right to vote such Shares and to receive all dividends and other distributions paid with respect to such Shares, subject to Section 6.3. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term unless otherwise required under applicable law. Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service at any time.

 	12.	LEGENDS.	
The Company may at any time place legends referencing the Company Reacquisition Right and any applicable United States federal, state or non-U.S. securities law, including Local Law, restrictions on all certificates representing the Shares. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing the Shares in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET FORTH IN AN AGREEMENT BETWEEN THIS CORPORATION AND THE REGISTERED HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”
 
 	13.	TRANSFERSIN VIOLATIONOF AGREEMENT.	
No Shares may be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner which violates any of the provisions of this Agreement and, except pursuant to an Ownership Change Event, until the date on which such Shares become Vested Shares, and any such attempted disposition shall be void. The Company shall not be required (a) to transfer on its books any Shares which will have been transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such Shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such Shares will have been so transferred. In order to enforce its rights under this Section, the Company shall be authorized to give a stop transfer instruction with respect to the Shares to the Company’s transfer agent.
 
 	14.	MISCELLANEOUS PROVISIONS.	
14.1  Termination or Amendment. The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that no such termination or amendment may adversely affect the Participant’s rights under this Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation. No amendment or addition to this Agreement shall be effective unless in writing.
14.2  Nontransferability of the Award. The right to acquire Shares pursuant to the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.
14.3  Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

14.4  Binding Effect. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
14.5  Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or non-U.S. postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a)  Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the parties may deliver electronically any notices called for in connection with the Escrow and the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.
(b)  Consent to Electronic Delivery. The Participant acknowledges that the Participant has read Section 14.5(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice and notices in connection with the Escrow, as described in Section 14.5(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 14.5(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 14.5(a).
14.6  Integrated Agreement. The Grant Notice, this Agreement and the Plan shall constitute the entire understanding and agreement of the Participant and the Participating

Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, this Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.
14.7  Country-Specific Terms and Conditions. Notwithstanding any other provision of this Agreement to the contrary, the Award shall be subject to the specific terms and conditions, if any, set forth in the Appendix to this Agreement which are applicable to the Participant’s country of residence, the provisions of which are incorporated in and constitute part of this Agreement. Moreover, if the Participant relocates to one of the countries included in the Appendix, the specific terms and conditions applicable to such country will apply to the Award to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan or this Agreement.
14.8  Applicable Law. This Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties as evidenced by this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of the County of Santa Clara, California, or the federal courts of the United States for the Northern District of California, and no other courts, where this Agreement is made and/or performed.
14.9  Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

APPENDIX
ADDITIONAL TERMS AND CONDITIONS OF
MAGNACHIP SEMICONDUCTOR CORPORATION
RESTRICTED STOCK AGREEMENT
FOR NON-US PARTICIPANTS
TERMS AND CONDITIONS
This Appendix, which is part of the Agreement, includes additional terms and conditions of the Agreement that will apply to Participant if Participant is resident in the countries listed below. Capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan and the Agreement.
NOTIFICATIONS
This Appendix also includes information regarding exchange control and certain other issues of which Participant should be aware with respect to Participant’s participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of January 2011. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information in this Appendix as the only source of information relating to the consequences of Participant’s participation in the Plan because such information may be out-of-date when Participant’s Shares vest and/or Participant sells any Shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to Participant’s particular situation. As a result, the Company is not in a position to assure Participant of any particular result. Participant is therefore advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation.
Finally, if Participant is a citizen or resident of a country other than that in which Participant is currently working, the information contained herein may not apply to Participant.
COUNTRY-SPECIFIC LANGUAGE
Below please find country specific language that applies to Hong Kong, Korea, Japan, Taiwan and the UK.
HONG KONG
Terms and Conditions
Securities Law Notice. The Shares do not constitute a public offering of securities under Hong Kong law and are available only to employees of the Company and Participating Companies. The Agreement, including this Appendix, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong, nor have

the documents been reviewed by any regulatory authority in Hong Kong. The Shares and any related documentation are intended only for the personal use of each eligible employee of the Company and Participating Companies and may not be distributed to any other person. If Participant has any doubt about any of the contents of the Agreement, including this Appendix, or the Plan, the Participant should obtain independent professional advice.
Vesting of Awards and Sale of Shares. In the event that the Award vests within six months after the Date of Grant, the Participant agrees that he or she will not dispose of any of the Shares prior to the date six months following the Date of Grant.
Notifications
There are no country-specific provisions.
JAPAN
Terms and Conditions
There are no country-specific provisions.
Notifications
Exchange Control Information. If Participant acquires Shares valued at more than ¥100,000 in a single transaction, Participant must file a Securities Acquisition Report with the Ministry of Finance through the Bank of Japan within 20 days of the acquisition of the Shares.
SOUTH KOREA
Terms and Conditions
There are no country-specific provisions.
Notifications
Exchange Control Information. If Participant receive US$500,000 or more from the sale of Shares, Korean exchange control laws require Participant to repatriate the proceeds to South Korea within 18 months of sale.
TAIWAN
Terms and Conditions
There are no country-specific provisions.
Notifications
Exchange Control Information. If the transaction amount is TWD500,000 or more in a single transaction, Participant must submit a Foreign Exchange Transaction Form. If the transaction

amount is US$500,000 or more in a single transaction, the Participant must also provide supporting documentation to the satisfaction of the applicable bank.
UNITED KINGDOM
Terms and Conditions
UK Sub-Plan. The “UK Sub-plan” contains additional terms and conditions that govern the Units. Participants should review that document carefully.
[Joint Election for Pass-Through of Employer National Insurance Contributions. The Participant acknowledges and agrees that participation in the Plan and the vesting of the Award is subject to the Participant’s prompt execution of the Inland Revenue approved joint election in the form provided by the Company or its subsidiary, transferring all or a portion of the Company’s (or its subsidiary’s) National Insurance Contribution liability to the Participant.]
Notifications
There are no country-specific provisions.

ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED the undersigned does hereby sell, assign and transfer unto                                                                                                                           ( ) shares of the Capital Stock of MAGNACHIP SEMICONDUCTOR CORPORATION standing in the undersigned’s name on the books of said corporation represented by Certificate No. herewith and does hereby irrevocably constitute and appoint                                            Attorney to transfer the said stock on the books of said corporation with full power of substitution in the premises.
Dated:                                         

 	
 
Signature	

Print Name	
Instructions: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its Company Reacquisition Right set forth in the Restricted Stock Agreement without requiring additional signatures on the part of the Participant.

Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Amendment No. 9 to the Registration Statement on Form S-1 (as amended, the “Registration Statement”) of our report dated February 1, 2011, except for the effects of the conversion to a corporation described in Note 27(B), as to which the date is February 18, 2011, relating to the consolidated financial statements of MagnaChip Semiconductor Corporation, successor to MagnaChip Semiconductor LLC, and subsidiaries, and of our report dated March 13, 2010 except for Note 28, condensed consolidating financial information, which is as of August 4, 2010, relating to the consolidated financial statements of MagnaChip Semiconductor LLC, and subsidiaries, which appear in such Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
February 18, 2011