MAGNACHIP SEMICONDUCTOR Corp
For the period ended Dec 31, 2025. Filed Mar 16, 2026.
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FY2025 · Filed Mar 16, 2026
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Report of Independent Registered Public Accounting Firm (PCAOB ID 1437) on Consolidated Financial Statements
To the Shareholders and the Board of Directors of
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Magnachip Semiconductor Corporation and subsidiaries (the Company) as of December 31, 2025, the related consolidated statements of operations, comprehensive loss, changes in stockholders' equity and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 16, 2026 expressed an unqualified opinion thereon.
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
| Realizability of deferred tax assets | |
| Description of the Matter | The Company recognized total deferred tax assets of $170.9 million and a valuation allowance of $97.6 million, as of December 31, 2025. As described in Notes 1 and 17 to the consolidated financial statements, management’s assessment of the realizability of deferred tax assets depends on the Company’s ability to generate future taxable income.Auditing management’s evaluation of whether it is more likely than not that all or some portion of the deferred tax assets will not be realized involved especially complex and subjective auditor judgment in assessing significant assumptions used in the forecast of future taxable income, such as sales forecasts and the timing of reversals of existing temporary differences. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s process to assess the realizability of deferred tax assets, including controls over developing and reviewing the significant assumptions used in its forecasts described above. To test the evaluation of realizability of deferred tax assets, our audit procedures included, among others, evaluating the reasonableness of significant assumptions underlying its forecast. Specifically, we compared the future sales volume to historical performance trends and available external market |
outlook information and evaluated the average selling prices by analyzing historical price increases and decreases by product group and benchmarking such trends against industry pricing developments. We also performed sensitivity analyses to assess the impact of potential changes in sales forecast on the forecast of future taxable income. We clerically tested the Company's schedule of the reversal of temporary differences, and with the assistance of our tax subject matter professionals, we evaluated the timing of the reversal of the temporary differences into taxable income, application of relevant tax laws, and the impact of these assumptions on the realizability of deferred tax assets.
/s/ Ernst & Young Han Young
Seoul, Republic of Korea
March 16, 2026
We have served as the Company's auditor since 2025.
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