At the same time, a fund led by South Korea's KTB Securities Co. Ltd. has acquired MagnaChip and its affiliates, according to court documents. The deal is valued at about $80 million.

The bankruptcy filing involves the following entities: MagnaChip Semiconductor LLC, MagnaChip Semiconductor SA Holdings LLC, MagnaChip Semiconductor Inc., MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Co.

The company's sales units in Europe, Taiwan and Japan are not part of the Chapter 11 filing, according to reports. MagnaChip has assets up to $50 million, but it also estimated liabilities of more than $1 billion.

In 2004, the non-memory chip unit of Hynix was sold to a newly-created South Korean company formed by Citigroup Venture Capital Equity Partners L.P., CVC Asia Pacific Ltd. and Francisco Partners.

The new company, MagnaChip, inherited three main business lines from Hynix, including CMOS image sensors, LCD drivers and foundry services. In 2005, MagnaChip's sales were $937.7 million, a 13.6 percent decrease over 2004. It also showed a loss of $100.9 million in 2005.

In foundry services, the company does not compete head-to-head against Chartered, TSMC and UMC, but rather it offers specialty analog and mixed-signal foundry processes. MagnaChip has one 6-inch fab and two 8-inch plants in Cheongju. It has another 8-inch fab in Gumi.