InnoInstrument Takes Active Accounting Measures to Address Risk Factors for Profit Turnaround in 2020

InnoInstrument, a global specialist in optical communication connectors and measuring instruments (CEO Daehwan Kwon), announced preliminary consolidated results for the fourth quarter of 2019, recording sales of 9.9 billion KRW and a net loss of 17.2 billion KRW.

The company stated that it will actively strive to establish a solid profit structure in 2020. The year 2019 was marked by the US-China trade dispute, which caused a significant decline in performance within China, making it a very challenging year for the company’s results.

Despite these adverse conditions, InnoInstrument maintained its annual R&D investment for new 5G-related products at around 13 billion KRW recently, but expenditures on prototype production and other costs led to a 40% deficit due to increased selling and administrative expenses.

InnoInstrument’s activities to improve profitability in 2020 include, first, conservative and proactive provisioning. Most of the products available for sale and equipment assets planned for disposal are expected to generate returns in 2020, which is anticipated to result in additional profits.

Second, there is a more conservative reflection of expenses. Although an additional 3 billion KRW was recorded as an expense due to a conservative evaluation of deferred corporate tax reductions under Chinese accounting standards, this is expected to be recognized as profit later. Furthermore, a large-scale restructuring of the organization and workforce has been carried out. Since the second half of last year, the company reorganized its internal structure around 5G-related product groups, completing restructuring of over 60% of headquarters and branch personnel by the end of the year, significantly reducing costs. The company is also pursuing radical cost reductions and differentiation elements for optical fiber fusion splicer (hereafter, connector) products. Through comprehensive adjustments of parts and design, costs have been greatly lowered, and new market-differentiated elements are being developed.

Finally, fundamental countermeasures to avoid the US-China trade dispute have been implemented. From the second half of 2019, most leading US IT and measuring instrument companies have established and are operating InnoInstrument’s production facilities in Penang, Malaysia. Additionally, R&D for new products such as spectrum analyzers has been completed, which will significantly reduce R&D expenditures.

Although InnoInstrument is currently facing additional difficulties in sales within China due to the COVID-19 virus, it expects no further risk factors throughout 2020.

The North American market is also expected to improve significantly with the start of network deployment triggered by the 5G network race among telecom operators following the T-Mobile and Sprint merger. Investments in telecommunications infrastructure are expected to expand competitively in Europe and emerging countries as well.

Moreover, InnoInstrument is the only domestic company to offer products covering the high-frequency bands required for 5G (9kHz to 43GHz), which is expected to be an advantage.

InnoInstrument’s 5G spectrum analyzers are expected to begin generating sales this year as domestic 5G base station installations accelerate. Particularly, based on the installation cases of 4G LTE network base stations, sales of spectrum analyzers are expected to be sustained continuously for the next 3 to 4 years, and sales volume is anticipated to increase significantly starting in 2021 when 5G Stand Alone begins.