[Asia Economy Reporter Ki-min Lee] LG Innotek, an electronic components affiliate of LG Group, is at a turning point to increase its performance in the automotive sector. This comes not only as major client Apple’s autonomous vehicle launch plans have been revealed but also as its parent company LG Electronics enters the core parts business for electric vehicles.
According to industry sources on the 25th, as LG Electronics and Apple actively enter the electric vehicle market, LG Innotek’s portfolio is expected to diversify, with a decrease in the proportion of camera module sales and an increase in automotive parts sales.
Earlier, on the 23rd, LG Electronics held an extraordinary board meeting and resolved to spin off part of its green business, including electric vehicle motors, inverters, and infotainment driving systems, within its Vehicle Component Solutions (VS) division. The newly established company from the spin-off will be a joint venture, with 49% of its shares acquired by Magna International, the world’s third-largest automotive parts company based in Canada. Consequently, LG Innotek, a consolidated subsidiary of LG Electronics, is expected to supply automotive communication modules, camera modules, and more in the future.
Moreover, it has become a foregone conclusion that Apple, a major customer for camera modules, will officially launch an autonomous electric vehicle in 2024. The Dutch media outlet LetsGoDigital even revealed concept designs of Apple’s autonomous electric vehicle. An industry insider said, “IT companies like Apple and Tesla often request existing suppliers to prioritize product supply when starting new businesses to ensure business stability,” adding, “If Apple formalizes the production and launch of its autonomous electric vehicle, it is highly likely that LG Innotek will be requested to supply camera modules for electric vehicles.”
Accordingly, LG Innotek’s earnings structure, which has been heavily concentrated in smartphone camera modules, is expected to improve with increased sales in automotive parts. Last year, the Optical Solutions division, responsible for camera modules and 3D sensing modules, recorded sales of 5.4257 trillion KRW, accounting for about 65% of LG Innotek’s total sales. Although the automotive parts division supplies high-value vehicle lighting modules, advanced driver-assistance system (ADAS) cameras, DC-DC converters, and other vehicle power modules to automakers, its total sales proportion remains low at around 10%. The operating profit ratio is similar to the sales proportion.
Researcher Min-woo Joo of Meritz Securities stated in a report released the day before, “LG Innotek’s business portfolio is changing,” and added, “The proportion of iPhone-related operating profit is expected to decline to 52% in 2022,” forecasting an increase in the shares of substrate materials and automotive parts.
He further explained, “Starting with increased sales of small motors, cameras, V2X (vehicle to everything) modules, and DC-DC converters for existing customers, by 2025, there is potential to supply Apple Car with cameras, 3D sensing modules, and V2X communication modules.”
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