LG Innotek Opens Era of 1 Trillion KRW Annual Operating Profit

Surprising Q1 Operating Profit of 300 Billion KRW
Over 100% Increase Compared to Last Year
Thanks to iPhone 12 Featuring LG Innotek Camera Module
Impact of Competitor Sanctions Amid US-China Trade Conflict Also Contributed

[Asia Economy Reporter Suyeon Woo] LG Innotek's surprise performance in the first quarter has strengthened expectations that it could usher in an era of annual operating profit of 1 trillion KRW this year. This is because the supply price is rising due to the supply of camera modules with added new technologies, and market share expansion is expected due to the restructuring of major competitors.

According to the industry on the 12th, LG Innotek's operating profit is estimated to account for about 20% of LG Electronics' provisional operating profit of 1.5 trillion KRW in the first quarter of this year, with the operating profit in the low 300 billion KRW range. This is an excellent performance with operating profit more than doubling compared to the same period last year.

LG Innotek 3D Sensing Camera Module / Photo by LG Innotek Website

The industry evaluates that this surprise performance was made possible thanks to the success of Apple's 'iPhone 12', for which LG Innotek supplies camera modules. According to a Wedbush Securities investment report, iPhone sales this year are expected to reach a record high of 250 million units, driven by the success of the 'iPhone 12'. The increased proportion of the 'iPhone 12 Pro Max', which applies LG Innotek's sensor-shift (image stabilization) camera technology, also contributed to the improvement in performance by raising the average supply price.

The US-China trade conflict, which led to sanctions on Chinese parts companies, also worked as a market share windfall for LG Innotek. In July last year, the US included 11 companies, including China's Ofilm, in the sanctions list citing human rights violations. NH Investment & Securities analyst Lee Gyu-ha analyzed, "Due to the exclusion of the supply chain of Chinese camera module competitor Ofilm, LG Innotek's module market share has slightly increased."

Influenced by these favorable factors, LG Innotek's performance outlook for this year has risen to sales of over 10 trillion KRW and operating profit around 1 trillion KRW. Compared to last year's performance (sales of 9.5418 trillion KRW, operating profit of 681 billion KRW), sales are expected to increase by about 5%, and operating profit by about 50%.

Not only the optical solutions (camera module) division but also the semiconductor substrate materials and automotive components business divisions are expected to turn around starting this year. The substrate materials business division is expected to increase sales from about 550 billion KRW last year to the 700 billion KRW range due to the semiconductor industry's favorable conditions, and the automotive components division is also expected to see increased sales centered on vehicle camera modules and power modules for electric vehicles.

Daishin Securities analyst Park Kang-ho said, "With LG Electronics' mobile business suspension, LG Innotek is expected to focus on expanding automotive components," adding, "It will turn profitable this year and be nurtured as a next-generation growth sector."