[Asia Economy Reporter Jeong Hyunjin] LG Innotek recorded its highest-ever quarterly sales and operating profit in the first quarter, driven by increased component sales amid expanding smartphone demand despite the mobile off-season.
LG Innotek announced on the 29th that its first-quarter sales reached 3.07 trillion KRW, and operating profit was 346.8 billion KRW. Compared to the same period last year, sales increased by 55.6% and operating profit by 97.3%. Compared to the previous quarter, sales decreased by 20.1%, while operating profit rose by 1.3%.
LG Innotek explained that although the first quarter is generally a seasonal off-season and uncertainties due to COVID-19 have increased, continued smartphone demand drove performance, led by high-performance products such as triple cameras and 3D sensing modules for smartphones. Additionally, growth in 5G communication semiconductors, mobile and display substrates, and power components for electric vehicles supported the increase in results.
The market evaluates that the deferred demand for camera modules due to delays in new smartphone model launches by LG Innotek’s major clients boosted first-quarter performance. Analyst Park Kang-ho of Daishin Securities analyzed, "Based on LG Innotek’s high market share and competitiveness within Apple, optical solutions will continue high growth, semiconductor substrate supply shortages will persist, and with the automotive business turning profitable this year, operating profit in 2021 is expected to reach about 1 trillion KRW, setting a new record."
By business segment, the optical solutions business recorded sales of 2.2593 trillion KRW, a 69% increase year-on-year but a 26% decrease quarter-on-quarter. The substrate materials business posted sales of 358.5 billion KRW, up 24% year-on-year and 6% quarter-on-quarter. Growth continued due to steady sales of 5G communication semiconductor substrates and expanded supply of new models of chip-on-film (COF) for mobile and display applications.
The automotive components business recorded sales of 334.4 billion KRW, up 18% year-on-year but down 2% quarter-on-quarter. Sales of power components for electric vehicles, such as battery management systems (BMS) and DC-DC converters, increased with the growth of the electric vehicle market. Additionally, components for autonomous driving, including cameras for advanced driver-assistance systems (ADAS) and communication modules, showed steady performance improvements. An LG Innotek official stated, "The automotive components business is improving profitability through continuous internal innovation activities, including enhancing order quality."
For the second quarter, LG Innotek stated that the optical solutions division expects demand to slow due to seasonality but will respond to new models for other global customers. The substrate materials division anticipates expanded market supply due to increased semiconductor substrate production capacity and expects continued solid performance in display product lines amid rising global TV demand. Furthermore, the automotive components division plans to expand sales through global demand recovery and new project mass production in the second quarter, focusing on high value-added orders and profitability improvement.
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