[Asia Economy Reporter Minji Lee] Ahead of the release of Apple's new iPhone this fall, expectations are rising for related component stocks.
As of 1 PM on the 7th, LG Innotek was trading at 213,500 KRW, down 0.3% from the previous trading day. Over the past week, it showed an increase of around 6%, leading the rise in the electrical and electronics sector, and appears to be undergoing a slight correction. BH, which recorded a rise of around 10% over the past week, was also showing a decline of about 2% at the same time. However, the securities industry predicts that as production of components for the new iPhone begins this fall, both the stock prices and earnings of component manufacturers will show an upward trend in the second half of the year.
LG Innotek supplies camera modules for the iPhone. In the fourth quarter of last year, it played a leading role in supplying 3D sensing models for the iPhone 12 series, resulting in the optical solutions division's operating profit increasing by 215% quarter-on-quarter to 342 billion KRW. Apple is forecasting higher iPhone shipments this year compared to the previous model, and if demand supports this, the earnings outlook for related component companies is expected to rise further. Juminwoo, a researcher at Meritz Securities, stated, "The benchmark for the success of the next iPhone series is 80 million units. If this is exceeded, LG Innotek's operating profit estimate for this year is expected to increase by 200% compared to a year ago, reaching 1.16 trillion KRW."
BH is expected to supply components for all four models of the new iPhone this year. In particular, there is growing anticipation in the market that BH could take over the production of OLED RF-PCBs for Apple iPhones, as Samsung Electro-Mechanics is considering withdrawing from the RF-PCB (Rigid-Flex Printed Circuit Board) market. BH holds a 50-55% share of RF-PCB production within Samsung Display, Apple's key OLED panel supplier, while Samsung Electro-Mechanics holds about 45%. Chocheolhee, a researcher at Korea Investment & Securities, said, "Considering the rigorous quality inspections, BH can fill a significant portion of the gap left by Samsung Electro-Mechanics," adding, "The company is already preparing for increased sales through expanded production capacity."
Typically, before the launch of a new smartphone, there is a net buying trend for component and material suppliers, followed by profit-taking after the release. Although there are concerns about demand uncertainty due to the success of the previous iPhone 12 series, Apple's strong demand forecast for the next iPhone series and increased production volume suggest that expanding interest in related stocks this year remains a valid strategy.
Kim Rokho, a researcher at Hana Financial Investment, analyzed, "Although demand uncertainty is high, the fact that set manufacturers are strongly anticipating demand and increasing production volume can be a sufficient investment point," adding, "Smartphone shipments in the third quarter are expected to increase by about 20% compared to the previous quarter, which could lead to a sharp improvement in the earnings of related companies compared to the previous quarter."
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