[Click eStock] LB Semicon, Non-memory Test Facility Investment "True Value Revealed"

[Asia Economy Reporter Lee Seon-ae] A flood of positive analyses from the securities industry followed LB Semicon's public announcement of a large-scale investment in non-memory semiconductor testing equipment (facilities). On the 29th, Hana Financial Investment stated, "The fact that sales are expected to increase from 2022 and that the proportion of testing in the post-process sector is increasing company-wide is positive in terms of margins and corporate value."

Semiconductor company LB Semicon announced a large-scale investment in non-memory semiconductor testing equipment (facilities) the previous day. Including machinery, land, and buildings,

the amount is 95.5 billion KRW. This accounts for 32% of its equity capital (298 billion KRW). Since the investment area is non-memory, it is estimated that testing equipment will be purchased from Advantest and Teradyne. It is presumed that internal reserves and borrowings will be utilized. The non-memory semiconductor sectors where testing equipment is used include AP (Application Processor), camera image sensors (CIS), DDI (Driver IC), and PMIC (Power Management IC). The testing equipment to be delivered by the end of this year is expected to contribute significantly in terms of utilization rate and sales from the second quarter of 2022.

LB Semicon's headquarters is located in Cheongbuk-eup, Pyeongtaek-si. The announced facility investment includes land and building investments, but LB Semicon's

testing business is expected to be mostly deployed at the Anseong production line rather than Pyeongtaek. Sales and operating profit for the third quarter are estimated to increase from the previous quarter (sales of 121.6 billion KRW, operating profit of 12.4 billion KRW) to 130 billion KRW and 14 billion KRW, respectively. The reason for the increase compared to the previous quarter is the rise in the utilization rate of testing equipment in applications including camera image sensors (CIS). Despite the off-season, fourth-quarter sales are estimated to be similar to the third quarter at 129.1 billion KRW, due to the expected increase in sales of 12-inch DDI (Driver IC).

In the same industry, companies such as Tesna, Hana Micron, and Nepes Arc, followed by LB Semicon, announced investments in non-memory semiconductor testing equipment between August and September. Among them, many companies are focusing on the AP (Application Processor) testing business. This is because the proportion of Application Processor internalization by smartphone finished product customers in the front-end industry is increasing. Due to trade disputes, COVID-19 and the spread of the Delta variant, and China's power supply shortages, the importance of semiconductor (component) procurement in the smartphone supply chain is increasing. The expansion of Application Processor internalization is expected to increase related sales for these testing service providers from 2022, and the increasing proportion of testing in the post-process sector company-wide is positive in terms of margins and corporate value.

Kim Kyung-min, a researcher at Hana Financial Investment, emphasized, "Non-memory testing service companies are still influenced by sentiment somewhat unrelated to the fundamental trends of the industry, such as the decline in memory semiconductor spot prices. However, if Samsung Electronics' non-memory foundry utilization rate is high, this sector benefits in terms of quarterly performance, so over time, the market will eventually recognize the true value of the non-memory testing industry."