Apple, Tesla... Korean Parts Companies Relying on Global 'Big Players'

South Korea's Leading Electronic Component Company Expanding into a Global Component Company

[Asia Economy Reporter Park Sun-mi] Leading Korean electronic component companies such as Samsung Display, Samsung Electro-Mechanics, and LG Innotek are solidifying their positions as global component suppliers by securing major global 'big spender' clients like Apple and Tesla.

According to the industry on the 29th, with Apple announcing the launch of the new iPhone 14 series on the 7th of next month, the second half sales volume to Apple of Samsung Display, which supplies OLED displays, and LG Innotek, which supplies camera modules, is expected to increase significantly.

The sales proportion by iPhone 14 model is 30% for iPhone 14 Pro Max, 28% for Pro, 24% for standard, and 18% for Max, with the high-end models (Pro Max, Pro) accounting for a record-high 60%. Korean component companies hold the largest share in these high-end models. The industry expects Samsung Display to have an 85% supply share and LG Innotek 75% for the iPhone 14 high-end models. Accordingly, the proportion of iPhone sales in total revenue this year is also expected to be around 50% for Samsung Display and 80% for LG Innotek.

Despite the declining smartphone shipment trend, the high brand loyalty and the iPhone's insensitivity to inflation and economic downturns act as favorable factors for Samsung Display and LG Innotek, which are increasing their component shares at Apple. The initial iPhone 14 order volume (September to December) pre-ordered by Apple from component suppliers is 93 million units, a 15% increase compared to 82 million units of the iPhone 13.

Dongwon Kim, a researcher at KB Securities, analyzed, "Pre-orders for the iPhone 14 by Chinese distributors have reached an all-time high, and 70% of American consumers (among iPhone 11, 12, and 13 users) intend to upgrade to the iPhone 14, making it unmatched in the global smartphone market in the second half."

Korea's major electronic component companies are also aggressively securing global 'big spender' clients in the newly entered automotive electronics business. LG Innotek and Samsung Electro-Mechanics, which operate camera module businesses, are reportedly close to securing orders worth trillions of won from Tesla. Tesla, the world's number one electric vehicle manufacturer, is considered a representative 'big spender' client for Korean electronic component companies increasing their automotive electronics business share. Regarding LG Innotek's disclosure inquiry about a trillion-won camera module order from Tesla, the company stated, "Nothing has been concretely decided yet, but discussions are ongoing." If the contract is finalized, parts will be supplied to Tesla's Austin plant in Texas, USA.

Samsung Electro-Mechanics, which is increasing the sales proportion of ultra-high capacity automotive MLCCs (Multilayer Ceramic Capacitors), has also seen results in Tesla orders as a result of focusing on growing vehicle camera modules as a new business since last year. In response to a disclosure inquiry about supplying camera modules worth 5 trillion won to Tesla, Samsung Electro-Mechanics said, "We cannot disclose details such as transaction scale or amount, but we are in the negotiation stage."

As electronic component companies expand their scope from smartphones to automotive electronics, securing global 'big spender' clients will contribute to stable automotive electronics business revenue in the future.

Until now, the main demand for camera modules was smartphones, but facing a crisis with the recent slowdown in smartphone demand, companies must place hopes on expanding new businesses such as automotive electronics. An industry official said, "The component industry, which has focused on smartphones, is expanding into automotive electronics for business diversification," adding, "Securing the top client in the industry is important for stable client and revenue acquisition."