Slumping Parts Industry Performance... Signs of Improvement from Q2

Samsung Electro-Mechanics and LG Innotek Operating Profit Down Over 60% YoY
Both Companies Seek Q2 Breakthrough Through Automotive Parts

Samsung Electro-Mechanics, LG Innotek, and other component suppliers saw their operating profits in the first quarter drop by more than 60% compared to the same period last year. This is explained as a result of the first quarter being an off-season and the impact of decreased demand due to the global economic slowdown.

Samsung Electronics Chairman Lee Jae-yong (second from left) inspecting the MLCC production plant at Samsung Electro-Mechanics' Tianjin facility in China on the 24th of last month (local time). Samsung Electro-Mechanics President Jang Deok-hyun (second from right) is explaining the equipment.
[Photo by Samsung Electro-Mechanics]

Samsung Electro-Mechanics announced on the 26th that its consolidated operating profit for the first quarter of this year was preliminarily estimated at 140.1 billion KRW, down 66% from the same period last year, and sales decreased by 23% to 2.0218 trillion KRW. A Samsung Electro-Mechanics official said, "Due to the global economic recession, demand for IT devices such as PCs has decreased, resulting in a significant drop in sales and operating profit compared to a year ago."

Jung Cheol-dong, President and CEO of LG Innotek. [Photo by LG Innotek]

LG Innotek's performance also plummeted. LG Innotek announced the day before that its consolidated operating profit for the first quarter was preliminarily estimated at 145.3 billion KRW, down 60.4% from the same period last year. Sales recorded 4.3759 trillion KRW, an increase of 10.7%. An LG Innotek official said, "Profitability declined due to the seasonal off-season and the slowdown in front-end IT demand caused by the global economic recession."

Samsung Electro-Mechanics expects its second-quarter performance to improve compared to the first quarter. This is because orders for high value-added server flip-chip ball grid array (FC-BGA) substrates are increasing, and the growth potential of automotive multilayer ceramic capacitors (MLCC) is also high.

In a conference call held immediately after the earnings announcement, Samsung Electro-Mechanics said regarding semiconductor substrates, "Additional supply of server (semiconductor) substrates is continuing this year," and "Expansion of the server-dedicated substrate line is also progressing as planned."

Regarding the automotive MLCC business, they said, "The automotive MLCC market and Samsung Electro-Mechanics' automotive division growth will continue," and "We will continuously secure market share in advanced driver-assistance systems (ADAS) and infotainment for vehicles and expand the lineup of high-growth electric vehicle high-temperature and high-pressure powertrain products."

LG Innotek also stated that it will enhance the profitability of its automotive business. An LG Innotek official said, "The automotive parts business is improving profitability through product and customer structure optimization and strengthening global supply chain management (SCM) capabilities."