'iPhone 16' Not Selling... Apple Supplier's Operating Profit Also Drops 28.9%

LG Innotek Q3 Operating Profit Declines
Sales Reach 5.6851 Trillion KRW

LG Innotek received a disappointing report card due to sluggish sales of Apple's 'iPhone 16'. This is because the iPhone 16 series is struggling more than expected.

LG Innotek announced on the 23rd that its operating profit for the third quarter of this year was 130.4 billion KRW, a decrease of 28.9% compared to the same period last year.

During the same period, sales increased by 19.3% to 5.6851 trillion KRW.

A company official said, "The supply of high-value-added camera modules has expanded due to mass production of new customer models, and sales of semiconductor substrates and vehicle communication modules have increased." However, they explained, "Operating profit decreased compared to the same period last year due to the decline in the KRW-USD exchange rate, weak demand in front-end industries such as electric vehicles and displays, and intensified supply competition in the optical business."

Industry analysts suggest that the Apple effect was not as strong as expected. According to Morgan Stanley, the first-week sales volume of the iPhone 16 was 37 million units, which is 12.7% lower than its predecessor. Production of the iPhone 16 series in the fourth quarter of this year is also expected to be slightly lower than the previous model. Guo Mingchi, a Taiwan TF International analyst known as an Apple expert, estimated that the iPhone 16 series will ship 88 to 89 million units in the fourth quarter, lower than the 90 to 91 million units produced in the fourth quarter of last year.

LG Innotek Gumi Plant exterior. [Photo by LG Innotek]

Looking at the business segments, the Optical Solutions business recorded sales of 4.8369 trillion KRW, a 24% increase compared to the same period last year. Mass production of high-value-added camera modules for mobile devices began in earnest due to the launch of new customer models, and supply of vehicle camera modules also increased. This is a 31% increase compared to the previous quarter.

The Substrate Materials business recorded sales of 370.3 billion KRW, a 13% increase compared to the same period last year, but a 2% decrease compared to the previous quarter. Supply of semiconductor substrates such as RF-SiP (Radio Frequency-System in Package) increased due to new product launches by customers, but display product lines such as COF (Chip On Film) showed weakness due to weak demand in front-end industries like TVs.

The Automotive Components business recorded sales of 477.9 billion KRW, a 9% decrease compared to the same period last year and a 4% decrease compared to the previous quarter. Sales declined due to a slowdown in the growth of the electric vehicle market. On the other hand, sales of vehicle communication modules for autonomous driving have steadily increased, and the order backlog has also grown annually, reaching 11.9 trillion KRW as of the third quarter of this year.

A company official said, "Sales of vehicle parts, which are being developed as core businesses such as vehicle cameras, communication modules, and lighting, are increasing every year, and the order backlog of the automotive business has reached 12 trillion KRW, showing results in business structure advancement." They added, "We will strengthen our market-leading position by expanding early proposals of advanced technologies and products, while continuously improving profitability through cost competitiveness using AI and digital twins, and strategic production site reorganization."