Earnings Plunge Due to Persistent "Apple Risk"
Hopes for Second-Half Rebound Through "Business Diversification"
LG Innotek posted a 92.5% year-on-year drop in its second-quarter earnings due to the persistent "Apple risk." This "earnings shock" fell far short of market expectations, and analysts attribute it to a "triple whammy" faced by the company's core camera module business: sluggish demand from its largest client Apple, intensifying competition, and a stronger Korean won.
On July 23, LG Innotek announced that it recorded sales of 3.9346 trillion won and an operating profit of 11.4 billion won in the second quarter of this year. Compared to the same period last year, sales plunged by about 13.6% and operating profit by about 92.5%. Even though market consensus had already been lowered to sales of 3.8183 trillion won and operating profit of 42.1 billion won, the results still fell short. An LG Innotek official explained, "Unfavorable exchange rates and pull-in demand in the first quarter, driven by U.S. tariff risks, had an impact."
The exterior view of LG Innotek headquarters located in LG Science Park Magok, Gangseo-gu, Seoul. LG Innotek
However, LG Innotek expects product demand to recover in the second half of the year as Apple’s new product launches ramp up. An LG Innotek official stated, "With the mass production of new models by major customers in the second half, demand is expected to increase for camera modules as well as for communication semiconductor substrates such as RF-SiP (radio frequency system-in-package). In addition, we expect to realize sales from high-value automotive electronic components previously ordered, such as vehicle communication and lighting."
By business segment, the optical solution business recorded sales of 3.0527 trillion won, down 17.1% year-on-year. Compared to the first quarter, this was a 26.2% decrease. The company explained that, in addition to entering the typical seasonal off-peak period, a decline in exchange rates and tariff risks, as well as the impact of pull-in demand in the first quarter, contributed to the drop in sales.
The substrate and materials business posted sales of 416.2 billion won, up 10% year-on-year and 10.4% quarter-on-quarter. Stable supply of semiconductor substrates, centered on RF-SiP, drove the sales growth.
The automotive components business recorded sales of 465.7 billion won, down 6.2% year-on-year and 0.4% quarter-on-quarter. Although sales growth was limited due to a slowdown in downstream industries such as electric vehicles, the sales and proportion of high-value products increased.
LG Innotek is accelerating the advancement of its business portfolio, which includes semiconductor components such as flip chip ball grid array (FC-BGA) and automotive application processor (AP) modules, mobility components such as vehicle sensing, communication, and lighting, and even robot components. Through this, the company aims to establish a stable profit structure and secure mid- to long-term growth engines.
In addition to business advancement, LG Innotek plans to continuously improve profitability. An LG Innotek official explained, "With the completion of new plant expansions in Vietnam and Mexico in the second half of the year, we will accelerate the operation of strategic global production sites, while also strengthening cost competitiveness by expanding the adoption of artificial intelligence transformation (AX)."
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