It is predicted that LG Innotec’s LED Business Department is going to be at a crossroad once again as there are possibilities of opportunities and crisis this year. People are interested whether or not it can clear its name from being a business department that makes perpetual loss because lower depreciation of facility investments and strengthening of product lines with high values can act as reasons for opportunities. On the other hand, difficult time can be expected this year once again if high-output lighting, lightings for vehicles, and UV LED businesses do not go into operation on the right time.
According to industry on the 1st, depreciation for LED Business Department is going to be reduced by 50% compared to last year. Depreciation for major facility investments that had taken place from 2010 to 2011 finished last year, and depreciation for facility investments between 2012 and 2014 is going to be reduced this year also. As most of elements that worsen financial structure disappear, there are opportunities this year for LED Business Department to improve its performance.
With such opportunities, LG Innotec is planning to prepare steppingstones that can chance its business around. It is heard that LED Department also made loss last year. In this year, it is going to strengthen vehicle product lineups such as normal radiation LED, head lamp, and DRL (Daytime Running Light), and high-output lightings and UV LEDs will also act as driving forces. Because these products have high unit prices and technical barriers, they can improve profitability and defend against attacks from foreign products.
Lesser dependence on BLU, which is a main reason that worsens feasibility, on overall sales is also another reason why there are opportunities for LED Department this year. During last year’s 4th quarter, LED Department made overall sales of $144 million (178.1 billion KRW) where sales of LEDs for lightings and sales of BLUs were $66 million (81.4 billion KRW) and $78.4 million (96.6 billion KRW) respectively. Proportion of BLU’s sales fell down to 54.2%. Industries are predicting that LED Department will start making surplus if proportion of sales of LEDs for lightings surpasses proportion of sales of BLUs.
BLU’s competitive edge has gotten worsened due to lower demands from TV and display markets, oversupply of BLUs globally, and low-priced BLUs from Chinese companies. Also because it was considered as suitable for small businesses for 3 years, BLU business could not enter large corporations. Due to these reasons, LG Innotec, which had carried out enormous facility investments based on BLU, had received direct hits.
It is crucial how fast can LED businesses for vehicles and lightings that currently do not contribute much to overall sales grow. Although LEDs for vehicles have high chance for growth, their level of contribution towards sales is still low. Even though UV LED has technical advantages, there are not any large contracts for the time being.
UV LEDs are LEDs for special purposes that have disinfection and sterilization functions by releasing UV rays. Unlike mercury ramps, it does not have any pollutants. If B2B market is opened, they can help growth of sales.
“Because this year’s depreciation is going to be reduced by 50% compared to last year, we can grab a turning point if we strengthen our businesses in first half of this year.” said a representative for LG Innotec. “It is important how fast can high-value products such as lightings for vehicles, LED lightings, and UV LEDs create upward trends.”
Staff Reporter Song, Junyoung | songjy@etnews.com