In spite of partial cuts in Apple iPhone 14 production, Korean key parts partners have had their best 3rd quarter performances. Securing key technology that differentiated them from late comers to greatly increase its market share in its clients was largely effective. In contrast to cuts in iPhone production mostly being in medium to low range prices, the demand for the premium range is gradually increasing, making it another positive factor.
According to the industry on the 30th, key Apple partners, such as Samsung Display, LG Innotek, and BH, had their best 3rd quarter results to date.
Samsung Display had their best 3rd quarter profits. Compared to the same period last year, their operating profit increased by 32.9%, recording 1.98 trillion KRW. Their operating profit margin reached 21.9%.
Samsung Display achieved their best performance thanks to profits resulting from delays and difficulties in high-end iPhone 14 model display supply from latecomers.
The iPhone pro series, the high-end model, will be equipped with low-temperature polycrystalline silicon (LTPO) OLED panels that only Samsung Display can currently stably mass produce. The company supplied most of the panels on the Apple iPhone pro series this year.
LG Innotek recorded 3rd quarter sales of 5.3874 trillion KRW, and operating profits of 444.8 billion KRW. This was the first time they exceeded 5 trillion KRW in 3rd quarter sales. Compared to the same period last year, their sales went up by 41.9%, and their operating profits by 32.5%.
Following their supplying of rear cameras on the iPhone 14, LG Innotek began to supply some of the front cameras and camera module parts for the first time, massively improving their performance. Compared to its predecessor, the number of pixels has increased significantly, raising the proportion of premium products with high unit prices. The camera module business typically is low in profitability, but the improvement in specs have improved the profitability this quarter. As the LG Innotek’s position in the iPhone camera module supply chain becomes more significant, the importance of companies in Japan and China are slowly declining. Thanks to the demand in the year-end peak season, LG Innotek is expected to continue its strong performance into the 4th quarter.
BH, the supplier of iPhone’s rigid-flexible PCB (RFPCB), had their strongest 3rd quarter performance with the Apple effect. BH supplies RFPCB to Apple through Samsung Display.
BH had their 3rd quarter sales rise by 42% compared to the same period last year with 473.2 billion KRW, and their operating profits showed a 35% rise with 59 billion KRW.
With quality issues in latecomer iPhone suppliers in the RFPCB industry this year, the market share of BH has risen greatly. They are expected to make up 80% of iPhone 14 supplies. Apple is searching for new RFPCB supplies, but it appears that the proportion of BH’s supply will be maintained for the time being.
The reason Korean companies were able to produce their best 3rd quarter results were because Apple has implemented a cut in production on the regular line of iPhones with low-medium range parts, while focusing on their plus model. The proportion of demand for their high-end models in the Pro and Pro Max model continue to rise. As Apple adheres to the ‘multi-vendor’ strategy of getting parts from multiple suppliers, the proportion of their supply of next generation product parts might be partially adjusted.
A member of the parts industry said, “The reason Korean parts companies have excellent results in the midst of a recession in the IT front market and Apple cutting production, is because their premium parts strategy worked perfectly,” They went on to say, “This trend looks likely to continue into the 4th quarter.”
[Chart] Status of Korean suppliers of iPhone 14 parts
Reporter So-ra Park (srpark@etnews.com)