LG Innotek and Samsung Electro-Mechanics, the leading electronics parts companies in Korea, have attracted attention for their contrasting performance this year. Despite the global economic downturn, LG Innotek has recorded a significant growth in sales, while Samsung Electro-Mechanics gathered attention as they maintained a double-digit profit margin.
According to securities firms, LG Innotek is expected to record sales of 19.45 trillion KRW (about 15.3 billionUSD) and operating profit of 1.54 trillion KRW (about 1.2 billionUSD) this year. Samsung Electro-Mechanicsis expected to have sales of 9.48 trillion KRW (about 7.45 billionUSD) and operating profit of 1.22 trillion KRW (about 960millionUSD). This is the first time that the two companies' annual sales have differed by nearly double the amount.
LG Innotek has benefited greatly from the iPhone. Despite the global economic downturn, demand for high-end iPhone models (Pro series) has been strong.LG Innotek has increased its market share in parts supply for the iPhone Pro and Pro Max models, and as average supply prices increased, the size of its optical solution business grew. Based on the third quarter, the optical solution business accounted for 79% of LG Innotek's sales. High-value substrate business and battlefield parts business also saw increased sales, contributing to overall performance growth.
Samsung Electro-Mechanics' IT parts business has become mature, and overall sales have slightly declined compared to last year. The component business unit MLCC, which accounts for the largest share of sales, has been affected by the adjustment of inventory by set companies. MLCC, which had seen rising prices until last year, has seen a price drop and intensifying competition this year, leading to a decrease in utilization rate.
The optical communication solution business unit, which is in charge of camera module business, has become mature due to the adjustment of Samsung Electro-Mechanics smartphone inventory and the downturn in the Chinese smartphone market. Only the substrate business has consistently seen increased demand and has grown on its own.
However, there has been a difference in operating profit. Samsung Electro-Mechanics’ operating margin is expected to be 13%, higher than LG Innotek's forecast of 9%. Most of LG Innotek’s sales comes from the camera modules; however, the lower performance reflects the characteristics of the module assembly business.
It is expected that the performance of the two companies in the new year will show a "mixed" trend. This is because global demand for electronic parts is expected to hit a low point in the first half of the year and recover in the second half. Much attention is directed towards LG Innotek's new battlefield parts and high-value substrate business. There is much attention on Samsung Electro-Mechanics’ new businesses, such as battlefield MLCC and battlefield cameras, which are focused on growth markets.
By staff reporter Sora Park (srpark@etnews.com)