Budget Products
LG Innotek has set up a two-track strategy to ramp up production capacity for budget products at its forward base in Vietnam and focus on high-value-added premium products in Korea. The company announced on June 26 that it will invest 1.3 trillion won (approximately US$1 billion) in its Hai Phong production facility in Vietnam to implement this strategy.
LG Innotek established its Hai Phong subsidiary in September 2016. It started producing camera modules in September 2017 and surpassed 1 trillion won in sales the following year. As demand for camera modules from corporate customers such as Apple exploded, LG Innotek invested an additional US$140 million in 2018 to expand the Hai Phong subsidiary’s facilities after only four months of the factory’s operation.
Since then, the Hai Phong subsidiary’s production lines have grown steadily, posting sales of 4.3479 trillion won and net profit of 145.9 billion won in 2022. It has the largest size among LG Innotek’s overseas subsidiaries. It currently employs about 3,500 people in Vietnam.
LG Innotek aims to further increase its capacity to produce cameras for smartphones through this additional investment. The investment will more than double the Vietnamese plant’s camera module capacity. The new plant is expected to be completed in the second half of 2024 with an eye towards starting volume production in 2025. The city of Hai Phong welcomed the investment and promised to provide support such as the construction of additional substations to expand power supply and tax incentives.
According to Taiwanese market research firm Trendforce, smartphone camera module production is expected to reach 4.62 billion units globally this year. This is a 3.6 percent increase from 4.46 billion units in 2022.
The large increase in camera module production coincides with a rebound in smartphone demand. Global market research firm IDC analyzed that the global smartphone market is expected to grow at an annualized rate of 2.6 percent over the next five years, starting from the second half of this year.
The investment reinforces LG Innotek’s dual strategy of focusing on Vietnamese lines for budget models and lines in Korea for premium products. By expanding production facilities in Vietnam, the company will be able to focus more on high-value-added products at its factories in Korea.