Competing Component Suppliers
Samsung Electro-Mechanics and LG Innotek, the component-manufacturing subsidiaries of the Samsung and LG Groups, respectively, announced less-than-expected Q4 business results. However, market participants are giving opposite outlooks as to their business for this year, based on their performance improvement in 2013.
Samsung Electro-Mechanics held an IR session in Yeouido, Seoul on January 28 and announced that it recorded 1.7101 trillion won (US$1.5986 billion) in sales and 35.9 billion won (US$33.5 million) in operating losses in Q4 last year on a consolidated basis. The turnover and operating profits fell 18% and 19%, respectively.
LG Innotek announced its business results for the same period on the previous day. The sales were 1.544 trillion won (US$1.442 billion), 5.1% and 3.2% down from a year and a quarter earlier. The operating profits added up to 28.9 billion won (US$27.0 million) to post a 48.2% decline quarter-on-quarter.
They moved in quite different directions last year. Specifically, Samsung Electro-Mechanics earned 8.2566 trillion won (US$7.7107 billion) in sales and 464 billion won (US$433 million) in business profits. The former increased by 4%, but the latter dropped by no less than 20%. Meanwhile, LG Innotek increased its sales 16.8% year-on-year to 6.2115 trillion won (US$5.8008 billion), breaking the six trillion won mark for the first time in its history. The operating profits surged 76.1% from the previous year to reach 136.2 billion won (US$127.2 million) as well. Samsung Electro-Mechanics had outperformed LG Innotek in 2012, but things were reversed in 2013.
The companies are showing opposite outlooks for this year, too. Although both of them are supplying components such as camera modules and substrates to smartphone manufacturers, they have pretty different business structures. Samsung Electro-Mechanics is highly dependent on Samsung Electronics and is very vulnerable to the possibility of Samsung Electronics’ slump.
However, LG Innotek is relatively free from the ups and downs on the part of its partners. Besides, things are likely to get better, with LG Electronics having recorded losses for two consecutive quarters so far. LG Innotek established business relations with a series of clients other than LG Electronics to further improve its performance last year. Such efforts are expected to have a positive impact during the course of this year as well.