LG Innotek will pull out from its smartphone high-density interconnection (HDI) substrate business. The decision was made as its profitability plunged due to a slowdown in the growth of the smartphone market and intensifying competition with Chinese companies.
LG Innotek will close its HDI substrate plant in Cheongju of North Chungcheong Province within the year, industry sources said on Sept. 26. The facilities and workers in the Cheongju plant will be transferred to the Gumi plant in North Gyeongsang Province, which produces substrates for semiconductors.
An HDI substrate is a board with high-density circuits that make it possible for electronic parts mounted on a PCB to send and receive electrical signals between themselves. LG Innotek started producing HDI substrates in the early 2000s, with sales once topping 300 billion won a year. However, its annual sales fell to less than 200 billion won due to price war initiated by Chinese and Taiwanese companies and a drop in smartphone sales. LG Innotek has been working on cutting down on HDI production to less than a half of last year’s.
LG Innotek plans to devote human resources and funds invested in HDI substrates to the semiconductor substrate business. The company invested more than 300 billion won in parts for semiconductor substrates and large display panels from last year to this year. “If LG Innotek abandons the HDI substrate business and concentrates its capacities on semiconductor substrates, the company's overall profitability will improve,” a securities industry official said,
LG Innotek is increasing its market share by attracting more Korean and overseas semiconductor manufacturers. Its market share in the global semiconductor substrate market rose from 9.5 percent at the end of 2015 to 20.8 percent in the first half of this year. Its operating profits rose 24 percent on year to 61.3 billion won on the back of the semiconductor substrate business.