LG Innotek's Operating Profit Grows Sharply
South Korea's two leading electronic component makers, Samsung Electro-Mechanics and LG Innotek, showed a contrasting performance in 2019. Samsung Electro-Mechanics performed poorly due to falling prices of multilayer ceramic capacitors (MLCCs), while LG Innotek posted strong results thanks to an increase in sales of premium smartphone components.
Samsung Electro-Mechanics recorded 8.04 trillion won in sales and 734 billion won in operating profit in 2019. Its sales increased 0.5 percent on year but its operating profit fell 36 percent. The company explained that its earnings shrank as sales of its major products including multilayer ceramic capacitors (MLCCs), camera modules, and rigid flexible printed circuit boards (RFPCB) fell.
LG Innotek posted sales of 8.30 trillion won in sales and 403.1 billion won in operating profit in 2019. Its sales and operating profit grew 4 percent and 53 percent, respectively. The company said the sales and profit growth was led by the optical solution business, which produces camera modules, and the board material business, which produces semiconductor substrates.
Industry analysts expect both companies to show a better performance this year thanks to an improvement in business conditions and their restructuring efforts. Samsung Electro-Mechanics and LG Innotek are seeking to reduce their unprofitable high density interconnector (HDI) business. LG Innotek is also expected to gradually downsize its LED business.
Samsung Electro-Mechanics is highly likely to make a turnaround in its MLCC business, one of its core businesses, as supply of high-value-added industrial products is expected to swell in line with the expansion of the 5G smartphone market. The company is also expected to benefit from the smartphone market trend towards multi-cameras with high pixel and optical zoom functions.
LG Innotek's profitability is also expected to improve on the back of strong sales of new iPhone models. The company’s automotive parts business is also expected to grow. The division produces automotive motors, communication modules, camera modules for the advanced driver assistance system (ADAS), and power parts for electric vehicles.