Tesla/Apple Included in Auto Parts Order Backlog of KRW10tn
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
Maintain BUY, target price at KRW500,000; developer of the “eyes” of autonomous vehicles
We maintain BUY and TP of KRW500,000 on LG Innotek given (1) potential to supply key optical components for self-driving vehicles (e.g., camera, lidar, radar) to 20 global automakers and (2) the company is the only automotive parts supplier with both optical and communication technologies (e.g., V2X technology). Also, there is chance of winning orders from Mobileye, which is expected to raise capital this summer after its IPO (to be listed on NYSE) to fund a self-driving system.
Self-driving vehicle market to register 40% CAGR until 2035
According to Navigant Research, the global self-driving vehicle market will see rapid growth, from KRW8tn in 2020 to KRW1,300tn in 2035 (40% CAGR), on the back of EV market growth, advances in self-driving technology and a decline in accident rates of self-driving vehicles to socially acceptable levels. Vehicle autonomy is classified from level 0 to level 5, with level 3 or higher considered automated driving. Mercedes-Benz, Audi and Hyundai Motor plan to begin releasing level 3 vehicles in 2H22, which suggests the market will start to develop in 2023.
Tesla/Apple included in auto parts order backlog of KRW10tn
Automotive Components’ order backlog, currently at KRW10tn, has increased by an average of KRW3tn/year. The division should turn profitable in 2H22, which would mark the first time in six years. We see LG Innotek, which already supplies automotive cameras to Tesla, becoming the largest beneficiary of the self-driving vehicle market (order growth, ASP increases) regardless of the outcome between camera-based systems at Tesla/Mobileye vs. lidar/camera-based systems at Apple/Waymo, based on the following:
(1) The required number of cameras doubles with the increase in vehicle autonomy level (three to four cameras for level 2→eight to nine for level 3 →15 to 20 for level 4)
(2) ASP of such cameras is three times higher than that of smartphone cameras.