Samsung Electro-Mechanics and LG Innotek Focus on Defending Q2 Amid 'Camera Module Performance Improvement'

[Asia Economy Reporter Ki-min Lee] Despite the impact of the novel coronavirus infection (COVID-19), South Korea's two major electronic component affiliates, Samsung Electro-Mechanics and LG Innotek, recorded solid performance in the first quarter of this year, driven by increased camera module sales. However, the outlook for the second quarter is expected to be less favorable.

According to the electronics industry on the 1st, Samsung Electro-Mechanics posted consolidated sales of 2.2245 trillion KRW in the first quarter of this year, up 7.9% from the same period last year, while operating profit fell 32.1% to 164.6 billion KRW. However, this figure is more than 60 billion KRW higher than the average forecast of 100.1 billion KRW by securities firms compiled by financial information provider FnGuide.

LG Innotek also showed significantly improved results compared to last year. LG Innotek's consolidated sales in the first quarter of this year rose 46.9% year-on-year to 2.0109 trillion KRW, and operating profit turned positive to 138 billion KRW. In particular, the operating profit was an 'earnings surprise,' reaching twice the average forecast of securities firms.

The camera module and other module businesses of Samsung Electronics and LG Electronics are cited as the main business areas driving the first-quarter performance. Samsung Electro-Mechanics saw a positive impact on its results as the supply of high-spec multi-camera modules and Wi-Fi communication modules for new flagship smartphones of its strategic clients expanded. In addition, increased sales of package substrates for PC central processing units (CPUs) and 5G antennas also contributed to the performance. Samsung Electro-Mechanics stated that while sales increased year-on-year due to the decline in the average price of MLCCs (multi-layer ceramic capacitors), another major business area, operating profit decreased. LG Innotek explained that the increase in sales of multi-camera modules for premium smartphones of major clients, 3D sensing modules, and semiconductor substrates used in 5G communication chips led to improved performance.

However, following COVID-19, a decline in camera module demand is expected, and both companies are concerned about defending their performance in the second quarter. Regarding the module business, Samsung Electro-Mechanics expects the 5G communication module market to gradually expand, but predicts that demand in the camera module sector will decrease in the second quarter due to fewer smartphone launches by clients during this period and consumption contraction caused by COVID-19. Accordingly, Samsung Electro-Mechanics plans to expand new entries into Greater China clients by utilizing camera modules with the latest optical technology such as folded zoom.

LG Innotek also forecasts weak demand for camera modules in the second quarter due to sluggish smartphone sales by North American clients such as Apple amid the COVID-19 situation and production adjustments ahead of new product launches in the second half of the year. Accordingly, LG Electronics plans to focus on supplying the new LG flagship model, LG Velvet, to defend its performance. Industry insiders also speculate that depending on the success of Apple’s iPhone SE 2nd generation, a major client of LG Innotek, there is potential for improved parts supply performance compared to the second quarter of last year.

This content was produced with the assistance of AI translation services.