'Corona Windfall' LG Innotek Takes Over Japanese Sharp's iPhone Supply Volume

Impact of Sharp Japan Ho Chi Minh Factory Shutdown
Apple Expands Adoption of 'iPhone 13' Sensor-Shift Camera Module
Apple Likely to Increase Dependence on LG Innotek Camera Module Supply

[Asia Economy Reporter Suyeon Woo] LG Innotek, which supplies camera modules for Apple's new smartphones, has gained a windfall by securing supply volumes from competitors due to the impact of COVID-19. With the expansion of sensor-shift (image stabilization technology) adoption in the new 'iPhone 13' models and the shutdown of competitor Japan Sharp's factory in Vietnam, Apple's dependence on LG Innotek for component supply is expected to increase further.

According to foreign media and industry sources on the 10th, Japan Sharp recently transferred some of the iPhone 13 camera module volumes produced at its Ho Chi Minh factory in Vietnam and supplied to Apple to LG Innotek. This was due to production disruptions caused by the Vietnamese government's shutdown order in the Ho Chi Minh area until the 15th to prevent the spread of COVID-19. With Sharp's Ho Chi Minh factory closed, it is interpreted that Apple requested LG Innotek's Hai Phong factory, which was relatively less affected by COVID-19, to increase supply volumes.

Until the previous model 'iPhone 12,' sensor-shift technology was applied only to high-end models, with LG Innotek and Japan Sharp forming a two-competitor system. In the new iPhone 13, expected to be unveiled in mid-month, the application of sensor-shift camera modules will expand to all models, increasing the required component volumes accordingly. According to the industry, Apple plans to produce up to 90 million units of the iPhone 13 by the end of the year, which is a 20% increase compared to the previous year.

In addition to the shutdown of competitors' factories in Vietnam due to COVID-19, another competitor, China's O-Film, was excluded from Apple's suppliers in March due to the US-China trade conflict, raising expectations that LG Innotek's supply share will increase significantly. An industry insider said, "By taking over Japan Sharp's supply volumes, LG Innotek could account for up to 70% of the iPhone 13 camera module supply."

LG Innotek has annual camera module production lines capable of producing around 500 million units at its factories in Gumi, South Korea; Yantai, China; and Hai Phong, Vietnam. As of the first half of this year, the operating rate is about 60%, indicating there is still production capacity available. If order volumes increase, production adjustments can be managed not only at the Hai Phong factory in Vietnam but also at the Gumi and Yantai factories.

This positive outlook for windfall profits has also turned on a green light for LG Innotek's plan to achieve 10 trillion KRW in sales and 1 trillion KRW in operating profit this year. The current consensus among securities firms expects annual sales of 12.4925 trillion KRW and operating profit of 1.1225 trillion KRW this year, representing increases of 31% and 65% respectively compared to the previous year. The increased supply share of camera modules to major clients and the continued supply shortage in the semiconductor substrate business, another core business, are expected to maintain high profitability.

Jongwook Lee, a researcher at Samsung Securities, said, "The sensor-shift effect is expected to perform better than anticipated, with camera module sales for new products expected to grow 33% year-on-year this year," adding, "The supply shortage of semiconductor substrates is also expected to continue into the first half of next year, longer than expected, allowing LG Innotek to stand out in its areas of strength."

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