[Click eStock] LG Innotek, Investment as Proof of Growth Leads to 'Stock Price Revaluation'

[Asia Economy Reporter Lee Seon-ae] On the 23rd, KB Securities announced that it maintains a buy rating and a target price of 500,000 KRW for LG Innotek. This is because LG Innotek announced an investment of 413 billion KRW in FC-BGA (Flip-Chip Ball Grid Array), which is expected to face supply shortages over the next five years until 2027, raising expectations for securing long-term growth in the semiconductor substrate business.

Dongwon Kim, a researcher at KB Securities, stated, "Considering the current severe supply shortage situation, the investment conditions for FC-BGA are favorable," and added, "It is expected to take the form of long-term supply contracts with global strategic customers, which will guarantee LG Innotek's performance growth through additional investment execution in the future." He estimated that substrate material sales will increase 4.3 times from 1.2 trillion KRW in 2020 to 5.1 trillion KRW in 2030 due to new FC-BGA sales and increased demand for semiconductor substrates.

FC-BGA, a core process in chip packaging for high-performance computing (CPU, GPU, NPU), is at the highest level of technical difficulty, and demand is surging due to the expansion of FC-BGA mounting in data center servers, autonomous electric vehicles, and artificial intelligence fields. From the second half of next year, LG Innotek is expected to start mass production of FC-BGA for communications and PCs and expand supply to FC-BGA for autonomous vehicles and servers. FC-BGA sales from a mid- to long-term perspective are estimated to exceed 1 trillion KRW, similar to the expected semiconductor substrate sales of 1 trillion KRW in 2022, and profitability is expected to reach an all-time high level considering the average operating profit margin (20-30%) of global FC-BGA companies.

Researcher Kim emphasized, "The FC-BGA investment, which is expected to bring a structural boom due to prolonged supply shortages, implies future performance growth and is expected to directly lead to a revaluation of LG Innotek's stock price."

Following the recent announcement of FC-BGA investment, Samsung Electro-Mechanics' stock price surged 6% the next day, and Daeduck Electronics and Korea Circuit's stock prices also recorded about a 20% increase over approximately two weeks after deciding on FC-BGA investment. In particular, although LG Innotek is a latecomer in FC-BGA, it is expected to narrow the gap with leading companies and expand its market dominance in the future.

This is because ① LG Innotek ranks first globally in next-generation semiconductor substrates such as SiP (System in Package) and AiP (Antenna in Package), which share 80% similarity in product characteristics and mass production processes with FC-BGA, making smooth initial mass production prospects likely; ② FC-BGA investment is made at the request of loyal global strategic customers, facilitating long-term volume securing; and ③ it enables the supply of optimized component solutions for autonomous vehicles along with LiDAR, radar, and V2X systems, which is expected to expand the customer base centered on global big tech companies in the future.

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