LG Innotek Rising, Samsung Electro-Mechanics Falling... Diverging Fortunes of Component Stocks

[Asia Economy Reporter Kwon Jaehee] LG Innotek and Samsung Electro-Mechanics, the leading mobile component stocks, have recently experienced contrasting fortunes in their stock prices. LG Innotek and Samsung Electro-Mechanics are well-known component suppliers representing Apple’s iPhone and Samsung’s Galaxy, respectively. While LG Innotek’s stock price is on the rise due to expectations surrounding the new iPhone models scheduled for release this year and next, Samsung Electro-Mechanics is struggling due to Samsung Electronics’ reduction in smartphone production volume.

According to the Korea Exchange on the 7th, LG Innotek’s stock price rose by 12.95% over the past month (May 6 to June 7). During this period, institutional investors net purchased 63.879 billion KRW, and foreign investors net purchased 77.345 billion KRW. As of 9:55 AM on the 7th, LG Innotek was trading at 389,000 KRW, up 0.26% from the previous trading day.

LG Innotek is recognized as a key Apple-related stock, supplying camera modules for Apple’s iPhone. The stock price is being driven by anticipation of new releases such as the iPhone 14 this year and the iPhone 15 next year, as well as industry assessments that LG Innotek’s expansion of its camera business from mobile to autonomous vehicles is nearing a turnaround to profitability in the automotive camera sector. Despite a global decline in smartphone demand, high-end models like the iPhone 13 Pro continue to show unusually strong sales even after about nine months since their release. Additionally, expectations are rising for replacement demand for models equipped with high-spec cameras ahead of upcoming reopenings and travel plans.

Kim Dongwon, a researcher at KB Securities, analyzed, “LG Innotek’s automotive parts business has seen new orders increase by an average of 3 trillion KRW annually, and currently holds an order backlog of 10 trillion KRW. With the effects of new iPhone products this year and next, and the expansion of the camera module business from iPhones to autonomous vehicles, a performance turnaround is expected in the second half of this year for the first time in six years.”

On the other hand, Samsung Electro-Mechanics, which supplies components for Samsung Electronics’ smartphones, was trading at 146,000 KRW as of the same time on the 7th, down 2.34% from the previous trading day. On June 2, the stock hit a new low of 147,500 KRW during trading, and it recorded a new low again on this day. Samsung Electro-Mechanics’ stock price fell by 9.12% over the past month (May 6 to June 7). During this period, foreign investors net sold 134.512 billion KRW, and institutional investors also net sold 117.64 billion KRW.

The stock price slump of Samsung Electro-Mechanics appears to be due to weak smartphone demand caused by recent lockdowns in China. Samsung Electronics announced last month that it would reduce smartphone production by about 15-20% due to lockdowns in major Chinese cities and plans to continue production cuts until July. This news is believed to have dragged down the stock price of Samsung Electro-Mechanics, which supplies components for Samsung Electronics’ smartphones. The future direction of Samsung Electro-Mechanics’ stock price is expected to hinge on how much smartphone demand in the Chinese market recovers.

Kim Rokho, a researcher at Hana Financial Investment, interpreted, “While LG Innotek recorded a stock price increase exceeding the KOSPI index for four consecutive weeks, Samsung Electro-Mechanics was considered the stock most reflecting concerns about the sluggish Chinese smartphone market, causing its stock price to underperform the index. However, Samsung Electro-Mechanics’ stock price is at a historically low band level, so further declines are expected to be limited.”

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