LG Innotek Acquires LG Electronics Gumi Plant... Production Expansion Set to Accelerate Next Year
LG Electronics Expands Production Capacity by Acquiring Gumi A3 Factory
[Asia Economy Reporter Park Sun-mi] LG Innotek, which has shown differentiated performance based on its high market share within Apple, is expanding its production capacity by acquiring LG Electronics' Gumi A3 plant.
On the 10th, LG Innotek announced that it held a board meeting the previous afternoon and resolved to acquire the land and buildings of LG Electronics' Gumi A3 plant. The acquisition price is 283.4 billion KRW. LG Electronics also stated through a public disclosure that it expects an improvement in cash flow through the sale of idle assets.
The Gumi A3 plant is the largest among LG Electronics' A1, A2, and A3 plants operated in Gumi, Gyeongbuk, with a total floor area of approximately 230,000㎡. LG Innotek had been leasing 17% of the A3 plant's land to produce camera modules and semiconductor substrates, but with the acquisition of the entire plant land and buildings, it will be able to significantly increase production of camera modules and semiconductor substrates starting next year. The acquisition funds are reported to be paid entirely in cash.
The factory transfer contract was finalized as the interests of the two companies aligned. Originally, LG Electronics' Gumi A3 plant was used to produce solar panels. However, LG Electronics announced the termination of its solar panel business earlier this year, making the A3 plant no longer necessary. On the other hand, LG Innotek has been supplying camera modules for iPhones to Apple for several years with increasing order volumes, and has also invested in establishing a mass production line for flip chip-ball grid array (FC-BGA) substrates used in semiconductors, making securing a factory essential.
LG Innotek announced plans to invest a total of 1.0561 trillion KRW in the optical solutions business and 413 billion KRW in the semiconductor substrate FC-BGA business within this year. An LG Innotek official explained, "Due to increased sales, there is a need to expand production capacity in the optical solutions division, which produces substrate materials and camera modules, and while searching for additional factory sites, we acquired idle assets from LG Electronics, which no longer produces solar panels."
Meanwhile, the securities industry expects LG Innotek to achieve record-high performance again this year due to increased orders following last year. Kang-ho Park, an analyst at Daishin Securities, said, "We expect the highest sales of 3.2 trillion KRW in the second quarter due to improved camera module mix (product ratio) and the effect of exchange rate increases," adding, "High-priced Apple smartphones such as the iPhone 13 Pro and Max are still selling well, so differentiated performance based on a high market share within Apple is expected."
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He also added, "This year, with the new supply of front cameras for the iPhone 14, LG Innotek's market share within Apple is increasing, and we expect additional sales of about 600 billion KRW in the second half compared to previous estimates."
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