LG Innotek Focuses on Substrates as Optical Solutions Sales Account for 80%...

Apple accounts for 74.8% of total sales... Severe concentration in optical solutions
Need for business diversification emerges
Future growth driver is 'FC-BGA'

High-magnification optical continuous zoom camera module from LG Innotek. [Photo by LG Innotek]

[Asia Economy Reporter Han Ye-ju] LG Innotek is actively fostering its high-value-added semiconductor substrate business. This is interpreted as a strategy to secure new growth engines while reducing dependence on the optical solutions business, which accounts for more than 80% of sales. In particular, as the proportion of its major client Apple has grown, and the company's performance is influenced by iPhone sales, LG Innotek appears to be making all-out efforts to diversify its business.

According to FnGuide on the 26th, as of the third quarter of this year, Apple's share of LG Innotek's sales stands at 74.8%. The share, which was 61% in 2018, increased to 64% in 2019, 67% in 2020, and 75% in 2021, showing a steady rise. The sales proportion of the optical solutions division, which manages the camera module business supplied to Apple, recorded 79.2% of total sales in the third quarter of this year, marking an all-time high.

Of course, the optical solutions division played a major role in LG Innotek's rapid growth. LG Innotek, which recorded sales in the 7 trillion KRW range in 2018 and 2019, posted nearly 15 trillion KRW in sales last year. LG Innotek's annual sales for this year are estimated to reach 20 trillion KRW.

The problem is that as dependence on Apple intensifies, if variables such as iPhone production disruptions or sluggish sales occur, LG Innotek could also be affected. This highlights the need for business structure diversification.

LG Innotek has identified FC-BGA (Flip-Chip Ball Grid Array) as its future growth engine. FC-BGA is a semiconductor substrate that connects semiconductor chips used in PCs, servers, and networks to the main substrate. Recently, its usage has been expanding in the fields of artificial intelligence and network servers, but there are not many manufacturers worldwide, causing a supply shortage. Semiconductor industry insiders expect that demand will not be resolved at least until 2024.

Until now, the FC-BGA market has been led by Japan's Ibiden and Shinko Electric, and Taiwan's Unimicron. Domestic companies were relatively behind, but with Samsung Electro-Mechanics leading, along with Daeduck Electronics and Korea Circuit, large-scale investments have been made, increasing their presence. In particular, Samsung Electro-Mechanics began shipping server-use FC-BGA from last month, advancing to a global level.

LG Innotek holds the global number one position in the substrate market for Radio Frequency Package System (RF-SIP), which has a manufacturing process similar to FC-BGA, and is evaluated to have the potential to quickly raise its status in the new FC-BGA business as well.

In June, LG Innotek secured an FC-BGA production base by acquiring LG Electronics' Gumi A3 plant for 283.4 billion KRW. Since then, it has begun preparing a dedicated line by ordering manufacturing equipment. It has set a plan to invest 413 billion KRW to establish FC-BGA manufacturing facilities by 2024. In September, it also showcased FC-BGA prototypes at an official event. Although the schedule was delayed more than expected due to increased equipment lead times (the period from order to delivery), it is anticipated that mass production of the final product will begin next year.

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