Younger Siblings of Electronic Components Unable to Keep Up with Elders... Relief Expected Only in Q4

Samsung Electronics and LG Electronics announced solid third-quarter earnings despite the economic downturn, while their component subsidiaries that supply parts for set products are expected to report poor results by the end of this month. It is anticipated that their performance will only improve in the fourth quarter at the earliest.

LG Display 42-inch Bendable OLED

On the 13th, the electronic components industry predicted that in the fourth week of this month, they would announce disappointing third-quarter earnings that fall short of market expectations. Unlike Samsung Electronics, which offset a semiconductor (DS) division loss exceeding 3 trillion won with profits from other business units such as mobile, and LG Electronics, which compensated for sluggish home appliance sales with its automotive components business, electronic component subsidiaries heavily depend on their core businesses and specific customer groups, making it difficult to find alternatives compared to set manufacturers.

LG Display, which will announce its third-quarter results on the 25th, is expected to report an operating loss of around 600 billion to 700 billion won. Initially, the market consensus was that the third-quarter loss would be about 500 billion won, but shipments of OLED mobile panels to its client Apple were delayed by nearly two months compared to initial expectations, resulting in the third-quarter results not fully reflecting the order benefits. Currently, the OLED mobile panel shipment delay issue at LG Display is reported to have been resolved. Therefore, only in the fourth quarter, when the mobile OLED production line is expected to operate at full capacity, can a slight return to profitability be anticipated.

LG Innotek CES 2023 Exhibition Booth Appearance

LG Innotek, which will also announce its results on the same day, is likely to reveal third-quarter earnings that fall short of expectations. Analysts suggest that production disruptions in initial volumes of products supplied to its major client Apple, which accounts for over 70% of total sales, have hampered LG Innotek's third-quarter performance.

The industry currently expects LG Innotek's third-quarter operating profit to be around 150 billion won, a decrease of more than 60% compared to the same period last year. Some forecasts even predict profits as low as 130 billion won, a drop exceeding 70%. For component suppliers serving smartphone manufacturers, the third quarter is considered the peak season due to orders for parts used in new products. Until July this year, it was widely expected that third-quarter operating profits would exceed 200 billion won.

However, this year’s third quarter is unlikely to fully benefit from this effect. Issues with yield rates and module assembly processes related to folded zoom components installed in the client’s new model caused initial volumes to fall short of expectations. On the other hand, the deferred volumes reflected in the fourth quarter’s results are expected to yield better performance. There is even anticipation for a record-breaking quarterly operating profit exceeding 500 billion won.

Samsung Electro-Mechanics Automotive Power Inductor

Samsung Electro-Mechanics, a component subsidiary of Samsung Electronics, will announce its third-quarter results on the 26th. The industry consensus forecasts operating profits in the 200 billion won range, about 30% lower than the third quarter of last year. In the overall sluggish IT demand environment, coupled with the depreciation of the yen, the component business division?which accounts for the largest portion of Samsung Electro-Mechanics’ earnings?struggled in price competition against Japanese competitors. Experts diagnose that Samsung Electro-Mechanics’ future depends on how quickly it can increase the proportion of automotive components across all business divisions, including components.

Samsung Electro-Mechanics, which has a business structure focused on IT components, must achieve results in the automotive sector to minimize the impact of weak IT demand. Jang Deok-hyun, CEO of Samsung Electro-Mechanics, recently announced that the company was selected as a first-tier supplier of automotive cameras for Hyundai Motor and Kia, stating, "Based on the know-how accumulated in IT, we will provide solutions that enhance customer value through the establishment of a cutting-edge automotive lineup and strengthening production capabilities."

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