LG Innotek’s task ahead: Lessen reliance on Apple

LG Innotek Co. faces growing pressure to lessen its reliance on Apple Inc., which accounts for 70% of its sales. The iPhone maker has been reducing the portion of 3D sensing modules purchased from the South Korean company as it diversifies into Taiwan’s Foxconn and other suppliers.

LG Innotek recently was the exclusive supplier of 3D sensors embedded in Apple’s virtual-reality headset, Vision Pro.

However, industry observers forecast Apple will further slash the proportion of LG Innotek’s 3D sensing modules used for smart devices to 50% this year, compared with 60% in 2022.

Reflecting such concerns, LG Innotek’s share price has plunged to 201,000 won ($150) as of Tuesday’s close, half of its all-time high of 414,500 won in March 2022. In comparison, the benchmark Kospi index has shed 2.3% and Apple’s stock price firmed up over the same period.

A 3D sensing module is used to precisely capture the optical images of faces and objects. Along with camera modules, it is LG Innotek’s core growth pillar of its optical solutions division.

When LG Innotek developed 3D sensing components in 2019, it was the world's only producer of them.

As its competitors markedly narrowed the technology gap with LG Innotek, however, Apple is said to be diversifying into Foxconn and other suppliers.

LG remains the dominant supplier of camera modules to Apple’s iPhones, accounting for 70% of Apple's supplies, up slightly from 65% in 2022.

3D sensing modules make up 20% of LG Innotek’s sales, or about 4 trillion won ($3 billion) of its 20 trillion won in revenue in 2023. The biggest chunk of its camera module sales come from Apple.

LG Innotek has been hastening to expand into new areas such as automotive parts used for self-driving cars, robot components and flip chip ball grid array (FC-BGA) substrates. However, it may take a long time for these to contribute to LG Innotek’s earnings.

“Apple is also under pressure from the stagnating smartphone market, so it will gradually reduce its dependence on high-end components,” said an electronics industry official. “LG Innotek needs to accelerate efforts to grow new businesses.”

Write to Chae-Yeon Kim at Why29@hankyung.com
 

Yeonhee Kim edited this article