As Apple iPhone sales are expected to slow down in the Chinese market, LG Innotek, which is its largest customer, is focusing all its efforts on improving profitability. LG Innotek aims to enhance its revenue through increased supply volumes of camera modules for the iPhone 16 series and diversification of its portfolio.
On the 14th, industry sources analyzed that the decline in iPhone sales in the Chinese market is slowing. Park Jun-seo, a researcher at Mirae Asset Securities, noted, "Sales of iPhones in the Chinese market decreased by 28% and 19% year-on-year in November and December last year, but the decline in sales last month is said to have eased compared to the previous year."
Apple is its largest customer, accounting for more than 70% of LG Innotek's revenue. LG Innotek supplies not only the folded zoom camera module but also the actuator, which is a core component of the camera module, for the iPhone 16 series. The folded zoom is a high-end product first mounted on the iPhone 15 Pro Max, designed to bend light and relay it to the image sensor. The number of applicable models in the iPhone 16 series has increased to two.
However, as Apple diversifies its camera module supply chain with the launch of the iPhone 16 series, weak sales in the largest smartphone market, China, have worsened LG Innotek's performance. Apple announced that its revenue share in China for the fourth quarter of last year decreased by 11% year-on-year, with sales volume dropping by 18%. Consequently, LG Innotek recorded an operating profit of 247.9 billion won in the fourth quarter of last year, down 48% compared to the same period the previous year.
As China provides subsidies to boost the economy, the outlook is positive that iPhone sales will gradually increase. Since last month, three models of the iPhone series have been included in the Chinese subsidy policy, which appears to be boosting sales.
Researcher Park said, "We submitted an approval application for launching specialized artificial intelligence (AI) features in collaboration with Alibaba, and global sales of the iPhone SE4 model are set to start in the first half of this year," adding, "Improvements in AI features for the domestic market could lead to a recovery in consumer sentiment, and sales may rise with the launch of the SE4 model."
However, competition within the iPhone camera module supply chain is intensifying, leading to predictions that LG Innotek's recovery of profitability may be slower than expected. According to financial information provider FnGuide, the projected revenue and operating profit for LG Innotek in the first quarter of this year are 4.3497 trillion won and 92.1 billion won, respectively. The operating profit for the first quarter is expected to decline by about 47% compared to the same period last year (176 billion won).
Lee Min-hee, a researcher at BNK Investment & Securities, stated, "As price competition with latecomer camera module companies intensifies, compromises in profitability will be inevitable to maintain market share," adding, "Improvement in customer sales is crucial in the stagnant smartphone market."
LG Innotek plans to improve its structure through portfolio diversification. Moon Hyeok-soo, CEO of LG Innotek, stated at a press conference held last month during the CES 2025 in Las Vegas, "We have begun mass production of flip chip (FC)-ball grid array (BGA) for supply to North America's big tech corporations," and noted, "We are also pushing for development in the rapidly growing field of humanoids in the AI era."