In its last year's sales, semiconductor design corporation LX Semicon had over half of its revenue from China. It is estimated that the company expanded the supply volume to China's largest display corporation, BOE. As LG Display, its previous major client, diversified its supply chain, LX Semicon also appears to be reducing its dependence on LG Display and expanding its external outreach.
According to LX Semicon's business report on the 17th, the revenue share from China, which had remained in the 40% range in 2023, rose to 54% ($1.092 billion) last year. It is analyzed that the revenue share from BOE, its largest customer in China, also reached about 30% last year.
◇ “Diversifying portfolio after the recruitment of President Lee Yoon-tae”
In the past, LX Semicon depended heavily on LG Display, which accounted for nearly 80% of its revenue. LX Semicon, which was previously a subsidiary of LG Group, changed its name after becoming independent from LG Group in 2021. During this time, LX Semicon has grown by virtually monopolizing the supply of display driver integrated circuits (DDI) to LG Display. DDI is a semiconductor that generates output signals to drive the display panel by receiving signals from the central processing unit (CPU) of electronic devices.
In late 2023, LX Semicon recruited President Lee Yoon-tae, who previously served as president of Samsung Electro-Mechanics. This marked the beginning of bringing in leadership from outside after previously being filled with individuals from LG Group. LX Semicon is focusing on diversifying its portfolio, not only by broadening its DDI supply sources but also by expanding into heat sink board business.
An industry insider said, “While LX Semicon has grown by supplying DDI to LG Display stably, there was an internal sense of crisis that business diversification was essential as LG Display struggled with management difficulties,” adding, “It is true that after President Lee Yoon-tae's appointment, efforts are being made to reduce reliance on LG and focus on diversifying the portfolio.”
Novatech, the world's second-largest DDI company, is competing with LX Semicon after starting to supply DDI to LG Display last year. Novatech has taken supply volumes from LX Semicon by leveraging price competition, and it is estimated that LX Semicon's market share with LG Display was around 45% last year.
◇ Expanding supply volume to China’s BOE… focusing on improving profitability through business diversification
As LX Semicon increases its revenue share from China, it is recognized that LX Semicon holds the largest portion in BOE's DDI supply chain. BOE is competing with Korean display companies in the organic light-emitting diode (OLED) market and also supplies OLEDs to its largest client, Apple. A display industry insider noted, “DDIs supplied to major clients of BOE, such as Apple, are more than 90% provided by LX Semicon.”
Consequently, LX Semicon's performance is gradually improving. Last year, LX Semicon recorded an operating profit of 167.1 billion won, a 29.5% increase compared to the previous year. There are expectations that the effects of portfolio diversification will be reflected in this year’s performance as well. Nam Gung-hyun, a senior researcher at Shinhan Investment Corp., stated, “Since last year, DDI sales related to virtual reality (VR) devices have started, and this year, mass production of vehicle heat sink boards is also expected to begin,” adding, “This year’s operating profit is projected to be 191.9 billion won, increasing by 14.9% compared to last year.”
However, analysis suggests that a trade secret infringement dispute filed by Samsung Display against BOE may become a variable affecting future performance. Jeong Won-seok, a researcher at iM Securities, mentioned, “The preliminary decision regarding the trade secret infringement lawsuit filed by Samsung Display against China’s BOE at the U.S. International Trade Commission (ITC) is expected to be made this month, which could serve as a variable,” adding, “If the trade secret infringement is recognized, the import of BOE's flexible OLED panels, as well as smartphones or finished goods using them, could be banned in the United States, which may negatively affect LX Semicon.”