LG Innotek's supply of mobile semiconductor substrates is reportedly expanding. As rival corporations focus on producing high-value flip-chip (FC) ball grid array (BGA) substrates, where demand is surging on the back of the artificial intelligence (AI) industry's growth, supply of mobile semiconductor substrates has tightened. With the shortage raising the possibility of unit price hikes, analysts say profitability at LG Innotek's substrate business will improve.
According to the industry on the 3rd, unit prices for LG Innotek's radio frequency system-in-package (RF-SIP) and flip-chip (FC) chip-scale package (CSP) are expected to rise. Both semiconductor substrates are key components mounted in mobile semiconductors. As Taiwanese and domestic rival corporations focus on producing FC-BGA substrates used in AI Semiconductor chips, supply is short and unit prices are expected to climb.
With rival semiconductor substrate makers—Taiwan's Unimicron and Nanya and the domestic corporation Samsung Electro-Mechanics—concentrating on the FC-BGA market, supply and demand for mobile substrates appear to be tightening. As a result, there are forecasts for a rise in LG Innotek's market share in mobile substrates and for unit price hikes. Park Hyung-woo, an analyst at SK Securities, said, "LG Innotek is benefiting from the domestic and Taiwanese rivals' focus on FC-BGA. We expect market share gains and higher supply unit prices in RF-SiP and FC-CSP."
Also helping profitability is the expanding range of applications for mobile substrates. FC-CSP, which had been used to package low-power DRAM (LPDDR) mounted in mobile devices, has seen its applications grow into SOCAMM, which stacks multiple LPDDRs and is mounted in AI Semiconductor chips. In addition to SOCAMM, FC-CSP is also said to be used in next-generation graphics DRAM (GDDR7) produced by SK hynix. RF-SIP is also seeing rising demand as AI expands into smartphones.
Meanwhile, in the FC-BGA market that it entered as a new business, a deepening supply shortage is increasing the likelihood of market entry. FC-BGA is a core substrate used in AI servers and high-performance computing, and demand has recently surged. Although FC-BGA corporations are expanding production lines to meet demand, it still falls short. LG Innotek has established FC-BGA production lines in Gumi, North Gyeongsang Province, and is seeking to enter the market.
An official in the electronic components industry said, "With FC-BGA demand continuing to grow, led by global Big Tech, supply from existing corporations is not enough, creating an opportunity for LG Innotek, which is newly entering the market," adding, "As early as this year, it is expected to win orders for FC-BGA volumes to be mounted in AI chips for global Big Tech customers, begin mass production, and start reflecting this in results."
As profitability improves in LG Innotek's package substrate business, this year's operating profit is expected to jump sharply from a year earlier. According to financial data firm FnGuide, the securities industry's estimate for LG Innotek's operating profit this year is 917.5 billion won, up about 38% from last year's 665 billion won.
Park Kang-ho, an analyst at Daishin Securities, said, "It will influence earnings growth in semiconductor substrates. Utilization is rising for high value-added products, boosting profitability," adding, "Within semiconductor substrates, market share is increasing at the main customer for RF-SiP, which has a large weight, and with strong FC-BGA demand and reduced supply capacity, LG Innotek is also expected to benefit."