LG Innotek has signaled a significant improvement in profitability for the first half of 2026.
At the annual shareholders' meeting on March 23, 2026, CEO Moon Hyuk-soo stated that as depreciation expenses start to decrease, operating profit for the first half of the year should see a 'meaningful increase'. This is a message that the burden from large-scale facility investments made between 2021 and 2022 is finally beginning to lighten.
Let's look at the causal chain. First, there's the cost structure improvement. The massive investments, including the expansion of the Vietnam plant, led to a surge in depreciation costs until 2025. As this burden eases from 2026, the company's profitability is expected to naturally improve even if sales remain the same. It's a mechanical and cyclical recovery where more profit is left per unit of sales.
Second, the base effect is a key factor. In the first half of 2025, LG Innotek's performance was quite poor, with operating profit in the second quarter plummeting to around 9.3 billion won. This was due to weak demand in the Apple supply chain and intensified competition. Compared to this low point, it's easier to show a significant growth rate in the first half of 2026.
However, it's important to note that this doesn't mean the company's fundamental business structure has changed. LG Innotek still relies heavily on Apple, with its optical solutions division, primarily camera modules for iPhones, accounting for about 85% of total sales. This high dependency solidifies the '상저하고' (weak first half, strong second half) pattern, where performance is concentrated in the second half of the year when new iPhones are launched. CEO Moon's mention of this pattern confirms that the 1H26 improvement is driven by cost management, not a fundamental shift in seasonal demand.
In the long run, the key will be diversification. The company is actively fostering new growth engines like high-value semiconductor substrates (FC-BGA), which have already started mass production, and components for autonomous vehicles and robots, such as LiDAR. These new businesses are crucial for reducing the reliance on the smartphone cycle and achieving stable, long-term growth.
- Depreciation: An accounting method of allocating the cost of a tangible asset over its useful life. Large upfront investments in factories or equipment result in high annual depreciation expenses, which reduce reported profits.
- FC-BGA (Flip Chip Ball Grid Array): A high-performance semiconductor substrate used to connect high-density chips like CPUs and GPUs to a printed circuit board. It's a high-value-added product.
- 상저하고 (Sang-jeo-ha-go): A Korean four-character idiom describing a pattern of being weak/low in the first half and strong/high in the second half. It's often used to describe the seasonal performance of companies in the Apple supply chain.