LG Innotek Accelerates the Transformation of Companies Driven by Semiconductor Substrates and Physical AI

- Building stable profitability through semiconductor substrates

- Expand the physical AI business to ensure a future growth engine

Seoul, South Korea, September 30th / PRNewswire / -- LG Innotek indicates that the transformation of the company's business portfolio has begun to show tangible results, with a significant performance rebound achieved in the first half of this year, which is usually a off-season period.

The company stated that in the first half of this year, it achieved revenue of $8.22 billion and operating profit of $401.96 million, representing year-over-year increases of 24% and 296%, respectively. This is the first time since 2022 ($480.79 million) that the company has managed to achieve such “performance surprises” in the first half of the year, which is usually considered a quieter period.

Building stable profitability through semiconductor substrates

Since Moon Hyuksoo took on the role of CEO in 2023, LG Innotek has been focused on strengthening business structure reforms. By reorganizing the business portfolio, they have established a 'high-performance portfolio' ( High Performance Portfolio ) that is high in profits and value-added. The goal is to create a resilient profit structure that can withstand external variables and drive sustainable future growth.

Over a period of more than 50 years in the substrate business, LG Innotek has established a prominent technical competitiveness. Leveraging this experience, the company has launched market-leading products and gained a leading share in the global market, successfully transforming its semiconductor substrate business into a high-profit, high-value-added industry.

One important example is the company's RF-SiP ( Radio Frequency - System in Package ) substrates, which utilize Cu-Post ( Copper Post ) technology. Since 2016, LG Innotek has maintained the first place in the substrate market share among the top five global customers, specifically with RF-SiP. By being the first to implement Cu-Post technology globally, the company has differentiated itself from its competitors; this key technology has enabled smartphones to be made thinner. Results indicate that LG Innotek's market share this year is expected to approach 80% (calculated based on the top five customers).

At the same time, the FC-CSP ( Flip Chip - Chip Scale Package ) substrate, which was originally mainly used for mobile application processors ( AP ), has recently expanded into the storage field with the craze for AI and has become a new cash cow for the company.

After achieving mass production of the PC chipset FC-BGA for large technology customers last year, LG Innotek began large-scale mass production of FC-BGA for PC CPU in the third quarter of this year. At the same time, the company is working to acquire more large customers in order to rapidly increase its revenue. Starting next year, the company plans to enter the AI accelerator and AI server markets in succession.

The revenue from the LG Innotek packaging solutions business has maintained an upward trend for three consecutive years. With both the packaging solutions business and the optical solutions business achieving substantial results, the company has enhanced its stable profitability.

LG Innotek plans to rapidly expand its share in the emerging semiconductor substrate market, with the goal of developing its packaging solutions business, which includes semiconductor substrates, into a business with operating profits of $743 million by 2031.

Expand the physical AI business to ensure a future growth engine.

LG Innotek is establishing a stable profit structure through its high-value-added camera module and semiconductor substrate businesses, while also actively exploring new areas for future growth. Among these, the physical AI solution business is a typical example.

Among these initiatives, the autonomous driving perception solution business has made the fastest progress in terms of commercialization. This field provides favorable opportunities for the company to rapidly expand and apply its leading optical capabilities accumulated in its mobile camera module business.

LG Innotek is considered one of the few companies in the industry to possess a complete technical system. Its technology scope not only covers traditional automotive cameras but also includes LiDAR (lidar) and radar. The company states that with this comprehensive product portfolio, which creates a key differentiating advantage, it is accelerating its efforts to gain a leading position in the market.

In March this year, LG Innotek signed a strategic cooperation agreement with American autonomous driving software company Applied Intuition and other enterprises to jointly develop autonomous driving solutions in order to accelerate the improvement of business competitiveness.

In May last year, LG Innotek signed an agreement with Boston Dynamics, a global leader in robotics technology, to develop robot components. This July, the company also signed a strategic cooperation agreement with Japanese TDK to jointly develop various physical AI sensing solutions, including visual and tactile perception modules for robot hands, in order to enhance its competitiveness in the robot components business.

The robot parts business of LG Innotek has generated revenue for the first time this year. The company is currently mass-producing camera modules for humanoid robot customers at its factory in Poju, South Korea. With the full-scale production launch, revenue is expected to increase significantly.

The key differentiating advantage of LG Innotek in the competition for robot parts orders lies in its so-called capability as a “physical AI integrated solution provider.” Humanoid robots require a variety of parts, including perception modules, communication connection modules, and semiconductor substrates. With its extensive range of related core technologies, LG Innotek is considered to have an overwhelming competitive advantage in rapidly establishing a leading position in the robot parts market.

Looking to the future, LG Innotek plans to expand its future business operations, which include semiconductor substrates and physical AI solutions, to $5.94 billion by 2030. The company's goal is for these new future businesses to account for 25% of total revenue, thereby achieving a more balanced business portfolio.