South Korea’s LG Innotek has achieved a remarkable earnings rebound in the first half of the year—traditionally a seasonal off-peak period—significantly boosting its prospects of returning to the ₩1 trillion operating profit club this year. The improvement is being attributed to the business restructuring efforts spearheaded by CEO Moon Hyuk-soo since his appointment.
According to LG Innotek’s semi-annual report released on the 24th, the company recorded first-half revenue of ₩11.06 trillion (approximately $8.0 billion) and operating profit of ₩541 billion (approximately $391.2 million). Revenue increased 24% and operating profit surged 296% year-over-year. This is the first time the company has posted such an earnings surprise in a first half since recording ₩647.1 billion (approximately $467.9 million) in operating profit in the first half of 2022. In the interim, LG Innotek’s first-half operating profit had remained in the ₩100 billion to ₩300 billion range (approximately $72.3 million to $216.9 million).
Securities analysts now expect LG Innotek’s full-year operating profit to exceed ₩1 trillion this year. If achieved, the company would return to the ₩1 trillion operating profit club for the first time in four years since 2022.
The core driver of the earnings rebound is the business portfolio expansion from camera modules to semiconductor substrates. Camera modules supplied to smartphone makers such as Apple and Google, as well as automotive companies, still account for more than 80% of total revenue. However, the business has faced structural limitations with revenue concentrated in the second-half peak season, along with gradually declining profitability due to market entry by Chinese competitors.
In response, CEO Moon identified semiconductor substrates—which simultaneously satisfy profitability and growth potential—as a core business after taking office in 2023, and pushed forward with business restructuring. In particular, the company has focused on securing “winning technology” in globally leading products to widen the gap with competitors.
A representative achievement is the radio-frequency system-in-package (RF-SiP) substrate featuring copper pillar technology. LG Innotek has maintained the No. 1 position in the global RF-SiP substrate market since 2016, and was the world’s first to apply this technology, which has played a decisive role in smartphone slimming, successfully differentiating itself. Market share is expected to approach 80% this year.
With sustained customer demand, the company began investing over ₩1 trillion in Vietnam in June to expand semiconductor substrate production lines. The decision was based on expectations of supply shortages due to expanding applications and surging demand not only for RF-SiP substrates but also for flip-chip chip-scale package (FC-CSP) and flip-chip ball grid array (FC-BGA) substrates.
CEO Moon has designated FC-BGA substrates as a high-value-added new business and has accelerated market penetration through the “FC-BGA Dream Factory” in Gumi, North Gyeongsang Province, which integrates the latest artificial intelligence (AI) technologies. Starting last year with PC chipset products for a North American big tech customer, the company has entered full-scale mass production of FC-BGA, and has rapidly grown revenue by securing additional major North American customers. Beginning next year, the company plans to sequentially enter the AI accelerator and AI server markets.
Bolstered by the semiconductor substrate business development strategy, the Package Solutions division’s operating profit has trended upward for three consecutive years. On a first-half basis, operating profit increased more than 170% from ₩36.8 billion (approximately $26.6 million) in 2024 to approximately ₩100 billion this year. With the added effect of improved capacity utilization through new customer acquisition, the turnaround timing for the FC-BGA business is expected to be accelerated further. CEO Moon plans to grow Package Solutions, including semiconductor substrates, into a business with ₩1 trillion in operating profit by 2031.
Beyond semiconductor substrates, the future growth business that CEO Moon is driving is physical AI solutions. At a recent employee communication event, he emphasized: “The physical AI era is not a distant future but an immediate one that we must prepare for right now. Since nearly all of the technologies LG Innotek possesses can be applied to physical AI, let us draw a new S-curve by providing diverse technologies as total solutions.”
The most actively commercialized area is autonomous driving sensing solutions. Last year, LG Innotek formed a strategic partnership with Aeva, a U.S.-based lidar technology leader, and recently established strategic partnerships with Applied Intuition, a U.S. autonomous driving software company, and Kakao Mobility for joint development of autonomous driving solutions.
The company is also moving quickly in the robotics components business. In May of last year, it signed a component development agreement with Boston Dynamics, which possesses world-class robotics technology. In July, it formed a strategic partnership with Japan’s TDK to jointly develop various physical AI sensing solutions, including vision sensing modules and tactile sensing modules for robot hands.
LG Innotek’s first-half earnings improvement demonstrates that its strategy of diversifying growth axes away from a camera module-centric business structure toward semiconductor substrates and physical AI solutions is producing tangible results. The growth trajectory of the FC-BGA business aligned with expanding AI semiconductor demand, along with the expansion of new business partnerships targeting the autonomous driving and robotics markets, are assessed as factors that will support future earnings momentum.